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

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