Friday, March 27, 2015

NASDAQ meanders in its trading range

Mark my words, NASDAQ will be back at 5000 soon enough, but... we may have to do some serious meandering in the wide trading range before we get there again (and again.)

Whether we have much more downside left in the current swing remains to be seen. The sharp decline into the close on Wednesday screamed capitulation to me, and the major bounce off the intra-day low on Thursday seemed like a strong signal to me as well, but even strong signals frequently are not a solid substitute for reality. So, NASDAQ could have some more downside, but relatively soon it should begin meandering back towards the upper portion of the trading range.

There is a decent chance that we will see a relief rally today, but even so, it could simply be a classic dead-cat bounce to be followed by renewed selling next week.

As I keep noting, the market is at the complete mercy of the hedge funds. Whether we see further declines or bounce back is completely dependent on how the funds shift their risk bias in the coming days. They could maintain or increase their risk-off bias and send the market lower, or they may indeed sense that further downside has limited prospects for profit, and decide to reverse their bias to more risk-on to seek greater gains on the upside. Rinse and repeat. Trading ranges and volatility can be quite profitable for them.

NASDAQ futures are down modestly, indicating a modest decline at the open, but as always we must note that futures and the opening move are not reliable indicators of the trading trajectory for the rest of the day, as we saw yesterday with NASDAQ closing well above the opening level despite very negative futures.

Today is another Friday,so some fraction of speculators will tend to liquidate positions in advance of the weekend when anything can happen. If they are net short, that could mean a rally.

Personally, I will have to do some serious selling over the next two weeks to raise the cash for my 2014 retirement contribution and to pay taxes on April 15th. I'll take some losses, but my retirement contribution will be able to pick up some decent bargains as well.

-- Jack Krupansky

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