Thursday, May 21, 2015

NASDAQ feeling a little tired and shaky

Now what? Exactly. NASDAQ has run out of steam and failed to set a new high for this cycle of advance in its trading range. The path of least resistance is to roll over and dive back down towards the lower portion of the trading range. That may indeed happen, but it is neither a slam dunk nor is its precise trajectory. We could see a quick selloff or we could see a slow but equally painful gradual decline over the coming week. But it may also be that there is some underlying strength to this market and that we may only be experiencing the market taking a classic little breather before regathering its momentum to push to another new high.

It would also be good for the market to establish some more solid technical support here in the 5000 range before attempting to reach too far towards a new high in the 5100 range. A down day now and then followed by a semi-decent up day can work wonders for technical support.

Some bad news is that the latest weekly mutual fund money flow report from the Investment Company Institute yesterday showed outflows from domestic stock mutual funds of almost three times the pace of outflows from the previous week. Yikes! What we still do not know is the extent to which ETFs, newer investment methods such as social media portfolios, and hedge funds have taken over from the traditional mutual funds that the older generations knew and loved.

NASDAQ futures are down modestly, indicating a modest pullback at the open, but as always we need to caution that futures and the opening move are frequently not reliable indicators of the market trend for the rest of the day. People may pile on and turn a modest pullback into an all-out rout, or they may buy the dip and push the market higher. Our fate is in the hands of the hedge funds and whether they decide to add risk or reduce their risk.

Meanwhile, I personally will be focusing on IPOs and be on the hunt for interesting dips of quality stocks to buy. And harvesting gains from stocks that do pop nicely. There is always something rallying even in a shaky or outright down market.

-- Jack Krupansky


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