Monday, March 30, 2015

NASDAQ remains mired within its trading range, but hopeful

Thursday may have been the low for this downward swing of NASDAQ off the peak of Friday ten days ago. We had a decent bounce from the opening low on Thursday and then a semi-decent recovery rally on Friday. But since the recovery rally was on a Friday and only semi-decent (less than 1%), there is still a chance that this nascent recovery could crumble and turn into a new low for the swing. Still, it does look quite promising.

I'm sure we will see NASDAQ at 5000 again soon enough, but we will have to trade up through this trading range first, and that could be a rather volatile process. It only took three days to fall down to Thursday's low, but it could take a week or more to recover from that fall. Or maybe only another two or three days. It all depends on how aggressive the hedge funds decide to be. They may try again for a new low for the swing, or just ride the rocket to a new peak and then kick off the next downward swing that much sooner.

NASDAQ futures are up fairly strongly this morning, indicating a fairly decent pop at the open. As always, futures and the opening move are not reliable indicators of the market trajectory for the rest of the day. There is no particularly great catalyst for the strength of futures today, so there is some non-zero chance that it could be a fake-out and hedge funds could use it as a ruse and sell heavily into the rally. We'll have to see how it plays out. In any case, the hedge funds are in control of the market.

My own trading will be lighter than usual for the next month or so as I focus on tax payments for April 15th and my SEP-IRA retirement contribution. My contribution is in transit right now - I'm not absolutely sure when the funds will be avavailable to trade in my retirement account, but most likely within a day or two. I need to refrain from trading any of the stocks I sold last week for losses for at least 30 days or I will run afoul of the Wash Sale Rule. Of course there are plenty of other great stocks to invest in. I may just park the contribution in a handful of my preferred stocks, plus keep 25% in cash as a reserve, and then reallocate after my 30 days and as dips occur. I don't expect to do frequent trading in my retirement accounts, but reallocation on dips is a viable strategy.

Once I have all of my tax payments squared away I will resume heavy trading, but with a significantly smaller trading capital base. I will have to reduce my nominal trade size but then still be able to keep up my trading pace, although my trading has been and will be based on trading opportunities, such as big dips for quality stocks. I also have a couple of new accounts I can trade in more cheaply so that I can make a larger profit with smaller trades.

-- Jack Krupansky


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