Thursday, June 25, 2015

NASDAQ seeks to establish stronger technical support in the 5100 range

NASDAQ desperately needs to try to establish more solid technical support in the 5100 range before it can make a sustainable advance to the 5200 level and beyond. It can gain this technical support if it can manage to bounce today after yesterday's decline and without setting a new low below the level of Friday's dip. We managed to fill almost all of Monday's opening gap, which is a traditional technical requirement before continuing a sustainable advance. If we can bounce here today, NASDAQ will essentially establish a double bottom pattern that generally is quite bullish. Unfortunately, it is also quite possible that we just don't have the momentum or money flows to sustain much of an advance at this stage, so we might be right back here within days. If the bounce doesn't stick today, the recent advance will continue to crumble.

NASDAQ futures are up moderately, indicating a bounce at the open, but as always we must caution that futures and the opening move are frequently not reliable indicators of the market trajectory for the rest of the day. We could see the opening rally fizzle out as people sell into the rally, so we could actually see a new near-term low below Friday, which could usher in a more sustained sell-off, which could put us right back into lazy range trading.

Ultimately our fate remains in the hands of the hedge funds. They need to decide whether to commit more capital to propel the advance, or take money off the table and bet on trading back down into the trading range. Some of them will be desperately closing positions to fund quarterly redemptions, but that could mean buying to close short positions as well as selling to cover long positions, so redemptions may or may not be a net move for the market much or may cause an excess of volatility. Either way, hedge funds have to pull out the stops to do their best to deliver acceptable numbers for the end of the quarter.

Greece awaits its eleventh hour, which will arrive whether anyone likes it or not. They could play into overtime - run out the clock, hit technical default, and then retroactively shuffle some cash to seal the deal, but either way a deal will get done. Nobody will be happy, except that the proverbial can will have been successfully kicked down the proverbial road. The open question is how far down the road will they kick the can this time. We will undoubtedly face yet another Greek financial crisis within a year as they still haven't arrived at a formula for a final solution.

-- Jack Krupansky

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