Was It Real Or Was It Memorex?
The
boisterous a.m. rally had f-a-k-e written all over it.
The reason had to do with conviction,
i.e. volume.
Following the opening, 70-minute vault
on dense turnover, and after a retracement, the Naz then embarked on a low-volume
advance from 11:35 to 1:30.
This is the very sort of
"wedging" rally that I’ve pointed out in this space several times over
the past few months, though on daily charts.
If you look at five-minute bars of the
Naz futures for Friday, you can easily see that the midday rise came on flow
that was far feebler than that of the opening 70 minutes.
That is objective information of
value, especially as it came just hours after Thursday’s second-heaviest volume
day ever.
In other words, since it was so soon
after such a high-volume intraday reversal, any follow-through by the Naz should
have occurred on robust turnover.
Highlight in the bells: Intel
(
INTC |
Quote |
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PowerRating),
flaking by 10%, and on major trade.
Otherwise, keep an eye out for any
type of wedging rally, both in individual issues as well as the indices.
Meanwhile, since I operate with the TV
off almost all of the time, I didn’t realize that Florida is still a
preoccupation of some until I read Jon Najarian’s excellent column.
I hope that you, as a medium-term
trader, are not getting distracted by things you’re seeing in the media.
It’s okay to muse as to whether the
bias will change at the Fed confab later this month, or whether Greenspan will
cut the funds rate in Q1.
But you should not be trading off such
speculation or opinions.
To state the obvious, you should
remain glued to all of the objective things that tell you what the market is
doing right now, each day.
As an East Coast salesman with a
bulge-bracket firm told me this a.m., "You keep things so basic,
Kevin."
The reason: Because it works.
In our conversation, I had caught the
salesman wondering what the Fed will do and wondering if the a.m.’s rally was
just short-covering.
As we hung up, I could only hope that
he doesn’t mix his musings with his trading.
They simply don’t mix, as some have
learned the hard way this year.
Otherwise, Friday’s a.m. blast in many
growth stocks is a timely reminder of
how important it is to be totally prepared with your shopping list in hand when
the market finally resets.
Whenever that opportunity comes, the new
crop of leaders may not give you much time to hop on their backs, pausing for
several days or a week or two, before erupting anew.
The sheer velocity of that recovery
will be disarming.
But you will only be able to react if
you have done your homework and know which names become the nouvelle
vogue.
As it’s too early to know of the next
crop of leaders, only time will tell.
Which is what keeps the game so
interesting.