Friday, February 13, 2015

NASDAQ looks to extend the rally

NASDAQ did manage to set a new 1-year high yesterday, cleanly above the previous peak in December - by a solid 50 points - so, there is a good chance that this rally will stick and not quickly evaporate, reverse, and revert to trading down in the wider trading range as has happened so many times in the past year. That said, there are no absolute guarantees in this crazy market, so a reversal and decline would not be a giant surprise to me. I remain optimistic but cautious, prepared to take advantage of the market whichever way it moves.

Some positive economic news out of Germany may be enough to override generally negative sentiment about Europe, in particular the sentiment that says that Europe is dragging down American companies who do a lot of business in Europe. Semi-positive news and chatter about Ukraine and Greece is a positive for the market as well. Most of that European chatter is really only a minor weight on the market overall, but can be enough to impact market sentiment on a short-term basis, in both a positive and negative direction, depending on the news of the day. Long term the market will trend based on underlying economic and business fundamentals, but in the short term news adds a layer of volatility above that underlying trend.

NASDAQ futures are up moderately, indicating a moderate pop at the open. As always, the opening move is not a reliable indicator of how trading will unfold during the rest of the trading session. Given that we solidly set a new 1-year high, there is probably enough lingering enthusiasm to fuel an extension to that rally. And to the degree that cynical bears may have shorted the market at the end of the day yesterday in a belief that  a top had been reached, enough of a rally this morning will cause those bears to hit their stops and kick off forced buying in a short squeeze and short-covering rally.

It's a Friday and Monday is a holiday, so some fraction of speculators will tend to close out positions ahead of the long holiday weekend when anything can happen (like a ceasefire supposedly going into effect in Ukraine Saturday night, and more bold and dire chatter related to Greece.) If they are net short they will be buying, if net long they will be selling. Whether that closeout activity will be enough to impact the impact significantly or how significantly is uncertain.

I closed out a lot of my trading positions at a net profit yesterday, but I still have a sizable number of trading positions in play, not to mention my investment portfolio which is fully invested. My primary focus will remain on buying sizable dips of my stocks, and cashing out 5% gains on my trading positions. Overall, I would prefer to let my long positions ride, but given the volatility of the market I am happy to play that volatility as well to boost my returns and give me short-term income as a side effect.

-- Jack Krupansky


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