This Cardinal Rule Will Never Change
While Friday’s sell-off
was probably the biggest highlight of the week, it does not likely
signal a break-down in the overall market. Nonetheless, it bears watching.Â
Although one has to wonder when the Dow “magically” closes at the 9504 level
after being down much lower, perhaps it is just coincidence. You will recall
that 9504 is the 50% level of the October 2002 low and the January 2000 high,
this level will be critical going forward.
So, with HVT
nowhere to be seen, you need to keep the time frame pushed out slightly. While
my trade frequency is way off, the effectiveness and winning percent remains
solid. While it is too early to say for sure, I believe the market may in fact
be in a phase whereby volatility (intra-day) will be subdued for some time. I
have made the necessary adjustments each summer, and in fact has even done so
prior to this summer, however, it looks as though it is not just summer
slowdown, the market feels as though it is on a new path.Â
Trading is a game of constant adjustment, this is
no different. The strategy is identical, you are just not as sensitive to the
moment to moment gyrations (or lack of currently) of the S&P’s. Frankly, in
many ways it is a bit more “relaxed” manner of trading (I am speaking in a
relative sense) and does allow for more movement of a per trade basis. Go back
and review the trades I highlighted in last week’s columns to get a flavor. On
Friday, (which was an abbreviated session due to computer issues) I shared/took
3 trades, although admittedly there were more. They are listed below. All the
trades were long, and were done within the first two hours.
KLAC:Â Â Â
Long at 57.96Â Â Â stopped out at 57.69/.70
GS:Â Â Â Â Â Â Â Â Â
Long at 91.02Â Â Â exited at 91.20/.21/.22
NEM:Â Â Â Â Â
Long at 39.24Â Â Â exited at 39.45
So, for the day, a modest gain. However,
going into today’s session I will be keeping an eye on a few more stocks that I
do when doing HVT. You will recall that
HVT requires immense focus, thus the
limitation of only watching one, maybe two stocks at a time. Now that the
duration of the trades is pushed out, the trade really becomes more a function
of pattern, than pattern and precision timing. As a result, I scroll through a
list of 5-10 stocks throughout the day to spot patterns.Â
One thing will remain the same, always trade with the trend and
make sure you are in synch with the S&P’s. For me, that cardinal rule will
never change.
On Friday I had mentioned that I was stopped out
of my short in the Euro (EUR). The employment number was not what the market
was expecting and that put quite a bid on the EUR.Â
In a rare move, I actually flipped this position around and am now long. While
I do not envision this being a terribly long trade, one cannot overlook these 2
weekly charts and see that an inflection point may, and I stress may, be at
hand.
Â
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me
your comments and questions.