To Decline or to Base…That is the Question.

The market looked like a pretty faced girl treading water in a beautiful lake. However when you looked under the surface you were able to see all 400lbs of her. A handful of Large Caps such as Microsoft (MSFT) and Yahoo! (YHOO) noticeably outperformed today which disproportionately skewed the NASDAQ's overall strength. Clearly Small Caps were lagging and Semi's didn't have much oomph either. The breadth was negative at almost 2:1 and defensive plays such as Gold and Oil had strong relative performance. This action is troublesome as it further sucks in capitulating Bears and overanxious dip buyers. Therefore the chance for a sharp decline to materialize will increase should the market continue to exude this type of behavior.

On the other hand if anyone ever doubted the concept of performance anxiety, action like this can help them find some religion. Under the surface lurks a ferocious buying appetite that will ultimately bring the NASDAQ to new highs by the end of the year. In the meantime we are weary of the near-term risk for a decline that may bring the NASDAQ to 2060 - 2070 by mid next week. We would expect that players who are being sucked in by the most recent action to stop out of their positions around those lower levels.

If You Held a Taser to Out Head:
Should the NASDAQ refuse to provide the above mentioned decline by mid next week we will be scrutinizing the internals for signs of a takeoff nonetheless. Either way we are expecting a large upward continuation move in the NASDAQ over the next few weeks. Simply put the consolidation can be fulfilled by one more sharp decline or several days of basing. For the time being we are still of the mindset that the decline is more likely due to the fact that the internals are deteriorating despite the resilience of the averages.

Hope you did well.

___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (“KTB”) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (“KCAP”) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firm’s principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________

Click Here To E-mail Comments