White Noize
Monday was one of the best days for
daytraders I’ve seen in some time.
But from a position player’s view, it
was just noise.
"Noise" because the volume
was holiday light, and "noise" because the Naz hit a fresh low for the
move.
In the bells, the only thing of note
was Cisco
(
CSCO |
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PowerRating), coming down another 4%, and printing a new closing low
not seen in 4+ months.
Since it’s been hurting for some time,
this is not a stock that will tell you what’s happening in the world of
institutional sentiment at the margin
Even though I would never base a trade
on their action, I do like to make myself aware of the behavior of
rate-sensitive groups.
More than anything else, this exercise
probably fulfills my curiosity in putting together the fundamental with the
technical.
But nothing more than that.
And so the action of the brokers, a
leading indicator due to their sensitivity to both rates and underwriting
volume, is of casual interest here.
The group just completed a
head-and-shoulders top, with its two leading lights, Merrill
(
MER |
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PowerRating) and
Schwab
(
SCH |
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PowerRating), appearing wobbly.
With a hefty cash position, perhaps
you are considering playing the short end of the ledger.
It is to be noted that, from an
intermediate-term standpoint, shorting is exceedingly more difficult than going
long.
The reason is that, of the two
emotions that govern investment decisions, greed and fear, it is fear that is
the more extreme.
Translated, this means that people
want to rid themselves of stock far faster than they want to accumulate stock.
The ’98-’99 pyrotechnics of the Nets
notwithstanding, stocks go down faster than they go up.
This means that your timing on the
short side must necessarily be much more precise.
For my intermediate account, I stay in
a 100% cash position in an iffy market.
However, in a separate account
earmarked for daytrading, I will gladly short when conditions warrant.
The point here is to realize that
shorting does not mean using the same pattern setups with the same money
management rules and the same expectations that you use on the long side.
Try doing that at your own peril.
Plug time: "The Best:
TradingMarkets.com Conversations With Top Traders," a book of interviews
with some of the world’s top traders that I authored with pal Marc Dupée, is
now available on our Web site…click here
for more info.