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

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