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

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