The Nasdaq is pulling back and retesting its lows
|Nasdaq is retesting its lows
I'm actually happy at this moment, and that's probably going to be baffling to almost everybody. So the question you probably have is why would I be happy if Nasdaq is pulling back and retesting its lows?
Well, the first thing is, when we had that incredible reversal yesterday, we had very strong volume to the upside. So that means there's smart money on the sidelines buying stocks. But every time you make a low, you have to retest the lows and you want the retest to be on lighter volume and eventually exhaust the selling pressure.
In the meantime, we have earnings coming out and they're great. Further, the Fed never fights market rates, and it's very important that since Friday, market rates have fallen. Some of that is a flight to quality that pushes downward pressure on our treasury bond yields.
Goldman Sachs last week said the Fed is going to raise rates four times. The Minneapolis Fed President, who ran the TARP program under Hank Paulson, says two times. Worst case, there will be three rates rises. But the bottom line is the Fed still going to keep interest rates below market rates and inflation.
Now we are going to go into a funnel with the stock market where there's going to be fewer leaders. Right now, we're early in the earnings announcement season and everybody's beating by and large, but it will get a little dicey here in the upcoming weeks.
I'm very comfortable that we are going to have a bottom here soon. Remember, the market is a manic crowd.
The Ukrainian situation
Now, as far as the Ukrainian situation they're not going to invade before the Olympics because China is one of Russia's main allies and Russia doesn't want to ruin China's party.
Russia is looking for hegemony over Ukraine versus NATO. The Ukraine is an important transit hub for natural gas bound for the European Union and Europe needs their natural gas. It's a big game of chicken. But it doesn't affect us at all. If anything, we might sell more natural gas to Europe. But we can't put in a boat and be as cost-effective as a Russian pipeline gas.
Now it's time to celebrate earning season. It's time to celebrate the fact that when the market goes up, it goes up on high volume. When it consolidates, like today, volume is low.
The key is to retest the lows and exhaust the selling pressure, and this can take a while. I'm ecstatic with the volume on the upside, I'm ecstatic with the positive press on good earnings and the economy is still growing.
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