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