Tuesday, June 02, 2015

NASDAQ bumping into resistance at the 5100 level

The 5100 level is certainly giving NASDAQ a lot of resistance. Sure, we actually have managed to close above it, just barely, but not with enough momentum to blast through to a sustainable new high. It's actually comforting to see that the market has enough strength to hang out here near the upper reaches of the 5050 range as much as we have recently. But I wouldn't get too comfortable - traders and short-term speculators will eventually realize that momentum has dissipated, and then they will take the path of least resistance, which means reversing their trading bias to risk off, and then pushing towards the lower edge of the wider trading range. But meanwhile, you've got to give them credit for being as persistent as they have been at testing the 5100 level.

NASDAQ futures are down moderately, indicating a moderate pullback at the open, but as always we must caution that futures and the opening move are frequently not reliable indicators of the path of the market for the remainder of the day. We may trade in a narrower trading range in the 5050 range until short-term players either muster the momentum to burst through 5100 in a sustainable manner, or they finally give up and revert to trading down into the lower reaches of the wider trading range, like the 5000 or even 4950 ranges.

I remain concerned that domestic stock mutual funds have been showing strong outflows in recent weeks, but it is difficult to fully assess the net impact due to the growth of ETFs and hedge fund trading. I personally don't hold any mutual funds - they just don't reliably deliver the kinds of returns I seek, and typically hold a lot of stuff that doesn't agree with their headline objective, plus the fees. I do hold a few ETFs (and ETNs), but mostly I'm into individual stocks, which I can better understand - or at least imagine that I can understand. Who knows, maybe there are a lot of other boomers and younger kids who feel the same way as me, considering mutual funds too stodgy and lame. Sure, sometimes some mutual funds will really perform, but what about the rest of the time?

Meanwhile, volatility remains the only real game in town.

NASDAQ does remain on a modest upwards long-term trend, but the crazy volatility masks that trend. Whether we close out June and July with even margin gains is uncertain, although I do think there is a decent chance, but even that decent chance is more towards flattish gains.

-- Jack Krupansky

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