Nasdaq broke a 3-session losing streak…

Riz

Experienced member
1,266 5
After three sessions of big losses, buyers finally acted like buyers and pushed Nasdaq nearly 5% higher…

Also giving Dow Jones that it pushed lower yesterday a hand with gains to IBM, Intel and Microsoft…

Just a day after tumbling down to lowest levels since 1998, Nasdaq rallied and gained +91 to (4.7%) 2014…Nasdaq 100 on the other hand put on +109 (6.5%) to 1789…While Dow Jones got +82 to 10290.

All technology sectors rallied… chip, hardware and software shares showed good advances..

Cisco Systems that signalled yesterday’s crash was among those giving Nasdaq the support to rally today with a hefty bounce of 13.6%…Sun Microsystems (12.1%), Oracle (11.5%), Dell Computer (8.2%), Intel (5.9%), Microsoft (4.3%) and Qualcomm (9.9%) were among the bigest bouncers today…

Nasdaq volume was 2.1b with winners beating losers by 21 to 17…

So what’s changed since yesterday that made US indexes rally?

Is it because most of the concerns already priced in?

Yes according to CIBC WorldMarkets' Subodh Kumar who said “with uncertainty in technology becoming front-page news, a signal is flashing that the bulk of the concerns have already been priced in.” he also said that the markets are underestimating long-term growth in technology… (CBS)

Or is the Nasdaq extremely oversold?

Yes according to John Zaro, managing member at Bourgeon Capital Management who thinks "The risk of being underweight in tech is now becoming much greater.." he also said that it probably makes sense to selectively nibble in the group…(CBS)

Or is it because the missing fear-factor has got or started getting in place last Friday and yesterday?

Let’s see what Terry Danish, technical strategist at Investec Ernst & Co. has to say in this regard…

"Over the past year, we have seen the Nasdaq move downward from 5,000 and the action during this descent has been steady and methodical. The decline was not accompanied by any real sense of panic and surrender and [it appeared inevitable that] this lack of psychological capitulation would yield to additional downside until the market began to shake up even the most head-strong tech player…"

So what about the rate cut issue? As I said yesterday it’s going to be argued about even more…

"The credible cut would have been 50 basis points but after Monday's action the debate is whether the Fed will do even more than that, which would be great news for the market," said Arthur Hogan, chief market analyst at Jefferies & Co. (cnnfn)


"We believe the amount of Fed ease necessary to revive the blue-chip indexes is considerably less than the amount of ease necessary to revive the economy. We continue to believe that Fed policy will succeed in placing a floor under the economy…" said Christine Callies, chief U.S. investment strategist at Merrill Lynch (CBS)

Merrill's quantitative strategist Richard Bernstein said on the other hand that the Fed typically loses the tug of war between earnings and interest rates in the early stages of an ease cycle as earnings continue to decelerate…

White House Press Secretary Ari Fleischer reaffirmed President Bush's view that evidence of a slowing economy only strengthens the case for the administration's tax cut proposal, when asked by reporters about the sell-off…I wonder if this refers to rate cuts as well..

Is this the bottom? That’s probably the most frequently asked question for some time…some say it is the bottom while some think it’s near the bottom…those who think it’s the bottom talk about a rally starting even this week naturally…

"We're getting reasonably close to where a bottom might occur," said Arthur Cashin, director of NYSE floor trading for UBS PaineWebber…adding "It's almost possible to sense a rally might occur this week." (cnnfn)

Sam Stovall, sector strategist at Standard & Poor's is however not that optimistic…

"We might have a little further to go on the downside," he said…

Over all Nasdaq did have a good rally, but this on its own doesn’t mean the uptrend has started as the real issues such as economic slow down and profit outlook, and most importantly uncertainty are still there…

But one sure thing is that Nasdaq’s current problems are also psychological and sentimental as much as fundemental…

Therefore I am still in the opinion of bounces both up and down.. it’s like a psychological pendulum swinging from optimism to pessimism..this includes not only investors but analysts as well...that's the one thing I try to avoid while writing these threads...yesterday it swung towards pessimism, today optimism…How about tomorrow then? I don’t think anyone can ever be 100% sure of the answer unless the US gets over the uncertainty and confusion…

So watch it..but if you think you’re skilful enough why not make best use of the swings….

Riz
 
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