Thursday, April 30, 2015

NASDAQ continues consolidating

After the recent strong advance of NASDAQ to fresh all-time highs, it comes as no surprise that a little consolidation is needed. How much? Nobody knows that, but it is up to the hedge funds to decide how much of a mini-correction they will need before they are ready to switch back to a risk-on trading bias for the next leg of the advance. They may decide that they want to do some extended range-trading, especially since we are on the threshold of the traditional "sell in May and go away" calendar trading period. The only certainty is volatility.

NASDAQ futures are down relatively sharply, indicating a decent pullback at the open, but as always we must refrain from treating futures or the opening move as reliable indicators of the market trend for the rest of the day.

It is very possible that NASDAQ will bounce back sharply after the opening dip has run its course. It is also quite possible that hedge funds will pile on to the opening dip for an extended sell-off in the 50-100 point range. Or we could have more narrower range trading. It is difficult to predict how the hedge funds will react.

In any case, further consolidation is a quite healthy sign for the market. I would be a lot more concerned if NASDAQ had first zoomed up to 5200 before retesting the 5000 and even 4950 levels. All of this will help greatly to establish a solid base of support in the 5000 vicinity which will provide support for further advances over the 5100 level.

Meanwhile, earnings season progresses, but most of the heavy hitters have now left the stage, so moves based on earnings will be more limited, typically to the individual stocks.

The Federal Reserve is now out of the picture again for another six weeks. Fed funds futures continue to point to December as the most likely time frame for liftoff of interest rates, with a second hike next March. Sure, the Fed FOMC is now free to lift rates at any meeting, including June, but they have already indicated that they will be data-driven, so now it is up to market participants to guess the trajectory of economic data over the next twelve months.

A correction? Sure, that is always possible, but more likely we will see occasional mini-corrections or 3-5% dips due mostly to range trading. In any case, my strategy is to keep cash in reserve and buy on the dips for 3-7% gains.

-- Jack Krupansky

Wednesday, April 29, 2015

NASDAQ needs to consolidate a bit more

The recent upwards momentum of NASDAQ has clearly faltered, but there is no clarity as to whether that is simply because a modest amount of consolidation is needed with any extended advance, or whether this upwards swing attempting to break out of the old trading range has ended and the hedge funds may simply be waiting for the best time to kick off a big push for the next downward swing in the revised trading range.

It was heartening to see that an early push downwards on Tuesday quickly ran out of steam and NASDAQ managed to recover almost all of those early losses. Heartening, but it doesn't mean that we are out of the woods by any measure. It is upwards momentum that the market needs, not simply the lack of downwards momentum.

In any case, more consolidation is warranted here before any further big advance.

So, we still have equal probabilities for the for all three directions - either renewed upwards momentum, or a downwards push back down into the revised trading range, or trading in a narrower range. By default, we are in the latter, stuck in the 5000 to 5100 range. In truth, I prefer the latter, so that we can build a decent amount of technical support to serve as a solid base for a new leg up for the advance a little further down the road. In any case, volatility remains king.

Earnings season is indeed driving a lot of stocks, but in all directions, sharply up, sharply down, and sideways, which results in a market that is on average sideways.

Some fraction of market participants are waiting on the Fed FOMC announcement this afternoon before placing bigger bets, but the news will likely be that there is no new news. No press conference will occur after the release of the announcement, so there is no real opportunity to explain any significant change, so there is no expectation on the part of the Fed itself for any major change. Still, there are a lot of people waiting on their hands for the Fed to confirm that they are not changing anything. The Fed has already confirmed that they will remain data-driven, so it is merely a matter of waiting for the data to pick up enough for a real Fed move to be more of a slam dunk. Everybody knows that Q1 was rather sluggish, and that Q2 is expected to pick up, but nobody knows by how much, or what Q3 will be like. Personally, I still expect Fed rate liftoff to be roughly in the October time frame, but fed funds futures are currently pointing to December as the time frame for liftoff of interest rates. Futures are currently indicating only a coin-flip chance of a second hike in March. In any case, interest rates will remain quite low for quite some time, so no worry for stocks.

NASDAQ futures are down moderately, indicating a further pullback at the open. People are getting antsy about the fact that upwards momentum has petered out, which typically presages a downswing unless there is some some great new catalyst coupled with significant inflows of fresh money to fuel a renewal of upwards momentum. As always, we must caution that futures and the opening move frequently are not reliable indicators of the actual trend for the rest of the day.

-- Jack Krupansky

Tuesday, April 28, 2015

NASDAQ needs a little consolidation

Sure, it was very disappointing to see a decent rally turn into a moderate sell-off, but that's par for the course, especially after the extent of the recent advance into record territory. Every market occasionally needs to take a breather no matter how strong it is.

We can't know in advance how far hedge funds are willing to take the current advance before making the decision to lighten up and even reverse to a risk-off bias in preparation for the next downswing of the range trade. Whether Friday set a new upper edge for a trading range or not remains to be seen. I would have expected a somewhat higher edge for the new trading range, but the hedge funds have a logic of their own that they certainly don't directly disclose to us in advance. We can only know what hedge funds are really up to by observing the actual behavior of the market after the fact.

Personally, I would be more comfortable seeing more closes for NASDAQ between 5000 and 5100 to establish a firmer base that will provide better support for a more sustainable advance above 5100. The goal is not to simply shift the upper edge of the old wide trading range upwards slightly, which we have done now, but to establish a new floor for an entirely new trading range that is above top of the old trading range. A core issue is that stocks are relatively overvalued and fresh money flowing into the market is relatively scarce, so nice clean big jumps upwards are definitely going to be fewer and farther between than say two years ago.

As usual, we have equal probabilities for whether we will resume the strong advance, or reverse and trade back down in a wide trading range, or trade in a narrower trading range.

NASDAQ futures are down modestly, indicating a modest additional pullback of the market at the open, but as always we have to caution that futures and the opening move are not reliable indicators of the market trend for the rest of the day.

It is indeed quite possible that we see a little softness at the market open, and then see a strong recovery bounce that completely erases the losses from the sell-off of Monday and then proceed upwards to a new record high. That's certainly not a slam dunk by any means, but is a distinct possibility.

The Fed FOMC meets today and tomorrow, but I don't expect any significant change in their posture - that the economy will likely bounce back from the winter weakness and that liftoff for interest rates will commence sometime in the fall. Fed funds futures currently point to December for liftoff, but that's based on market expectations for where the economy might be in the fall and the Fed has already clearly stated and reiterated repeatedly that they will be data-driven. The Fed will officially say that they will consider liftoff at any subsequent meeting, including even October, September, July, or even June, but consideration and likeliness to act are two distinct and separate issues. Market participants are trying to judge likelihood of action, rather than mere consideration. Also, each Fed official speaks their own mind (unlike the Greenspan days), so we need to be careful not to over-interpret the public statements of the more hawkish or more dovish Fed officials as being too representative of how the Fed FOMC overall might act in a coming meeting. Fed funds futures are now indicating less than a coin flip of a second hike next March, so we are currently looking at a full twelve months of very low interest rates.

-- Jack Krupansky

Monday, April 27, 2015

NASDAQ tentatively moves beyond the crossroads

Very impressive - NASDAQ is finally at the door of the 5100 level. The resilience of the recent advance has been quite impressive, but... short sprints do have a way of quickly unraveling, so we will have to see how it plays out. Personally, I like to see the market spend at least two weeks above some critical level before concluding that we have support at that level for a sustainable advance to yet another new level. Even the 5000 level is not yet secure. Personally, I need to see NASDAQ close above the 5150 level, solidly, for a couple of days as a prerequisite for considering the 5000 level a solid base as well. In any case, it is finally starting to feel as if the 5000 level may indeed be in our rear-view mirror.

Earnings continue to be mixed, but with enough bright spots and enough relief that things have not turned out even worse than expected. Some of this may simply be the traditional concept of selling the rumors and then buying the news.

NASDAQ futures are up moderately, indicating a nice pop at the open, partially on relief that Europe seems to be bouncing back, but as always we must be cautious that futures and the opening move are not reliable indicators of the trend for the rest of the day. We'll have to see whether hedge funds pile on to an early rally, or whether they instead sell into the rally.

There is some concern that inflows to mutual funds have been volatile and even negative in recent weeks, and that frequently more of the inflows have been to international funds, and that there have been actual outflows from domestic mutual funds in some recent weeks. Traditionally, inflows to domestic mutual funds have been the lifeblood of the stock market, but I see that things have changed in recent years. ETFs and hedge funds appear to be the main drivers these days. Money is a lot hotter than it used to be, especially with hedge funds which can switch their risk bias between risk-off and risk-on at a moment's notice.

For the moment, it appears that hedge funds have switched heavily to a risk-on bias. We should enjoy it while it lasts, but at some stage, likely when upwards momentum seems to be too toppy and petering out, they will flip the switch from risk-on to risk-off and then we will see another mini-correction as we swing down within a trading range. All of this is very unpredictable, other than it will happen eventually. Over the past 18 months it seems like the trading ranges last anywhere from a couple of weeks to a couple of months. The most recent range lasted about six weeks. So, will this one last two weeks or two months or what? Yeah, that's the open question.

Personally, I get the feeling that this range could take us to the 5250 level before the hedge funds throw in the towel, but even that is a fairly wild guess. Sure, based on experience, but there are just too many variables in play. A wide range of possibilities is that the recent advance may actually already be over, to maybe a couple more months taking us all the way to 5500 before we see serious consolidation. The only certainty is volatility.

-- Jack Krupansky

Friday, April 24, 2015

NASDAQ still lingering a bit too close to the same old crossroads

It is of course super-great that NASDAQ manage to score a new all-time closing high above the dot-com era peak of 5049. I wish I felt a lot better about that, but... well... I don't. We're still only a stone's throw away from the tired old wide trading range. We're going to need to close above the 5150 level for at least a couple of weeks before we can have a sense of conviction that the old trading range is behind us. And we still haven't set a fresh all-time intra-day trading high, which was 5,132.52 on March 10, 2000. We need to close well above that level before we can really breath a sigh of relief that the dot-com era is finally ancient history.

Besides the ongoing hand-wringing over weak earnings and outlooks, my main concern is that there isn't yet sufficient net inflows of fresh money from retail investors and institutional investors such as pension funds to power a strong advance from here and counteract the tendency of hedge funds to stage artificial reversals to capitalize on trading wide swings in a wide trading range.

I remain a bit disturbed by the fact that we haven't seen many big up days, like more than even 1%, but as they say, a bull market climbs a wall of worry, and a slower, steadier rise is probably more sustainable than a sharper move upwards.

I would personally prefer to see NASDAQ linger a bit longer in the low 5000 range, with a decent mix of down days so that we establish a solid base that can provide decent support for a more sustainable advance, but we have to work with the market we have, not the one we want.

One possible scenario (among many) is that the hedge funds may push NASDAQ up to 5250 or so and then revert to trading in the 5000 to 5200 range for months. That could also leave the door open to at least a mini-correction to revisit the old trading range even if only briefly, such as happened last October. None of this has anything to do with long-term economic and business fundamentals, but is what happens when there is not a sufficient mass of fresh investment money flowing into the market.

NASDAQ futures are up moderately sharply,due to enthusiasm for some of the quarterly reports from yesterday after the close, suggesting a decent pop at the open. As always, we must caution that futures and the opening move are not reliable indicators of the market trend for the rest of the day.

It's a Friday again, so some fraction of short-term speculators will tend to close out positions ahead of the weekend when anything can happen. If they are net long, especially considering the recent march to a fresh all-time high, that could mean some selling, but if enough people are still short because they don't believe the new peak will stick, it could mean some serious buying to cover those short positions.

The main thing I will be looking for today is whether we see some decent follow-through buying build on the opening rally and see that rise through the afternoon and into the close. The default would be to see a fair amount of selling into rallies throughout the day so that we end up with another half-percentage point gain as we have seen in other recent sessions. Still, it is possible that we could see a blowout rise today, to close above the 5100 level, in which case we could see some more serious profit-taking and consolidation next week.

My wash sale rule restriction ends with today, so on Monday I can once again start freely trading a bunch more of the high-volatility stocks on dips.

Overall I remain very long the market, especially with my retirement accounts. I remain optimistic about the future, but I do expect the road to be quite bumpy and the terrain quite challenging.

-- Jack Krupansky

Thursday, April 23, 2015

NASDAQ still hesitating at the crossroads

It sure is great that NASDAQ has managed to hit a 15-year closing high, is above the magical psychological 5000 level again, and has even closed above that level for two consecutive days, again. But... the trading action has been far too hesitant and tentative, with very few big days - the only recent big day was right after a big down day. Net-net, we are not out of the woods yet, and have merely been expanding the wide trading range rather than definitively advancing out of that trading range.

My overall evaluation stands - we remain at a crossroads and have equal probability of breaking out of the trading range, or reversing and trading back down in the trading range, or trading in a narrower range. The mere fact that we set a fresh 15-year closing high yesterday and are within a pebble's throw of a new all-time high for NASDAQ is a testament to the underlying resilience of market, the overall U.S. economy, and American businesses, but people are still overly-cautious despite all of that. Absent a more robust inflow of fresh cash from retail investors and institutional investors such as pension funds, we are at the complete mercy of the hedge funds, who are more than happy to play the swing trades in a trading range whenever momentum peters out for even a millisecond.

Earnings season remains the primary focus of the market. The reports have been quite mixed, with something for everyone, bulls and bears. Overall, I would say, that things are in fact as bad as expected, but are at least not much worse than expected - overall that is, not for individual stocks. The fact that the overall market has trended up is more a tribute to investors and medium-term speculators looking beyond the short-term to the coming quarters rather than obsessing over the spilled milk of Q1.

NASDAQ futures are down modestly to moderately, indicating a modest to moderate pullback at the open. A little profit-taking and consolidation after the recent advance is to be expected. Whether such profit-taking and consolidation does materialize is only speculation at this stage. As always, we have to note that futures and the opening move are not reliable indicators of the market trend for the rest of the day.

Today and tomorrow are my last two days under restriction of the wash sale rule since I took some big trading losses a month ago to raise cash for my taxes and retirement account contribution. There are a list of stocks that I would like to be trading more actively, but couldn't unless I wanted to give up the tax deduction of those losses. On Monday I'm free and clear. I'll also have less capital to trade with, but I plan on doing more trades of a smaller size, coupled with a new brokerage account that has much smaller commissions. I may reduce my target gain from 5% to 3% to increase my trading velocity as well. I may also allocate cash between short-term trades of one to three weeks and medium-term trades of one month to one year since there are quite a few stocks that get depressed by hedge funds but eventually bounce back after some months.

-- Jack Krupansky

Wednesday, April 22, 2015

NASDAQ frets at the crossroads some more

Hey, great, NASDAQ popped up above the magical psychological 5000 level again yesterday, but not with a lot of enthusiasm, and the early rally quickly ran out of steam. About the only good news from yesterday is that it didn't turn into an outright sell-off. Seriously, that actually is good news, but that goodness has a seriously short shelf-life, so if NASDAQ doesn't rally a little more strongly in the next couple of days, the hedge funds will have no choice but to switch to a risk-off bias and trade back downwards in the wide trading range. That's not to suggest that as the likely outcome, but simply to make the risk clear.

As with all of my recent crossroads references, we are still looking at equal probabilities for starting a new leg of the overall bullish advance above the trading range, or a reversal and another swing downwards in the wide trading range, or trading within a narrower range. The only certainty is volatility, as we saw with the big swing down on Friday and then up again on Monday.

The so-called earnings recession is effectively a reality. Even in cases where companies meet or beat estimates for earnings, they frequently either miss on revenues or offer lowered outlooks. The strong dollar gets some of the blame here as well. And the winter weather as well. To me, these are mostly short-term issues, which of course is the time frame and mind set for most traders, so any stock dips due to these short-term issues should be buyable dips for longer-term investors or even swing traders. That is not to suggest that stocks couldn't become significantly cheaper in the coming months, but that news on the earnings front will get rosier a few months down the road.

NASDAQ futures are down moderately, indicating a little pullback at the open. That reflects some trader anxiety that the rally may have run out of steam, which is the main takeaway from the fact that NASDAQ closed yesterday well below the level it opened at.

Fed funds futures point to liftoff in December, although there is almost a coin-flip chance that liftoff could occur in October. There is only about a coin-flip chance of a second hike next March, so we are still talking about an expectation of very low interest rates for a full year at this stage. Personally, I expect the economy to bounce back from the winter slowdown strongly enough that October will soon become the likely time frame for liftoff. I would go so far as to suggest that this December vs. October struggle may be the reason that people are worried about stocks right now - a feeling that that economy is weaker than people feel comfortable with. As I said, the outlook will be rosier in a couple of months.

I'll continue to focus on buying big dips of quality stocks with an expectation of holding for one to three weeks for a 5% gain. I have some flexibility, so in some cases three weeks could stretch into months, but it is the quality of the stock that drives the decision for me to hold longer.

-- Jack Krupansky

Tuesday, April 21, 2015

NASDAQ looks to zoom out of the crossroads

NASDAQ is still sitting at a crossroads, unable to decide whether to finally break out of its wide trading range. People will give it another shot today, maybe out of relief that the so-called earnings recession has not been as gloomy as expected.

We're poised just a few points below the magical psychological 5000 level, so  it really is a non-brainer to trade above that level - again, but whether it will stick this time for more than a day or two remains to be seen.

NASDAQ futures are up moderately sharply, indicating a decent pop at the open, but as always we must note that futures and the opening move are not reliable indicators of the trend for the rest of the day. NASDAQ's trend remains at the mercy of the hedge funds - we will have to see whether they build on the opening rally or sell into it on an expectation that we are once again topping out at the upper edge of the wide trading range and due for another reversal to trade back downwards in the trading range.

There is some risk that a strong rally today could mostly be due to the forced-buying of short-covering - a classic short-squeeze, which will look great for today, but then runs the risk that the shorts will simply return with a vengeance in the coming days.

The great wildcard is money flows from retail and institutional investors such as pension funds, but they are not very predictable or even, leaving the hedge funds in charge. A little more positive inflows could finally take us out of the trading range, but that remains a great unknown, especially as U.S. stocks are now considered relatively overvalued.

I remain fairly fully invested, with some reserves, but I'll be looking to take some profits to start raising reserves again. Mostly I will remain vigilant for big dips in quality stocks.

-- Jack Krupansky

Monday, April 20, 2015

NASDAQ continues to circle the crossroads

As dispiriting as the sharp decline for NASDAQ was on Friday, we remain essentially at the same crossroads as earlier in the week, with equal probabilities of a move in any direction - maybe further declines back downwards in the wide trading range, an eventual advance upwards to a new and more sustainable level above the magical psychological 5000 level, or more narrow range trading.

There was no true economic or business fundamental to drive the sharpness of the decline on Friday. Sure, people have come up with all manner of excuses (it was Chinese officials!... it was Greece!). It may indeed have been the Bloomberg terminal outage, which can be very disruptive for trading, flying blind. There is also simply the possibility that one of the hedge funds kicked off a selling program that had the precisely desired effect - to confuse people into believing that they were about to miss out on an emerging trend reversal. We will see soon enough. There is a solid chance that that reversal was real and will continue, but there is equal probability that it was a one-shot, Hail-Mary, last-ditch attempt to derail NASDAQ from establishing a solid beachhead above the 5000 level. And the lazy (or lurching) up and down swings within the wide trading range is the default behavior anyway.

Sure, the earnings outlook is less than exciting, but not as bad as some are asserting. Still, traders do need to earn a living too, so they will make the best - or worst - of even limited news.

NASDAQ futures suggest a moderate bounce at the open, indicating that traders feel the sell-off was a little too much and a normal recovery bounce is in order. As always, futures and the opening move are not reliable indicators of the trend for the rest of the day. The big question is whether hedge funds decide to sell into the early rally and extend the sell-off from Friday, or whether they might decide to take advantage of over-extended shorts and do enough buying to kick-off a forced-buying short-covering short-squeeze rally and nudge NASDAQ back up closer to the 5000 level.

In any case, NASDAQ remains within its wide trading range, where volatility is the only certainty.

I'm still recovering from the financial shock of paying my taxes. It will probably take me a couple more weeks to fully get back to a full trading strategy. I did manage to buy a few stocks on the big dip on Friday and will continue buying dips for short-term (one to 3 weeks) trading gains, nominally 5%, as stocks recover from the typically irrational slamming of quality stocks that occurs so often on Wall Street.

-- Jack Krupansky

Friday, April 17, 2015

NASDAQ still stuck at the crossroads

The good news is that NASDAQ has now managed to close above the magical psychological 5000 level for two consecutive days (again, for a second time). The bad news is that upwards momentum was relatively weak when we crossed above 5000 and has now completely evaporated. That can mean only one thing for swing traders - time to reverse and bet on a swing back downwards in the wide trading range. Sure enough, NASDAQ futures are down sharply on no particular fundamental economic or business news. There is no guarantee that a renewed downwards swing will occur, but you can't blame traders for trying.

It is also a Friday, so some decent fraction of short-term speculators will tend to close out positions ahead of the weekend when anything can happen. This means selling if they are net long, or buying if they are net short. Given the weakness of the past two days, which may have been due to some short-selling on weak upwards momentum, a rally off any opening low is a distinct possibility.

Given the lack of a fundamental cause for the sharp decline in futures, we could see a decent recovery rally from any morning low.

OTOH, given that the hedge funds remain in charge of the market, everything hinges on whether they decide, on net, to flip the switch and shift to a risk-off bias and bet on a downswing in the trading range, or whether they buck that trend and raise the ante for a risk-on bias and kick off a big short-covering rally by catching the more bearish traders off guard.

As always, we must be aware that futures and the open market move are not reliable indicators of the trend for the rest of the day.

Personally, my primary trading strategy is still based on playing big dips on individual quality stocks, so a decline here works to my benefit.

A correction? The permabears are ALWAYS forecasting corrections, so that's not really a forecast per se.

Volatility will remain king.

The real wildcards are retail and institutional investors, like pension funds, who must decide whether to pour more money into the stock market or take some out. A fair chunk of those fund flows are targeted at hedge funds, which have a very wide mix of strategies and an everchanging risk bias, so that even increased inflows don't necessarily mean a bullish stock market move on any particular day. Volatility thrives in this kind of environment.

In short, NASDAQ remains at a crossroads, with equal probabilities of another leg up in the longer-term advance, a swing back downwards in the trading range, or lots of volatility in a narrower trading range.

-- Jack Krupansky

Thursday, April 16, 2015

NASDAQ stubbornly lingering at the crossroads, lacking conviction

Sure, a 34-point gain is a nice thing, and it is great to see NASDAQ close above 5000 again, but... it was all too halfhearted, with less than a 1% gain and a pullback from the peak into the close. It was more of a check mark, been there, done that, kind of thing than a solid move with real conviction. IOW, there was nothing in yesterday's trading that inspired great confidence. That said, it is always true that a bull market climbs a wall of worry.

Some of the gain on Wednesday may simply have been the forced buying of short covering, in which case we can expect to see some renewed downwards pressure as soon any lingering buying pressure peters out.

We remain at a crossroads, with equal probabilities for a breakout to new highs, a reversal and trading back down in the wide trading range, or volatile trading within a narrower range at these crossroads.

The big unknown is the net fresh money flows - is new money flowing into the stock market from retail investors and institutional investors such as pension funds, or is money flowing out of the stock market. Absent fresh money, hedge funds will quickly revert to trading swings in a wide trading range.

In any case, the hedge funds remain in charge and volatility is the game plan.

NASDAQ futures are down moderately, indicating a moderate pullback at the open. There is no great catalyst, other than lingering anxiety over a suspected earnings recession. The worry is that a lot of companies will meet reduced Q1 targets, but offer weak guidance going forward. As always, futures and the opening move are not reliable indicators of the trend for the rest of the day,

A bit of profit-taking is not unwarranted after the recent advance. Typically that is the default if there is not sufficient fresh money flowing into the market, and especially when that flow is uneven.

My tax checks are now officially in the mail. It will take a few days before the cash is debited from my checking account, and then I can focus on adjusting my cash reserves to figure out exactly how much capital I can allocate for trading.

My main focus today will be on the Virtu (VIRT) and Etsy (ETSY) IPOs this morning. High frequency trading and crafts - what a great combination that perfectly represents the wide diversity of our modern economy! I'll buy some of each at the open, put in limit orders to sell half at a 10% gain, and sell that half at the end of the day if they go nowhere, and then trade on 5% dips after today.

-- Jack Krupansky

Wednesday, April 15, 2015

NASDAQ still stuck at the crossroads, hoping Intel will provide a catalyst

NASDAQ remains stuck a stone's throw beneath the magical psychological 5000 level. The modest declines of the past two days have been dispiriting, but haven't changed the overall picture or outlook significantly. Part of the problem has been concern that we might be facing an earnings recession - too many companies not revising their outlooks upwards. Maybe Intel (INTC) will break this logjam of stagnation, with either a decline on disappointment with their quarterly results and outlook,  or maybe a relief rally on relief that they didn't have even worse news than was expected. Or, maybe the market will yawn at Intel's lack of definitive positive or negative news and continue with the narrow range trading of recent sessions.

NASDAQ futures are up moderately, probably on relief that Intel didn't have worse news, indicating a moderate rally at the open. As usual, we must note that futures and the opening move are not reliable indicators of the market trend for the rest of the day. I do think it is very likely that we will see a decent relief rally based on Intel, but there is an equal probability that hedge funds will simply sell into any rally, based on the lack of a stronger upwards catalyst.

In any case, we are at the complete mercy of the hedge funds and whether they decide to crank their risk exposure up or down, based primarily on expectations of which direction the market might move faster. The recent upswing has run out of steam, but that's no guarantee that anther major downswing will gain more momentum than either a renewed upswing or more rapid swings in a narrower range. The recent modest declines may simply be a classic case of the market taking a breather between two legs of a larger advance.

Fed funds futures have pulled back a little, with October being a bit less than a coin flip (47%) for liftoff, with December being the more likely time frame for liftoff, but even then with only a 58% chance. A second hike in March is only modestly better than a coin flip at this stage. Personally, I expect the economic data to improve over the coming months, so that October, and maybe even September, will once again be the more likely time frame for liftoff. Either way, interest rates will remain quite low for an entire year, which is well beyond the radar horizon for most traders and short-term speculators.

I finally wrote all of my tax checks yesterday and will finally have the relief of mailing them today. Still, they won't be completely off my mind until they debit my checking account and I once again see exactly how much cash I really have to work with going forward. Hopefully in a week I can start getting my trading back to a reasonable pace.

I'm doing some research on likely tech IPOs for the rest of the year, so that I can reserve enough cash for them, both for long-term positions and for short-term trading of swings.

-- Jack Krupansky

Tuesday, April 14, 2015

NASDAQ still at a crossroads

Yeah, it was disappointing to see a nice rally at the open for NASDAQ yesterday peter out, evaporate, and then turn into a loss, but that's par for the course for this market. The fact that it ran out of steam by mid-morning was a telling sign. They call it selling into a rally. There are probably enough hedge funds poised to play a reversal and bet on a new swing back downwards in the wide trading range. Some of this also gets blamed on jitters about earnings season, especially a concern about an earnings recession, with companies either missing on revenue expectations or guiding down for this current quarter. Ultimately is is a question of money flows, so absent semi-decent inflows from retail investors and institutional investors to support the advance, hedge funds will revert to playing swings in the wide trading range.

Traders will react as each of the major companies reports, both before and after the trading session. It may take a few more days for people to get a handle on whether the feared earnings recession is taking root or not.

NASDAQ is still sitting within an easy stone's throw of the magical psychological 5000 level. We saw it again for awhile yesterday, but there hasn't been enough fresh money from non-hedge fund investors flowing into the market to make it stick.

We remain at a crossroads, with equal probabilities for a new leg up of the advance to take us cleanly over the 5000 level, a reverse and new swing downwards in the wide trading range, and trendless trading in a narrower trading range as traders key off of even the tiniest and most insignificant bits of news as if the short-term had some meaning beyond the short-term.

NASDAQ futures are fluctuating around the flat line, indicating a mixed open, that could be up or down, with no conviction. As usual, futures and the opening move are not reliable indicators of how the market will trend for the rest of the day. Volatility will be in charge, again.

We could well see another run at the 5000 level today, but it could fail to stick, much as the failure we saw yesterday. It's difficult to say whether short-term speculators might bet bullishly or bearishly in advance of the quarterly report for Intel (INTC) that comes out after the close. There is a lot of pessimism over PC shipments these days, but whether Intel adds to that pessimism or gives us some sunnier news is a real crap shoot.

Fed funds futures are indicating a coin-flip 50% chance of liftoff in October, and only a 33% chance in September. A second hike is not likely until next March. So, interest rates will remain quite low and supportive of stocks for at least an entire year. The fly in the ointment at this stage is not the Fed or interest rates, but whether the economy is just too anemic to support the lofty valuations of stocks.

My focus for today will be finally deciding how to calculate my estimated taxes for this year and writing the checks for all of my various tax payments so that tomorrow I merely need to drop them into the mail. I could pay them electronically, but I'd rather have the cash stick around, earning interest for at least a few more days.

I'll need to recalibrate my trading parameters for my reduced capital, especially how much I keep in reserves. Maybe next week I can get back to a decent level of trading.

-- Jack Krupansky

Monday, April 13, 2015

NASDAQ pausing at a crossroads

NASDAQ hasn't had any recent strong rally days, but has nonetheless managed to crawl back up to within spitting distance of the magical psychological 5000 level. So what's next? Ummm... Uhhhh... nobody's really sure. NASDAQ is poised near the upper edge of its wide trading range, where normally it might reverse and head back down. We are faced with the prospect of a so-called earnings recession this quarter. Stock valuations really are a bit on the high side. Ultimately it is a question of money flows and whether retail and institutional investors will be allocating more money to U.S. stocks. And we remain at the mercy of the hedge funds who can and do reallocate their stock exposures on an almost daily basis. There is also the traditional "sell in May and go away" dispirit looming just a few weeks away and more than a few people may be inclined to jump the gun. So, NASDAQ has arrived at a crossroads.

The are basically three ways the market could move right now. Hedge fund bulls could assert control and put the NASDAQ 5000 level in the rear-view mirror. Or hedge fund bears might take charge again and drag the market down towards the lower edge of the wide trading range. Or we could wobble within a narrow trading range at these levels, while more preliminary quarterly earnings reports come out for Q1 and revised outlooks for Q2 are issued, impatiently waiting until the bulls and bears make up their minds. Or, as sometimes actually is the case, the market could indeed climb the proverbial wall of worry and incrementally move upwards by a couple of percent in the coming weeks as actual news provides the usual mix of both positive and negative news.

The more rational move for the market would be to take a breather and wait for confirmation on at least a few key quarterly reports before heading up or down, but I can't recall a time when the market was particularly rational.

The really good news still is that all of this tentative movement in a trading range is establishing a really solid base of technical support for a further market advance that would leave the 5000 level behind as a bit of ancient history, with the dot-com era being more of a historical footnote than our primary guide.

I'm still optimistic that we have a decent amount of upside ahead of us, but it is always unwise to call the market direction with too much confidence. I personally am indeed long and overweight the market, but with semi-decent cash reserves so that I can take advantage of dips as well.

NASDAQ futures are hovering with just a modestly negative tone, as if traders were in favor of the market taking a breather and a little bit of profit-taking. This suggests the market may dip a little at the open. As usual, we must bear in mind that futures and the opening market move are not reliable indicators of how the market will trend for the rest of the day.

In truth, my primary financial focus for the week is paying my taxes and estimated taxes on the Wednesday the 15th. Last year was a great year for me, my best ever, so my liability is significantly greater than my previous estimated payments. This year is not shaping up for me to be anywhere near as good, so I am faced with the tough call of deciding how much to pay for estimated taxes. My accountant says I'll be okay as long as I pay 90% of actual tax due for the coming year, so now I have to project that number. It might be easier for me to guess where the stock market is going! In any case, all of this tax anxiety will be behind me sometime on Wednesday when the checks go in the mail. Electronic payment is a possibility, and my preference, but keeping the cash a few extra days is a preference as well.

-- Jack Krupansky

Friday, April 10, 2015

NASDAQ maintains a slow trend upwards

The moderate (but not great) NASDAQ gain on Thursday confirms that a gradual upwards short-term trend is in place. That is not to say that more sharp downward moves are not in the cards, but that at least we have a trend in place.

NASDAQ is actually only 26 points away from the mythical psychological 5000 level, again. There is nothing fundamental about that level, but it does have a way of scaring people away. We could actually see NASDAQ above 5000 (again) today.

We are still in a trading range, which means that this nascent upwards trend could run out of steam at any moment. Or not. The market will stay in a training range until enough money has flowed in or out of the market to finally break the stalemate between the bulls and the bears. Whether we stay in this one for another another day, week, or month is hard to say. There actually is a chance that yesterday was the last day, but that is by no means a slam dunk.

Earnings season is likely to be as uneven as last quarter, keeping everybody on the defensive, but there will probably be enough okay reports and enough occasional positive surprises to offset the negative surprises and keep the market supported for an advance out of the trading range.

Today is a Friday again, so some fraction of short-term market participants can be expected to close positions ahead of the weekend when anything can happen. If they are net long, that means selling, but if they are net short, that could mean buying.

As we are nearing the 5000 level, there are probably more than a few hedge funds betting on a reversal and swing back downwards in the trading range. Any pop in the market could cause a big leap due to the forced-buying of short-covering. That would superficially be a positive, but short covering tends to be reversed in the following days unless there is a more solid shift in the underlying risk bias towards outright bullishness.

The amusing thing about hedge funds is that they are more than happy to steal each others' thunder and take the wind of of each others' sails. There is no honor among thieves. Just lots of volatility.

NASDAQ futures are skittish, waffling between positive and negative territory, indicating a mixed open. People are still waiting for the hedge funds to shift their risk bias, either more bullish or more bearish. As always, futures and the opening move of the market are not reliable indicators of the trend for the rest of the day.

Fed funds futures have firmed a bit since the purportedly weak jobs report from last Friday, with October now once again the most likely time frame for liftoff, with a 53% chance. A second hike, to 0.75%, is priced in for next March, with modestly less than a coin-flip chance for that hike to be in January. All of this is good news for stocks, although the weak nature of the economic advance is a bit of a drag that roughly balances it out.

-- Jack Krupansky

Thursday, April 09, 2015

NASDAQ struggling to find short-term trend

That was yet another semi-decent rally on Wednesday for NASDAQ, but still only semi decent and not even a full one percent, let alone the 1.25% that I would look for to signal a strong rally. IOW, we're still drifting sideways in a wide trading range, with no clear short-term trend. We may drift back up to the 5000 level again, or maybe back down to the 4800 level, but there is no strong sense of conviction for either a bullish advance or a bearish correction.

Earnings reports may or may not provide sufficient catalysts for stronger market moves, but for the moment they may just provide lots of volatility to fuel range-trading moves and sharp moves in both directions for individual stocks. There will be plenty of dips to buy for individual stocks.

Q1 was indeed dogged by disappointment over earnings growth and the outlook for Q2. Q2 should indeed be better, but so often the whisper numbers take the wind out of the sails of even decent numbers.

NASDAQ futures are bouncing around, not sure whether they want to be up or down, indicating a mixed market open, maybe up a little, maybe down a little. People are waiting to see what the next moves are for the hedge funds - will they add risk (buy) or take more risk off the table (sell), which has more to do with speculation about short-term market swings rather than much to do with longer-term economic and business fundamentals. Of course, we must always note that futures and the opening move are not reliable indicators of the trajectory of the market for the rest of the day.

Fed funds futures are still indicating December as the more likely time frame for liftoff of interest rate, but with almost a coin-flip (49%) chance of liftoff in October. The odds favor the fed funds target rate being only 0.75 in a year. This is a double-edged sword, with low rates being supportive of stocks, but a relatively weak economy being a drag on revenue and earnings growth.

-- Jack Krupansky

Wednesday, April 08, 2015

NASDAQ gets ready to get ready for earnings season

Sure, it's kind of depressing being stuck in a trading range, but that's par for the course when valuations are stretched. Some argue that stocks are very overvalued, while some argue that they are not. It all depends on your valuation model, and there are enough different models and enough different and subjective criteria for evaluating those models that everybody goes off in their own direction. Personally, I'm not worried, but I do recognize that the fear factor does result in additional volatility due to reduced confidence in stock prices vs. perceived value.

Earnings season is upon us and has a very good prospect for being the main driver of market momentum for the next month or two. There is some anxiety that we are in an earnings recession, but that is balanced by the fact that the outlook for Q2 was so thoroughly and severely cut in Q1 that companies have a very low bar that they should easily be able to leap over in Q2.

The Fed? Hah! That allegedly weak jobs number from Friday leaves the Fed essentially out of the picture for a good six months, which is well beyond the near-term radar of traders and short-term speculators. June? Only a measly 6% chance of a hike - essentially no way. There is now only a 50% coin flip chance of liftoff even in October, and a relatively weak 61% chance for December. September? A skimpy 32% chance, a hedge, not a bet. IOW, October is a maybe, with December as the likely time frame for liftoff - unless they economy does indeed strengthen significantly in the next two quarters. I do personally believe that the economy will indeed strengthen incrementally over the next two quarters, but how strong that growth will be is a matter of intense (and fruitless!) debate and will simply be a matter of waiting and watching it play out.

NASDAQ futures are up modestly, indicating a modest pop at the open, but as always futures and the opening move are not reliable indicators of the trend for the rest of the day.

NASDAQ was volatile but weak yesterday. That was bad news and suggests that enthusiasm for a renewed march to 5000 is evaporating, but I wouldn't read too much into that one day. The hedge funds are not known for acting methodically like clockwork. I think that they are in a circling mode, patiently waiting for the right time to pounce, either for a bullish move or a bearish move, with not a lot of certainty as to which it will be. They may indeed make another push to the downside, but there really is a fairly decent chance that they will see more profits to the upside, even if the trajectory to get there is very volatile on a daily and intra-day basis.

There is also some emerging enthusiasm for a recovery in Europe. The strong dollar and European weakness has been dogging companies that have a significant international exposure, so even just a hint of a perception of possible potential for improvement could be a significant boost for U.S. companies and stocks.

-- Jack Krupansky

Tuesday, April 07, 2015

NASDAQ to continue wandering in its trading range

That was a halfway-decent bounce-back and rally for NASDAQ on Monday, but only superficially. We still have memories of the days when 30 points was a big deal, but up here near the 5000 level it amounts to little more than half a point - 0.62%. The bounce from the sharp 33-point decline at the open was more impressive, but the net gain for the day was less than that early morning bounce. Further, NASDAQ closed at a lower level than it was at at 12:30 PM. IOW, this was not a rally that had legs. It was most likely driven by the forced buying of short covering, by those who thought that the weak jobs number was going to be a real negative for the market. The real bottom line is that there was no significant evidence of any real enthusiasm for buying.

In short, NASDAQ remains locked in its wide trading range. That's not a completely bad thing, but it does mean that volatility is the name of the main short game. Sure, the long-term upwards trend remains intact, which is great news for serious, long-term investors (like me with my retirement accounts), but it does just feel more than a little unsettling for everybody else. But if you like volatility, you are set in spades.

The relatively weak jobs number from Friday did have the effect of pushing out expectations for the first Fed rate hike move - from October to December. Fed funds futures now show a 61% chance for liftoff in December and only a 48% chance in October, and 30% chance in September. Personally, I think the data will evolve to still make October the likely time frame for liftoff. But the bottom line is still that the fed funds target rate is not likely to be greater than 0.75% an entire year from now, which is well beyond the visibility of stock traders. That's good news for stocks.

NASDAQ 5000 is still coming (again), even if the path will be rather indirect, bumpy, and unpredictable. It's less than 2% away. The really good news is that all of this range trading does an excellent job of building a very solid support base upon which a sustainable advance above the 5000 level can be built. Traders like to see that kind of thing.

NASDAQ futures are up modestly, indicating a modest pop at the open, but as always (just look at yesterday!), futures and the opening move are not reliable indicators of the trajectory of the market for the rest of the day.

-- Jack Krupansky

Monday, April 06, 2015

NASDAQ to focus on volatility despite jobs number

The purportedly weak jobs report from Friday, when the markets were closed, will get the attention today, but as I frequently note, a lot of market movement is strictly technical in nature and driven in large part by shifting risk bias adjustments by the hedge funds, so that actual fundamental news is used more as cover for those underlying technical movements rather than a guide to the longer-term trend for the market.

Sure, we'll see a big hit at the open, but the remainder of the day is anybody's guess, other than that we can expect plenty of volatility.

The main question is whether the hedge funds will use the news as cover for a broader and deeper sell-off, or as a fake-out to get too many people leaning in a risk-off bias, and then... pull the rug out from under them, and actually switch to a stronger risk-on bias to kick off a big forced-buying, short-covering, short-squeeze rally. Seriously, it could go either way, or anywhere in between.

The real truth is that this supposedly weak jobs number is not so weak, well within the margin of error for this data series, and the mere fact that it holds the Fed in check for a longer period is a net positive for stocks.

Good economists will remind you that you should never treat the latest number in a data series as an indication of a trend. Sure, Wall Street traders do that all the time, but that is no guide for the long run, which is what true investors are interested in. Or at least supposed to be interested in.

Some are chattering that we should worry about a recession. Some are chattering about an earnings recession. Well, a lot of people chatter. (Do I chatter too?!!) It is best to ignore most of the chatter, and focus on the needles in the chattering haystacks - your own best thinking on the underlying fundamentals for the economy and individual businesses for the long term.

Personally, I would not read too much into reduced earnings outlooks. In fact, we should applaud the prospect of companies being courageous enough to be conservative in guidance. At this stage, we are more likely to see positive earnings surprises in the coming quarter, especially now that guidance is much more conservative.

NASDAQ remains in a trading range, and will remain there was awhile, with plenty of volatility. Get used to it. Nonetheless, the underlying long-term trend is higher.

NASDAQ futures are down sharply, indicating a sharp decline at the open, but there is no certainty that this will lead to a much deeper sell-off or merely quickly lead to selling exhaustion and be a buyable dip. As always, futures and the opening move are not reliable indicators of the trend for the rest of the day.

Sitting here trying to imagine what calculations are going on in the heads of the hedge funds traders... is not an easy task, other that to fall back on the one certainty, volatility.

I may do a little buying around 10 AM and then later in the day. I certainly can't predict the depth of the reaction to the weak jobs number, but I can predict that eventually we will bounce back, even if I can't predict exactly when or the exact path the market will follow in the meantime.

-- Jack Krupansky

Thursday, April 02, 2015

NASDAQ stumbling around in its trading range

This week continues to be a bit weird. Tomorrow is a trading holiday due to Good Friday, so that throws everything off. Today will trade sort of like a Friday, with some fraction of speculative market participants closing out short-term positions ahead of the weekend, when anything can happen. That could mean more buying if they were net short, or more selling if they were net long.

People are anxiously awaiting the monthly employment report, which comes out tomorrow morning, but... tomorrow is a trading holiday, so that makes things doubly weird. So, expect a lot of extra volatility as twitchy traders attempt to cope with this trading anomaly.

The net net is that NASDAQ remains in a wide trading range, and maybe even in a narrower sub-range of that wider range. It is all up to the hedge funds as they themselves get jerked around by end of quarter withdrawals and uneven inflows.

NASDAQ futures are down moderately, indicating a moderate pullback at the open, but as always we need to accept the fact that futures and the opening move are not reliable indicators of the market trend for the rest of the day. Yesterday we saw a dip at the open, with the low for the day at 10 AM, but then the market trended higher for the rest of the day, closing 30 points above that morning low. It was still a moderate loss for the day, but not as bad as early sentiment and early trading would have suggested. Volatility indeed.

Some people believe in seasonal trading, and "Sell in May and go away" is one of the top trading patterns. Even there, there is dispute over whether May is early or late May or even mid June or the beginning of April (or even February!), not to mention the fact that some traders will try to jump the gun to get an edge on their fellow traders. I would simply note that these are only statistical patterns, so even if they work on average (at least sometimes), they frequently don't work every time. Still, it is a reality of the market. Personally, I see it more as the froth overlying the underlying market.

The economy still continues to improve incrementally, albeit at too slow and uneven a pace to satisfy twitchy Wall Street traders. Sure, there is some concern that the fall and winter were a lot weaker than expected, with plenty of quarterly reports and outlooks that were weaker than expected, but a fair number of people expect the spring and summer to be a lot stronger. Again, even more cause for volatility.

Fed funds futures continue to point to October as the most likely time frame for liftoff of interest rates. June is still very unlikely, but of course this all will be data-driven, but that means the Fed FOMC interpretation of the data not necessarily the raw headline numbers. The Fed also tries to figure out how to factor out transitory factors. Futures point to a second hike in either January or March, with the fed funds target rate no higher than 0.75% a year from now. This is all very supportive of stocks.

I'm still on limited trading for the next few weeks as I cope with raising cash for tax time. That leaves me with a much more limited amount of trading capital, so I have to be much more judicious with trading positions, at least for the moment.

-- Jack Krupansky

Wednesday, April 01, 2015

NASDAQ continues to embrace volatility

Yeah, the big loss on Tuesday was depressing but.. hey, it didn't completely erase the gain on Monday, let alone the gain on Friday, so we are still ahead of the market low on Thursday. We remain mired in a wide trading range, and overwhelmed in volatility.

Late last night NASDAQ futures were down 55 points, on no particularly significant catalyst, but then they were actually up modestly earlier this morning. As I write this they are now down moderately. Wait five minutes and they will change dramatically again. That's what volatility is all about.

As I always note, hedge funds are in complete control of the market. Not that any given hedge fund is calling the shots, but collectively, each acting alone, the sum total is the market. This is one of the consequences of banning traditional prop trading desks at the investment banks. It may also be a consequence of boomers beginning to shift from asset accumulation to retirement and pre-retirement de-risking of assets. IOW, traditional mutual funds are less of a force in the short-term movement of markets. In any case, big money seeking big gains is increasingly dependent on the hedge funds, and trading of volatility is an easy path to easy money for the hedge funds. The problem is that the more people starting doing the same trades, those trades stop working and the hedge funds have to madly search for new trades, or revert to swing trading, pushing the same old stocks one way and then the other as buying or selling pressure waxes and wanes.

NASDAQ futures are now down moderately (15 points or so), indicating a moderate additional pullback at the open. Again, there is no particularly significant catalyst for the decline. It's more of a technical positioning and placing of bets. As usual, I need to note that futures and the opening move are not reliable indicators of the market trend for the rest of the day. It is still very possible that the hedge funds want to take another crack at breaking down below Thursday's low, or at least doing a test, but it is also still very possible that the opening decline could be the low of the day and that the market may trend up for the rest of the day. Either way, the hedge funds will exploit volatility within the trading range.

At least for right now, it does look like NASDAQ will be headed back towards 5000 in the coming weeks, even if the path is a bit... bumpy.

I'll be picking up some shares of the GoDaddy (GDDY) IPO at the open. I'll probably sell half on a 5% or 10% pop, and then trade on dips in the coming months.

I've completed my initial retirement contribution investments, with a modest reserve for future opportunities.

I'm still focused on corralling all the cash to pay my taxes on April 15th. Once I get that all squared away I will be able to make some decisions about my parameters for trading going forward. I'll continue doing a little trading in the next couple of weeks in any case, but be a bit more selective.

-- Jack Krupansky