Days Of Yore
Thursday
was the first day that felt like the good ole days.
Wednesday was a stand-up day.
No argument there.
Thursday, however, was the first
session we’ve seen in quite some time where the vogue complex was riddled with
opening gaps.
Too, whereas Wednesday’s key feature
was the perkiness displayed by many downtrodden, forgotten stocks, Thursday’s
was volume — much more critical.
Study the chart below.
When it comes to health, this is what
an index should look like.
Note that price has risen on six of
the last seven days in which volume increased over the prior day.
And when the Naz took out the top of
its three-week range Wednesday, volume was above average, with price closing at
the top of the intraday range.
Thursday’s follow-through action saw
higher volume than on Wednesday, with price closing in the upper part of the
intraday range.
Objective information such as this, as
well as the fact that quality growth stocks are building and breaking out of
bases on good volume, is all you need to know about intermediate-term market
direction.
I often speak of the leaders, and how
they’re an utterly indispensable tool for measuring a market’s health.
Today was a good example of why
they’re worth their weight in gold.
Despite the Naz’s gain being about
one-half of Wednesday’s 3.6% move, the xlnt. action in the leaders told you
that, from the standpoint of the aggressive trader, the session was on a par
with Wednesday’s in terms of health.
…We all have our own favorite
routine that we follow during the trading day.
Mine involves as few outside
distractions as possible.
Thus, I spend little time watching
financial television and only talk to a few traders, all of whom are monster
players.
And seeing as how TradingMarkets has a
column in which three market professionals are interviewed each day (Overheard
On The Street), I only rarely share the opinions of others in this space.
Today was an exception:
"The action of the past two days
is like shifting from second gear to third," said a Los Angeles trader
whose account has swelled well over 2,000% in the 1 1/2-year period ended June
30, 2000.
This trader has been accumulating a
select batch of the glamours, all of which have been mentioned in this space
regularly over the past six weeks or so, in the process putting his account in a
200% long position.
Like others, myself included, he sees
parallels between ’00 and ’94.
Added the L.A. trader: "This
time, however, you’ll see the rally kick in this
year…you won’t have to wait ’til next year."
In ’94, the market peaked in Q1,
bottomed in early April, then ground sideways for the rest of the year, setting
itself up for the ’95 blastoff.
Like ’94, the Fed was in a tightening
mode, bumping up the funds rate from 3% in February ’94 to 6% in February ’95.
Moral of the story: For anyone that
thinks that watching the Fed is more important than listening to the market’s
message, a quick review of what happened in ’94-’95 is in order.
I.e., the market bottomed
just two months after the Fed began tightening, with stocks basing for most of
the rest of the year before a dramatic run began in December, while the
tightening mode was still intact.
As for the L.A. trader, his identity
will become apparent in a couple of months upon publication of a book of
interviews with top traders that I’ve co-authored with TM Futures Editor Marc
Dupee.
Judging by the email that makes its
way into the TradingMarkets.com cyberbox, many TM members saw today’s leaders
weeks ago.
It’s gratifying to see some of you
ramping up the growth curve at a fast pace…much faster than when I started
trading in the pre-Web days of ’86, when the communication of ideas between
people took place at an ant’s pace.
Bravo!