Correspondence, Love Letters, & Advice
Greenspan’s
comments summed up exactly what the market has been saying.
Namely that the slowdown should not
affect consumer spending in a deleterious way (see the strength in retail
issues).
And that the capital equipment side of
the economy is the one out-of-whack.
Which means there’s too much of
everything.
Too many chips, too many PCs, too many
routers, too much fiber.
We know all of this, because the
market, in its infinite wisdom, has told us this for some time.
Which made his Tuesday testimony a
yawn.
I normally don’t respond to reader
e-mails in this space.
However, the following query no doubt
applies to many readers, and, thus, deserves attention.
Mr. Marder, in your recent
articles, you have mentioned several new issues in tech, in addition to oil,
energy and finance stocks, that are forming constructive bases. Are these
stocks that we (as intermediate traders) should be buying with the current state
of the market? Are these stocks that you are buying or are still of the
opinion that the best place is on the sidelines until the growth sector (tech
stocks) starts breaking out of sound bases?
A year ago, I received an e-mail from
a TradingMarkets.com member, asking
why I comment on a stock after it breaks out instead of saying the stock will
advance before it breaks out.
First, this is not a tip sheet. There
are a heap of places both on and offline that offer that type of service. But
that is not the intention of this space. The intention here is to educate, and
in as concise and fat-free a manner as possible. Along these lines, much of what
is discussed is better understood in the context of the Intermediate-Term
Trading Course that I wrote with my good friend Sir Greg Kuhn, available on TradingMarkets.com.
Second, as it turns out, there are
many readers of this space who do not trade
the intermediate-term timeframe (several weeks to several months).
They are daytraders who use daily
setups to enter a position one tick above the high of the breakout day. To them,
breakouts matter and intermediate-term setups matter, no matter the group.
They are daytraders who use intraday
setups to enter a position in a strongly trending stock after its initial
pullback on the day following the breakout. To them, breakouts matter and
intermediate-term setups matter, no matter the group.
They are swing traders looking for
ideas in the form of volatility explosions and volatility explosions
about-to-happen. To them, breakouts matter and intermediate-term setups matter,
no matter the group.
And then there are intermediate
traders who, like myself, simply want to know whether breakouts are working, and
if so, in what groups. In itself, this exercise alone yields valuable clues as
to the speculative sentiment, and how that affects the general market.
And, now, to answer the above
questions from our reader: Other sectors besides growth are highlighted for some
of the above reasons. Clearly, for the most part, the intermediate-term player
should not be buying tech, as the setups are largely nonexistent. As for the
question on whether an intermediate trader should trade names outside the growth
stock universe, this is a personal one that only you can answer.