Vacation, Anyone?

July 27, 2000
Kevin Marder

Bulls won’t
find any encouragement here.

The groups that are most important
from the standpoint of understanding intermediate-term health — the tech bells,
the Group of Seven (see
my June 6 column for an explanation), the glamours, the opticals, and the
bios — continue to break down.

When the action of a whole batch of
key segments confirms one another, and nearly every breakout in the growth
sector fails, the intermediate trader doesn’t need to look for new setups on the
long side.

It doesn’t matter.

When the market’s not ready, the
market’s not ready.

As in the March-May market, trying to
fight the tape can be quite costly.

And even if there were a bunch of
setups, they should not be trusted, the most recent example of this being
Applied Micro’s failed breakout of Tuesday.

One of the beauties of trading the
intermediate trend is that your decision to adopt a 100% cash position or a 0%
cash position doesn’t have to be a function of some sort of market forecast you
might have.

In fact it shouldn’t
be.

The problem with forecasting: If
you’re wrong, you end up painting yourself in a corner, unwilling to change your
stance for fear of appearing wrong in front of friends, business associates, or
clients.

Some time back in this space, I
mentioned that if five or so successive trades turn out to be losers, you should
take that as a sign that perhaps something is not right with the general market.

This simple test has been worth its
weight in gold for me over the years.

Meanwhile, I would not get too hung up
on when the Naz will halt its descent.

In particular, trying to guess the
next support level in the index, and whether it will hold at that level, is not
anything to base a strategy on.

Observing a few accumulation days in
the index, or up days on higher volume, will be one of two signs that the worst
is over.

Good tape action in the leaders will
be the other.

For newcomers to the strategy laid out
by Greg Kuhn and myself in the Intermediate-Term
Trading Course on the TradingMarkets.com site, you may be discouraged by
the events of the past three weeks.

I can assure you that everyone that
starts out with this strategy makes a series of mistakes at some point, the most
common mistake being the purchase of an extended stock.

I can also assure you that everyone
that has traded this strategy for years and years also makes mistakes.

Along these lines, my strong
suggestion is that you study what you did wrong in order to make you a better
trader.

To
repeat what I quoted one top trader as saying in a recent column: "Learning
from your losses is probably the biggest key to success, because the
losses actually tell you what you’re doing wrong."

Of note Thursday was JNPR’s decisive
break back into the top of its prior base, something that BRCM did seven
sessions ago.

Also of note Thursday was NTAP’s
elongation of its handle.

That leaves BRCD, which is the only
one still acting like a trooper.

Red, red, and red.

This type of analysis of the leaders
can tell you more about the sentiment of the market than practically anything
else.

Check Point
(
CHKP |
Quote |
Chart |
News |
PowerRating) is one glamour
that’s still holding its own.

Ditto for Ciena
(
CIEN |
Quote |
Chart |
News |
PowerRating), though
Thursday’s action was worrisome as it nears the bottom of its handle.

Otherwise, it might be an opportune
time, assuming that you’re a long-side-only player and sitting in 100% cash, to
take a day off.

Vacation, Anyone?

BUY THE FEAR, SELL THE GREED

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