Taking a little break

Sorry guys, but as the quarter draws to a close I have decided to take a little break to step back and reflect on where I've been and where I might go next - and ditto for the markets. It could be a break for just a few days, or it could be a few weeks or even a few months, or maybe simply for the summer. I may post on occasion, but don't get your hopes up.

I'll be reviewing and reflecting on my stock trading policy, trading velocity, etc. It is worth noting that what works well during one period will not necessarily be the optimal policy in a coming period. Agility and flexibility are essential, while complacency and over-confidence can crush you. But consistency and persistence can be your friends - or enemies - as well.

Meanwhile, the market seems poised to bounce back from its initial scare over the impending end of the Greek financial crisis. In truth, Greece has little impact on the U.S. economy or American businesses, but traders do enjoy using any excuse they can to boost market volatility.

So, bye for now. Good luck.

-- Jack Krupansky

NASDAQ to bounce around as people digest the impending Greek deal

Traders love a good crisis - it gives them extra volatility to trade. It will all net out in the end in a week or so, but all that crazy volatility is like free money to skilled traders. The trick is to avoid getting caught up in the emotion of the drama.

As I have said from the beginning of the Greek crisis, an eleventh-hour deal is inevitable. This week is that eleventh hour. A week from now the deal will be in the rear-view mirror.

The deal for Greece is virtually in the bag. There may be some nuances that will change over the next few days, but the final deal is the one presented by Europe last week and to be voted on by the Greek people on Sunday. So whatever the proposed deal looks like this Friday will be the final deal. Although, it is worth noting that the details will evolve as implementation of the deal proceeds in the coming months. All that's left is drama, lots of it.

Europe seems to accept that the Greek referendum is a reality and are now focused on selling the deal to the Greek people.

Politically, the Greek leaders can't be seen as being enthusiastic for the deal since it still feels a bit too harsh and too much like austerity for the main political parties to accept it, especially the main party that was elected to oppose exactly deals like this. Still, it's the best deal that Greece can get. The Europeans are also in a hard place, needing to protect a legacy of tough, disciplined financial management (or at least appearances.)

Neither Greece nor Europe wants or can afford a Greek exit from the euro zone. There is like zero chance of that happening. If Greece were to exit the euro, Russia and China and Iran are waiting in the wings to embrace Greece, a prospect which would be a horror for a united Europe. And if Europe can't make Greece work, their odds of success with Ukraine are even less. In short, Europe absolutely will assure that a deal with Greece deal happens.

Granted, this is not a truly final deal to end all deals for Greece, but merely one small step of a rather long process, but a very necessary step.

Sure, Greece may end up being in technical default of their IMF payment tomorrow, but that's a minor detail compared to the political process of accepting the overall deal through the popular referendum on Sunday.

In any case, the deal is effectively in the bag, despite the coming week of drama.

AFAICT, there is only modest risk of serious contagion in Europe itself, and essentially no risk of contagion to the U.S. markets, other than the knee-jerk reactions of traders to the initial shock of the crisis. If anything, U.S. markets are more likely to be viewed as a safe haven.

How will NASDAQ and the markets react? Sure, the initial reaction will be quite negative, but then rationality will gradually supplant the initial knee-jerk emotional reaction. Hard to say how deep the initial dip will be and whether it will just be a single day or two or three, but inevitably the reality of the deal being finalized on Sunday will take root and cause the market to bounce.

To be sure, it may take a couple of days for the pundits to come around to accepting that a final deal is indeed on the table and that the referendum on Sunday is simply a final rubber stamp, and all that's left is a large amount of pompous political theater to make it clear that nobody likes the deal however necessary it may be.

How to play this crisis? The simplest play is to do absolutely nothing, hang tight, sit back and enjoy the show and know that within a week or two or three it will all be ancient history.

More adventurous souls can of course play the dips.

NASDAQ futures are down sharply at this moment, indicating a 1.25% dip 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 week.

Today and tomorrow are the end of the quarter, so some fraction of market participants, including mutual funds and hedge funds will be squaring positions to position their portfolios and profits for the quarter. Wednesday will be the start of a new month and a new quarter. I expect that by Wednesday the reality of an impending Greek deal will have set in.

-- Jack Krupansky

NASDAQ stumbles, seeks direction

Where is NASDAQ headed next? Uh... absolutely unclear, or as clear as mud to be more precise. The recent advance has faltered and so far NASDAQ has not been able to establish any decent  technical support in the 5100 range, breaking below last Friday's closing and intraday levels yesterday. That's all bad news, but doesn't necessarily tell us what's next, other than uncertainty and volatility. In any case, the trend is fully in the hands of the hedge funds, who have only three trading sessions remaining to hit their numbers for the quarter.

NASDAQ futures are down modestly at this moment, indicating a most pullback 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, yesterday being a perfect example where pre-market enthusiasm and a pop at the open quickly evaporated and turned into a moderate loss.

The immediate task for the market is to see whether there might be some lingering technical support in the 5100 range or whether we must revert to the 5050 range for support. In truth, it wouldn't hurt to drop into the 5050 range a little to establish deeper support at that level before advancing since that would provide better support for any future correction.

So, the question of the day is whether NASDAQ recovers from early weakness and bounces, or whether the modest weakness grows into an outright rout.

It's a Friday, so I wouldn't put too much faith in the significance of any move today since some fraction of market participants will close out positions, long or short, ahead of the weekend when anything can happen (Greece.)

Greece? Same old same old. Some sort of unpalatable deal or agreement to kick the can down the road will suddenly materialize in the coming days.

The Fed? Still on track for liftoff in December, with an outside chance for October. Futures buyers are a bit less optimistic for the strength of the U.S. economy in Q3 than the Fed seems to be, but Fed rates will remain quite low for the next twelve months, which is supportive of the stock market.

The bottom bottom line is that the overall stock market remains likely to see a flattish to modestly up trend over the next twelve months, but with plenty of volatile range trading along the way.

Correction? Sure, corrections can occur at any time, so it wouldn't surprise me to see one or two corrections over the next twelve months, but their timing and duration and depth are of course uncertain. A couple of mini corrections or little scares in the 5-7% range are quite likely over the next twelve months.

The latest weekly report on mutual fund money flows from the Investment Company Institute on Wednesday showed a continuation of the trend of strong outflows from domestic stock mutual funds. This is concerning, but the exact impact is unclear due to the rising popularity of ETFs, hedge funds, and modern retail investment tools, not to mention individuals seeking to manage their own assets out of disappointment with the performance of many mutual funds. So, this is a yellow flag, but not necessarily one that will become a red flag.

-- Jack Krupansky

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

NASDAQ to test durability of the advance, again

Tuesday was another great example of the weak nature of NASDAQ this year - we get occasional strong days, but typically followed by mediocre if not outright weak days rather than strong follow-through. Futures were up moderately yesterday, which had so-so results, so now traders have reversed and futures on down moderately. Whether the result is people buying the dip and a renewed rally, or people selling into any rally and a modest to moderate to strong sell-off is a coin flip.

NASDAQ futures are down moderately at this moment, 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 trajectory of the market for the rest of the day. They have been aligned fairly well for the past two trading sessions, but even when that pattern does hold for a few consecutive days, the alignment inevitably evaporates just as soon as people begin to depend and bet on it.

Flip a coin whether we see a little more weakness and consolidation before we get the next strong rally, or whether the advance limps on for a bit longer before finally crumbling into more substantial consolidation and likely a reversion to range trading. Remember, the hedge funds have only five more trading sessions to make their quarter, so they will definitely be trying to pull rabbits out of their hats any way that they can think of.

Greece? Still waiting for that proverbial eleventh hour. We might go into overtime or even extra innings - pick your favorite sports metaphor - with various stopgap measures, but neither side seriously wants Greece to... align itself with Russia, China, Iran, and Venezuela. Its just that the political ugliness of the necessary compromises is seriously unpalatable for all involved, which is why it has to wait for the eleventh hour.

The Fed? Fed funds futures are wobbling around a bit but still pointing to December with an outside possibility of October for liftoff, a second hike in March, and a moderate chance of a third hike next June, assuring low interest rates for a full twelve months, which is very supportive of the stock market. Right now, the markets are predicting a weaker economy over the coming four to nine months than the Fed is. I'm in the middle - I still expect Fed liftoff in October and a second hike in January. The basic problem is that the economy, like the weather and geopolitical affairs, is very volatile, so you really do need to flip that coin again (and again) as to whether the economy will be stronger or more tepid over the next four months leading into that October decision by the Fed.

-- Jack Krupansky

NASDAQ to test strength of the advance

Although it was great to see NASDAQ rally to new all-time intraday and closing highs, the rally yesterday was a bit too tepid for my taste, being a fair amount less than my one percent to one and a quarter percent threshold for a decent rally. The good news is that since it was so tepid, it might not have been a blow-off short-covering rally. In fact, the breadth of the advance was mixed, with quite a few major momentum stocks in the red for the day, and even a fair number of stronger stocks exhibiting only modest interest. But all of that mediocrity helps to bolster the case for the advance to have room to continue, at least maybe for anther day. That plus the fact that the hedge funds are still desperate for a few more good days before the end of the quarter when their performance will come under a microscope.

At these lofty, uncharted levels, it is tempting to finally close the books on the old trading range for NASDAQ between the 4850 and 5100 levels, but I'd hold off a little bit longer. I'd like to see NASDAQ above the 5150 level and even the 5200 level for a good solid two weeks before concluding that we are sustainably above the old trading range.

The main good news from Monday is that the rally makes the dip on Friday a bit of semi-decent technical support for a base here in the 5100 range. Granted, it is still rather weak support, especially since it occurred on a Friday, but it is a whole lot better than nothing. The major risk at this stage is that we need to see a whole lot more technical support established in the 5100 and 5150 ranges before a sustainable advance above 5200 is warranted.

NASDAQ futures are up moderately at this moment, indicating a moderate rally at the open, but as always we must caution that futures and the opening move are frequently not reliable indicators of the trajectory of the market for the rest of the day - although yesterday all three were in close alignment.

The big question is whether enthusiasm builds and the opening rally grows into a strong rally, or whether people sell into the rally as the day wears on. We could also see the initial rally fizzle, but then build up again later in the day. There is also a decent chance that the rally could crumble and turn into an outright sell-off. That's why I say that today is a test of the strength of the advance.

Fed funds futures strengthened a bit yesterday, with December a bit more strongly the likely time frame for liftoff and October increasing as well, but the odds of a third hike to 1.00% next June are still iffy.

Greece? We may finally be to the stage of the eleventh hour where people finally accept that some sort of compromise deal will finally come together. IOW, traders are throwing in the towel about using Greece as a cover for pushing the market down.

The focus will be shifting to the case for a strengthening economy. The market seems amenable to accepting that case, or at least considering it as plausible, but it is all a question of whether the data starts to align with the case, including the outlooks from businesses as we head into the time for them to warn of any looming weakness and to show real results for Q2. I'm still hopeful for Q3, but we all will need to see evidence to justify that nascent enthusiasm.

-- Jack Krupansky

NASDAQ seeks to establish technical support in the 5100 range

Sure, it's great that NASDAQ will be gapping higher this morning on overly-buoyant enthusiasm based on a whiff of a hint of the possibility of a prospect for a deal or at least another stop-gap measure to pretend to deal with the fiscal mess in Greece, or so they say or at least seem to imply. Granted, I've always argued that an eleventh-hour deal is a slam dunk, and it will be, but... then what? Greece was always simply a side-show for the market anyways.

The real action is of course the state of the U.S. economy. The combination of bad weather, the west coast port strike, and anxiety over the timing and pace of Fed rate hikes threw the U.S. economy into a mini tailspin, short of a recession, but dispiriting for the market nonetheless. The theory was that once we had written off Q1, Q2 would be much better. Well, Q2 has been somewhat better, but that isn't saying much compared to a lousy Q1. Q2 is still playing out and we won't have a clear view of how good it will have been for a few weeks or maybe not until the GDP report for Q2 later in July and as companies start issuing quarterly reports for Q2 as well as warnings and surprises in advance of those reports. Meanwhile, the stock market, infamously acting as a barometer, will be trying to prejudge how Q3 will be playing out. Yes, Q3 should indeed be much better, but the market will be needing to see some evidence of that begin to accumulate, and fast.

Meanwhile, the immediate name of the game, besides a one-day spurt based on flimsy news from Greece, will be for NASDAQ to try to establish at least some preliminary technical support here in the 5100 range so that we have a solid foundation for a sustainable advance to 5200, 5250, and beyond. Although Friday was a down day, it provides the starting point for technical support here in the 5100 range, if NASDAQ can bounce above Friday's closing level and not fall back below it later today or in the next few days. These little valleys on the charts can work wonders to help guide traders when desperately searching for technical support.

The bad news is that any big opening rally leaves what is known as a gap, and the theory is that all gaps must be filled before the market can advance. That will put downwards pressure on the market later today and in the next few days as well. The problem is that if NASDAQ does fill that gap it also runs the risk of overrunning the gap and erasing the technical support that we were hoping to establish. The best outcome would be for NASDAQ to exactly retrace the gap and establish what is known as a double bottom, which would be viewed as very solid technical support and give the market a brighter prospect for a sustainable advance above the 5100 level.

NASDAQ futures are up moderately sharply at the moment, indicating a moderately sharp rally 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.

It's getting near the end of the quarter, so hedge funds have only seven trading sessions left to give themselves a track record that will persuade their investors to not pull money out next quarter. A nice little NASDAQ rally might do the trick for some of them. What happens after that could be something short of a pretty sight.

In any case, it is up to the hedge funds to decide where the market will go next. Whether the end of the quarter will incentivize them to push for a sprint up to the 5200 or even 5250 level for NASDAQ, or whether they revert to the old tried and true range trading and the comfort of the 4950 level remains to be seen.

-- Jack Krupansky

NASDAQ needs to consolidate a little

Wow, it's great that NASDAQ zoomed up to new all-time intraday and closing highs above the March 10, 2000 dot-com intraday peak, but now its time to see how much of the gains will stick. At least a little bit of consolidation would seem appropriate at this stage. The bad news is that we have no discernible technical support at these lofty levels, so as soon as buying momentum peters out, we could go tumbling back down to where we came from, or worse. There is also the concern that a hefty chunk of the gains yesterday may simply have been due to the forced buying of short covering, so angry shorts will re-open their short positions as soon as upwards momentum slows. It's also a Friday again, so some fraction of short-term players will tend to close out positions ahead of the weekend, when anything could happen (like Greece and Russia.)

Ultimately, it is all up to the hedge funds, whether they decide to go all-in and ride the rally to higher highs like the 5250 level, or exactly when they decide that enough is enough and flip the switch to reverse and go back to more of a risk-off trading bias and goose their returns by trading back down in the wide trading range. In short, we don't yet have a clear and sustainable breakout from the 4850 to 5100 trading range. One day and 33 points does not establish a trend.

The latest weekly money flow report from the Investment Company Institute on Wednesday showed continued outflows from domestic stock mutual funds, which is not good news at all, but it isn't clear to me how significant mutual funds are these days in a world ruled by ETFs, advanced investment tools for retail investors, and hedge funds. Still, these outflows are a concern, or at least somewhat of a drag on the market in any case.

NASDAQ futures are up modestly at the moment, indicating a modest rally 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. A modest to moderate rally or pullback in the 10 to 30-point range are the more likely scenarios for today.

Greece? Same old same old. An eleventh-hour deal or at least stop-gap measure was always the likely scenario. Sometimes the markets are smart enough to ignore the political theater, but sometimes traders use that negativity as a cover for underlying trades they are trying to promote.

It usually takes a few days for the dust to settle and the market gets back to its underlying trend after any Fed announcement, so we could see more erratic volatility until the middle of next week.

Another big concern is that way too many companies have been coming up short or below expectations on revenue and earnings, and even worse are reducing their outlooks for the coming quarter. Q2 was supposed to be a snap back from Q1 weakness, so this is rather disconcerting. As a result the market will now be hyper-vigilant for warnings or positive surprises for Q3, as well as obsessing over each and every economic report to get a sense as to whether Q3 will be the quarter that Q2 was supposed to be. Actually, Q2 is not over yet, so we face the prospect of warnings and surprises from companies over the next two weeks as they get a handle for how business is shaping up for the close of the quarter.

Meanwhile, volatility is the only certainty, even as the underlying long-term trend for the market remains upwards but at too slow a pace for people to readily discern on a daily or even weekly and sometimes monthly basis.

-- Jack Krupansky

NASDAQ wants to bounce on relief that the Fed has spoken

NASDAQ did manage to bounce a little after the Fed made its announcement and had its press conference, but it will take a couple of days for the dust to settle and trading to shift back to focusing on the economic and business outlook for the U.S. economy. Technically, the Fed will actually be doing the same, desperately grasping for straws to ascertain how strong or weak the U.S. economic outlook really is for the coming months.

The market will remain exceptionally volatile as people desperately over-parse the Fed's words to read far more into what the Fed said than they actually said or meant. The top dispute is whether the Fed actually meant to imply that there would be two hikes this year. The dot plot indicates uncertainty even on the Fed's part, but people again seek to over-parse what was actually said.

Meanwhile, Fed funds futures actually pulled back a bit, now indicating barely a 56% chance of liftoff in December, only 38% chance for October, and only a 19% chance for September, with a second hike in March, and a third hike to 1.00% in June. This outlook could easily change as the day progresses and nuances of the Fed and economic outlook are analyzed more carefully. My personal outlook remains that October is the most likely time frame for liftoff, but it all depends on whether or not the economy strengthens or weakens over the next four months. The economy should strengthen somewhat, but that strength is somewhat uncertain and somewhat tentative. Stay tuned.

The Fed itself repeatedly said that people are reading too much into the exact time when liftoff occurs, and repeatedly said that the rate of hikes would be slow and gradual. Clearly Fed funds futures got the message.

NASDAQ futures are up moderately at this moment, indicating a moderate bounce at the open, but as always we must caution that futures and the open are frequently not reliable indicators of the trajectory of the market for the rest of the day.

We could see a nice relief recovery bounce today, but we could just as easily see a renewed sell-off as people realize that the sluggish recovery that keeps the Fed at bay also limits the fundamental growth of most companies. The market will try to look past the immediate economic outlook, but only six to nine months out into the future. Meanwhile traders and short-term speculators will be all over the map as they play the news and also play the volatility over the news.

Greece? Still a sideshow focused on intensifying political theater. A deal is still likely, even as the sides talk up the prospect of failure as a negotiating tactic to get the other side to cave. Both sides know that a deal is highly likely and highly desirable, but politically neither side can accept compromise until the eleventh hour when politically it becomes okay to shrug their shoulders and say that they tried. The U.S. stock market may remain wary of a deal, but that's more traders seeking to incite a bit more volatility, rather than a clear bet on the outcome.

NASDAQ remains within striking distance of new highs, which is good, but also adds to the risk that hedge funds could be getting ready to reverse and seek to push the market back down within the wide trading range. Either way, volatility will be the result.

In short, volatility remains king, with equal probabilities for a big up day, a big sell-off, or a modest to moderate rise or fall for the day. Right now, we seem poised for a modest to moderate recovery bounce. The immediate question will be whether people pile on or sell into that rally. Eventually its momentum will peter out sometime today, and then it's back to the hedge funds and whether they wish to push the market higher or reverse and attempt to incite a sell-off.

-- Jack Krupansky

NASDAQ to be volatile around Fed FOMC announcement

The market will be prone to very erratic trading leading into and following the Fed FOMC announcement and press conference this afternoon, and in fact volatile all day and a couple more days beyond today. I don't expect any major surprises or decisions from the Fed today, but definitive relief that there really is no major news or unexpected decision is likely. I don't expect that the Fed will signal whether liftoff will be in September, October, December, or January, but I am sure that a lot of people will claim that they are signalling in some odd implied manner. Fed funds futures, the most reliable indicator, still point to December with an outside possibility of October, and essentially no real chance of September.

NASDAQ futures are bouncing around near flat at this moment, indicating a mixed open. 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, especially on a Fed announcement day. We could see either a rally or weakness ahead of the announcement, a reversal right after the announcement, and then yet another reversal as the press conference proceeds, and then yet a final reversal going into the close. Or not. The only safe bet is volatility.

Meanwhile, the economy continues to plug away at a semi-decent but erratic pace, which is relatively good for stocks, but also assures that we don't build up too much of an irrationally exuberant bubble. I still expect June to be a relatively flattish month, give or take a percent or two, or maybe even three.

It is worth noting that the Fed does not directly control all interest rates. In fact they only control two, the fed funds target rate and the discount rate. Sure, the target rate has an outsize impact on all other rates, but the market will determine Treasury, corporate, and municipal interest rates. Even T-bill rates, the closest proxy to the fed funds target or overnight inter-bank lending rate, are determined by the market, and will trade at a discount or premium to the fed funds target rate based on supply and demand. 2-year, 10-year Treasury notes and the 30-year long bond will be even less directly influenced by the Fed funds target rate, with market forces more focused on the economic outlook, inflation, dividend yields, and safe-haven demand as well. The spread between corporate debt and Treasures is determined by market forces as well. Confidence in the economic outlook as well as the inflation outlook will whipsaw debt security prices a lot more than the small, incremental moves by the Fed in the fed funds target rate. In short, even if we have a clear trajectory from 0.25% to 1.00% next April, that tells us very little about where Treasury and corporate interest rates will be over that period, other than volatile, and more dependent on how the economy performs and is expected to perform, and what safe-haven demand might evolve over that period.

Greece? The political theater is getting to the feverish pitch stage, which is great entertainment, but doesn't belie the fact that both sides know that a deal will get done in the eleventh hour. This won't be some grand final deal, just a stop-gap measure as negotiations progress over the next year. I'm not sure which is easier to accept, that a deal will happen, or that any deal will be rather ugly and unpalatable to just about everybody involved.

-- Jack Krupansky

NASDAQ marks time waiting for the Fed

I would not read anything into what the market does today or tomorrow or even the rest of the week since the main name of the game this week is waiting for the Fed to speak tomorrow afternoon. In truth, we have all the data we need to gain a ballpark assessment of what the Fed will say. Sure, we'll get some details and some color from the FOMC announcement and press conference tomorrow afternoon, but the result will be essentially the same, namely, that the Fed will likely begin raising their interest rates sometime in the fall and that the economy will gradually pick up and bounce back even as there remain challenges. And, the rise of Fed interest rates will be gradual so as to not disrupt the economy or markets. Sure, analysts and pundits will over-parse every word from the Fed, but that won't change the overall picture one iota.

September vs. October vs. December vs. January for the first Fed rate hike? As the Fed has said, it will all depend on the data, which we won't have until August, September, November, and December. Sure, we can all guess what the data will be, and the futures market is a great place to do that, but over-obsessing and over-analyzing an uncertain future achieves no productive purpose. Place your bets and then move on. Me, personally, I remain semi-confident that October will be the most likely time frame for liftoff and the Fed rate will be roughly 1.00% a year from now. Sure, the economy could be stronger or weaker than expected, but only when that unexpected possibility becomes a visible reality would it matter.

One last factor to keep in mind is that the Fed will always tend to be much more deliberative and much more cautious than the wild west gunslinger economists on Wall Street. The admonition of the Fed being behind the curve sounds like a negative, but it is the reality of the nature of the Fed's deliberative nature. Economists on Wall Street may be ready for a Fed hike in September, and they may be absolutely correct that September would be the best moment for liftoff, but the Fed has a different role than the gunslingers - the Fed needs to add an extra level of deliberation and and extra level of certainty to the process. By design, the Fed will always tend to be behind the curve. This time will be no different. In truth, history will probably end up showing that June would have been the optimal time for liftoff, but that is not to deny the role and value of the Fed's more deliberative process.

Greece? Still a sideshow, as it always was and always will be, but traders are always happy to reach for even the slimmest wisp of news to cover for underlying trades that they wish to engineer. Greece and Europe are engaged in a predictable dance of political theater. The fix is in. A deal will get done. But neither side can be seen publicly as admitting to having to compromise. So, they both just wait for the clock to run out and then grudgingly make the deal at the eleventh hour. A key factor here is that the Greek people need to see that their leaders went to the wall fighting for better terms. That perceived persistence will give the Greek politicians political cover for the unpalatable compromises that will result in the coming eleventh hour deal. And Europe will be forced to accept the ugly reality that they will be unable to force Greece to completely bend to its will.

Meanwhile, NASDAQ futures are down only moderately, recovering from earlier moderately sharp losses, indicating another moderate pullback 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. Flip a coin whether NASDAQ ends down or up for the day. We could see a sell-off in advance of the Fed tomorrow, or we could see a rally if people feel that the market feels a bit oversold. Whatever happens today, expect a reversal within days, so that a week from now we will probably be right where we are now, give or take 75 points.

Fed funds futures are now pointing to December as the most likely time frame for Fed rate liftoff, with October at less than a coin-flip chance for liftoff (47%) and September only a 26% chance for liftoff. Futures point to a second hike in January and a coin-flip for a third hike to 1.00% in April. October keeps hopping on and off the table based on whether the latest data report is warm or cool. October still feels right to me. The economy remains too mediocre for an earlier move, and only deeper weakness would derail an October move.

-- Jack Krupansky

NASDAQ waiting impatiently for the Fed

The Fed is the main game for this week. Not that there will be any big change, nor is any big change expected, but people want to hear it as a fact from the Fed itself that the Fed has no big change to make. Everybody wants to see the updated dot plot, but the odds of it being a lot different from current expectations of liftoff in 2015 are virtually zero. Still, people need to hear it from the Fed.

Whether liftoff occurs in October or December depends on how the economic data trends over the next four months. Unless the data gets a lot stronger than currently expected, the Fed could do either. The odds of the data being strong enough for liftoff in September are essentially zero.

The Fed has no magic special knowledge of how the economy will evolve over the next few months, and they have made crystal clear that their moves will be data-driven, so nobody should expect that we will have any great clarity about liftoff until it is almost about to happen. Maybe it will become clear when we are about a month away, or maybe even two. In any case, the Fed will want to be sure that they are really sure that the economy is solidly on track for a few months of economic data. We aren't even close to being there yet.

My view is that the Fed will want to see solid data reports for the months of July, August, and September before pulling the trigger in October. A move during the summer seems rather unlikely, and they will probably need the month of September to get their liftoff plan finalized. Only a few weak data reports between now and then would push liftoff out to December or January.

Greece? No real change on that front. Both sides are intent on running out the clock so that they both are forced to accept politically unacceptable compromises. That's just the way these kind of things have to be done these days. In any case, a compromise deal is inevitable. The IMF is pushing for pushing out debt payments, which seems likely. And Greece will end up agreeing to reforms that they can't yet publicly agree to. The real point is that traders like to use these periods of uncertainty and anxiety to justify trades that they would have done anyway, like the ups and downs of range trading.

NASDAQ futures are down moderately sharply, indicating a moderately sharp pullback 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. The only certainty is volatility.

Traders may simply be testing NASDAQ to see if we can establish firmer technically support in the 5000 range. If we can, we could see a recovery bounce. Otherwise, we could 

see a sharp sell-off.

We will probably see whipsawed markets up through, during, and after the Fed FOMC announcement on Wednesday afternoon. We could see any combination of moderate and sharp upwards and downwards moves. It will take a couple of days for the dust to settle after the announcement. By a week from Wednesday we will probably be roughly back where we are right now, give or take 75 points, with all possibilities being roughly equal probability.

We could easily see both a sharp sell-off and a sharp rally before or shortly after the Fed announcement on Wednesday.

NASDAQ is sitting roughly at the bottom of the 5050 range, which isn't bad by itself, but we have no nearby solid technical support, so we will be prone to selling pressure until we finally do establish a decent technical base in the 5000 and 5050 ranges.

We could see a moderate sell-off in the morning, but then a semi-decent recovery as the day progresses. It's all up to the hedge funds and whether they decide to push deeper with a risk-off trading bias or push higher with a risk-on bias to catch the shorts leaning too far and kick off a little short-covering rally.

In any case, NASDAQ will be open to a reversal on Tuesday and Wednesday as well as people continue to impatiently wait for the Fed at 2 PM on Wednesday afternoon.

Did I mention volatility?

The real bottom lines are that even with liftoff in the fall, interest rates will still be quite low a year from now, and the economy will be picking up steam, which is what is required for liftoff in the first place. Both eventualities are supportive of the stock market.

Correction? Corrections can always happen at any time and usually without warning. Analysts have predicted 25 of the last 3 corrections. That's a joke! But it's also reality. Sure, we're overdue for a correction, but the intensive range trading actually works to our benefit on that front, constantly squeezing out the excesses that lead to corrections in the first place.

-- Jack Krupansky

NASDAQ continues to get buffeted by Fed anxiety

Although it was nice that NASDAQ managed to close in the green on Thursday after a big up day on Wednesday, it was not a very broad advance by any measure, with many momentum stocks declining, indicating that the hedge funds were not very enthusiastic about the prospect of continuing the rally. The market is in Fed watch mode through Wednesday, so none of this really matters much at all. In fact it will take a few days after the Fed announcement before the dust settles and the market resumes any underlying trend, which is probably trend-less range trading for the short to medium-term anyway. Sure, there remains a medium to longer-term uptrend in place, but at too slow a pace to really notice in daily market activity. The good news is that NASDAQ is sitting in the high 5050 range, within striking range of the 5100 level. The bad news is that NASDAQ is just sitting. Period. Or maybe fidgeting would be a more apt characterization.

It's a Friday again, so expect some fraction of short-term speculators to close positions ahead of the weekend when anything can happen. That means selling if they are net long, but buying if they are net short.

NASDAQ futures are moderately sharply lower at this moment, indicating a moderately sharp pullback 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. The only certainty is volatility.

If we don't see a big decline today, it would probably occur on Monday or Tuesday, since NASDAQ up within striking distance of the 5100 level and a new closing high just feels more than a little overpriced to too many people. NASDAQ will be prone to this kind of range trading for the foreseeable future - until the economy picks up enough steam so that companies once again start surprising on the upside with earnings, revenue, and the outlook. We're just not there yet - and the Fed knows it.

Greece? A deal will get done. Period. It's simply a matter of waiting until the last moment since none of the parties can be seen as prematurely caving in to an unpleasant compromise. European banks don't need the messiness of outright default on Greek debt that they hold and Europe doesn't need the prospect of pushing Greece into tighter economic integration with Russia and China, not with Ukraine nipping at them as well.

The Fed? Fed funds futures shift a little on a daily basis, but are still solidly pointing to the fall for liftoff. The FOMC announcement, economic outlook, and press conference Wednesday afternoon will most likely not include any major surprises, but merely a bit more color on the outlook for the next few months and possibly some hints as to how exactly liftoff will occur. Fed funds futures currently indicate a slightly better than coin-flip chance of liftoff in October, with liftoff in or by December a little more likely, a second hike in January, and a third hike to 1.00% in April. IOW, the most likely scenario is low rates that should not undermine most stocks for a full twelve months from now.

-- Jack Krupansky

NASDAQ to test the enthusiasm of the hedge funds

A 1.25% gain for NASDAQ yesterday certainly fits my definition for a sharp gain (although just barely - my threshold for a sharp gain is 1.25%), but was it a truly solid gain or more of the forced buying of a short-covering rally, a classic short squeeze, that is more likely to be followed by an equally sharp sell-off than a couple more days of equally sharp gains? Sure, we could see a little follow-through buying before we fully hit buying exhaustion, where everybody who might buy has already done so, but that's not such a rosy scenario either. It's all up to the hedge funds, whether they choose to push the advance a bit harder at least for a bit longer, until it clearly runs out of steam, or whether or when they decide to flip the switch on their trading bias to more of a risk-off posture in order to seek greater profits by running stocks back down in the trading range.

The bottom line is that we have no clear short-term trend other than volatility within a trading range, especially as we wait for the Fed to speak next Wednesday.

The latest weekly money flow report from the Investment Company Institute showed even stronger outflows from domestic stock mutual funds than the prior week, although inflows to foreign stocks continue. This is not a good sign, but I continue to note that the role of traditional mutual funds may be getting a bit dubious, particularly due to the rise of ETFs, modern investment tools, and hedge funds. Older workers preparing for or in retirement are likely shifting assets out of stocks, while younger workers may choose to invest on their own using modern tools and ETFs. Still, it does make one pause to see such a strong pillar of the stock market look so weak.

NASDAQ futures are up moderately at this moment, indicating a moderate rally at the open, but as always we must caution that futures and the opening move are frequently not reliable indicators of the trajectory of the market for the rest of the day.

We could indeed see a nice little bounce at the open, but there is a high risk that people will sell into it. The wild card is whether some of the sharper and deep-pocketed hedge funds will sense that sentiment, let it run a little until it peters out and the shorts start flooding in, and then leap in and clobber the shorts again with enough buying to extend the rally. Hey, it could happen. Will it? It is one of the equal-probability scenarios, but I wouldn't bet the farm on any of the scenarios. Maybe the most likely scenario is a more-subdued continuation of the rally from yesterday, like a 20 to 40-point gain. But almost equal probability is a 20 to 40-point reversal of the gains from yesterday. My best estimate is that maybe we see a modest gain or loss today, ditto for tomorrow, but then we see a big sell-off on Monday to leave us roughly flat and back where we started - within striking distance of the 5100 level, but without any decent technical support to serve as a solid base for a sustainable advance above the 5100 level.

There is a risk that if NASDAQ fails to secure a close above the May 27 peak of 5106 within short order that people could more seriously abandon hope for the medium-term trend and lighten up their risk allocation for stocks, and that this could lead to at least a mini correction within a month or so. It's certainly not a certainty, but it is a very real risk. But the task immediately before us is to see if NASDAQ can indeed manage to set a new all-time high within the next week or two. Maybe once the infamous June meeting of the Fed FOMC is out of the way, we could see at least some people allocate risk with at least a little more conviction, at least for a short while, enough to keep the longer-term slightly bullish trend alive a bit longer.

Keep in mind that stocks will roughly track the economy (with great volatility, of course), so if the overall outlook for the economy has at least some upside, higher stock prices are supported. Sure, the recovery continues to be rather uneven, but there is no serious prospect for a recession anywhere on the horizon.

Fed funds futures softened a little, but then they reversed and ended up firming a little, so that there is once more a little more than a coin-flip chance for liftoff of Fed interest rates in October, only a 1 in 3 chance for September, a second hike in January, and a third hike to 1.00% in April. My personal forecast remains on October, where it ha been for months now. Only a lot more economic strength than we have seen in recent months, or currently expect to see in the next few months, would put September back on the table. In any case, Fed interest rates will remain quite low for an entire year into the future, which is well beyond the horizon for virtually all traders and short and even medium-term speculators.

What bond market speculators will do over the next four months is anybody's guess. The Fed moves over the next twelve months will primarily effect the short end of the yield curve. The longer-duration treasuries, such as the 10 and 30-year notes and bonds will see some knock-on effects, but more muted. I suggest that longer-duration treasuries will be more affected by moves by corporations to increase stock dividends to make socks even move appealing than longer-duration notes and bonds.

In short, anything can happen and the only certainty is volatility.

-- Jack Krupansky