Welcome To The Jungle

  • January 9, 2001
  • Goran Yordanoff

Welcome
to the Jungle, we got fun and games…

…you learn to live like an animal in the jungle where we play…

…if you got the money, honey, we got your disease…

…we’re gonna bring you to your knees…

…we’re gonna watch you bleed…

You know where you are?

You in the jungle baby, you’re gonna die!!

                       
–“Welcome to the Jungle” as performed by Guns ‘n’ Roses

With
the Nasdaq market devoid of leadership and an inability to sustain a
rally for longer than a handful of hours, trying to play the tape today was
virtually impossible. Multiple rallies and subsequent selloffs occurred
throughout the day in the cash and futures markets that made it impossible to

pick what side you wanted to trade on. The market is not telegraphing where it
wants to go and I suggest we not try to anticipate. 

I was inundated by calls last night by traders proclaiming that yesterday’s
hammer doji was “The Bottom.” I don’t even want to hear about that,
much less discuss it. As Landry has reiterated multiple times, the true bottom
will not be known until after the fact. Meanwhile, we have some very clear
trendlines and resistance/support levels to base our trades on. Why is a bottom
so important? Do we, as traders, really need to “buy and forget” like
we did during the “Millennium Melt-Up” (remember that?) in order to
make money? 

So far this year, the “experts” on television and the highest-paid
analysts have proclaimed several “bottoms.” None have held. The last
thing I will attempt to do in this column or with my trading is to proclaim,
anticipate, or even need a bottom. I am a trader. As an age-old Japanese
proverb says “As a cloud succumbs to the wind, so shall a trader go.”
That’s all we need to do. Leave the “bottom” calls to the
sensationalists on television. 

At times like these, your best trade is the stay the heck out. That tip alone,
if followed religiously, will save you more money than the best stock picker
will ever provide for you from his/her recommendations.

The market is treacherous at present, plain and simple. If you are trying to
jump on an intraday trend with the current conditions, you may as well go to
Vegas and bet “red or black.”  At least you will have
complimentary cocktail service.

The expanding volatility triangle we are in the midst of in the Nasdaq Composite
definitely concerns me. Please observe the following 60-minute chart

of the Nasdaq Composite. The chart extends back into mid-December, 2000. You
can clearly see the expanding volatility triangle that has been developing for
quite some time. 

We are certainly poised
for a sustained move in one direction or another; it is impossible to tell which
way it will go. We had some ridiculously
profitable trades the past few weeks by identifying some very low-risk setups.
At the present time, I am on the sidelines and waiting for my pitch.

It is foolish to expect the market to comply with what you want it to do. Whatever
you expect it to do, it will do the opposite. It is the ultimate

price arbiter.

No picks for now.

Goran