NASDAQ waits at the crossroads, again

Here, we are again, NASDAQ sitting modestly above the magical psychological 5000 level, which is great, but with no real momentum. Enthusiasm for a brighter Q2 could drive the market higher, but lingering anxiety from Q1 and the specter of "sell in May and go away" are placing a damper on the market. It all comes down to the hedge funds - how will they adjust their risk bias for the days and weeks ahead, and which direction do they see as having the least resistance and greatest potential for gain. Will this finally be the day and week when we finally break out of the old trading range of 4900 to 5100... or not?

It was certainly disappointing to see the opening rally on Monday fizzle and dissipate through the day, but no big surprise either since it is very typical in a trading range.

NASDAQ futures are down moderately, indicating a moderate pullback at the open. As always, we must note that futures and the opening move are not reliable indicators of the market trend for the rest of the day.

It all depends on how many people are lined up with sell orders, ready to pounce on any market weakness vs. people who are lined up with buy orders ready to buy a dip. Will a modest dip inspire buying, or do people need to see another big dip such as last Thursday before their wallets open up?

NASDAQ does have room to lazily trade back up to 5100 or at least 5050, but it is also noteworthy that we have not yet established any decent closing support within this 5000 to 5100 range - no days when the market closed down and then closed up smartly the next day. It's like all slippery slope. We can jump up onto the slope as many times as we want, but then down we slide, primarily due to lack of any decent momentum of strong fresh money inflows into the market.

One possible scenario for today is that the opening weakness turns into another moderate recovery rally, peaking in the 5020 to 5060 range, and then selling off again to lead to either yet another mediocre gain or a modest outright loss. Unfortunately, there are equal probabilities for a renewed sharp sell-off, or more narrower range trading, like in the 4975 to 5025 range.

In short, I am patiently waiting for the ghosts of Q1 to dissipate and for the prospects of Q2 to take the driver seat. Meanwhile, I'll continue to be a buyer on big dips of quality stocks, targeting 5% gains, as my primary technique for playing all this range trading.

-- Jack Krupansky