Wednesday, June 03, 2015

NASDAQ remains unsure of its near-term trend

It's great that NASDAQ futures are up sharply this morning, and it may be enough to vault us above the 5100 level and maybe even a new all-time closing high, but with no clear and convincing fundamental news and no great catalyst behind the move and ongoing uncertain money flows, it too may quickly peter out and lead to more trend-less range trading in the coming days. It's all up to the hedge funds and whether they choose to take risk off the table and sell into the rallies, or whether they switch to more of a risk-on bias and pile on to the rallies. There is nothing to stop them from doing either.

We remain locked in range trading, alternating between a wide range and a narrower range. Sure, sometimes, slowly, the range shifts a little higher, but not by enough for the market to truly feel like it is going higher in a sustainable manner.

NASDAQ futures are up sharply at this moment, indicating a sharp rise at the open, likely above the 5100 level again, but as always we must exercise caution since futures and the opening move are frequently not reliable indicates of the market trajectory for the rest of the day.

Why the sharp move? Forget any headline excuses - traders always make something up - this is almost certainly a bald attempt to manipulate the market by traders and speculators, with the basic thesis being that too many people are too short since the market is feeling toppy, so a good solid nudge can likely kick off the forced buying of a short-covering rally and classic short squeeze as shorts hit their stop-loss limits and are forced to buy to cover their shorts to protect their gains and prevent further losses. This market manipulation tactic frequently works, and looks great on paper, but does nothing to improve the health of the market since the angry shorts will simply wait a day or two or three and then be back with a vengeance - unless enough fresh money just happens to flow into the market in those days, which is where the hedge funds may or may not come in. The hedge funds could indeed pile on for a few days or weeks to make their June quarterly numbers look better, but even they are more likely to roll over and switch their trading bias back to risk-off as soon as any short-term upwards momentum peters out in the coming days or weeks.

Volatility remains king.

-- Jack Krupansky


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