A Defining Day
Not much of a
surprise given that it was a holiday. But overall trading was pretty
quiet. However, with a little patience and exercise in discipline, there were a
few trades to be had. As I have been saying lately, when it gets quiet,
you need to push your time frame out just a bit, while reducing your share size
in order to ride out the whipsaw action.
Yesterday I had highlighted in my
column, a chart which indicated some levels that I considered to be key. As
you will see, there was no real magic behind the derivation of the numbers,
simply a Fib. retracement of the recent trading range. While these numbers are
always useful for HVT, they can be very
effective for establishing those slightly longer-term positions mentioned above.Â
See chart below.
With that in mind, consider looking at
setups based on the 5 minute charts vs. the 1-minute charts. The
“noise” and hesitation as we all know have made HVT challenging
as of late.
The chart below highlights some areas
from yesterday’s session which offered decent entry points, both long and short.
While this chart may look like,
“That was easy to say after the fact.” It would not be true, these
levels were determined ahead of time, and when combined with the other
tactics we use for HVT, make for convincing
set-ups.Â
Point A
is a good example of a bearish candlestick formation as well as a cross to the
downside in the stochastics.
Point B
is a good example of a double bottom combined with “oversold”
stochastics.
The frequency of trades is less during
the day, but they are quality set-ups without too much noise.
So, going into today’s session, I will
be looking at more of the same, whether the trade be on the S&P’s or on the
stocks I trade. Bear in mind that yesterday being a holiday, one could
make the case that the “breakdown” may not be valid since banks were
closed, and trust departments were not active. Expect Tuesday to be a
defining day, if we trade back up above 890, that will set a positive tone, and
may catch shorts a little flat footed.
The Nasdaq 100 futures will be
wrestling with 984-85 on the opening. A fade of that area may offer a nice pop
to the downside.
I have been in this situation once
before, the Summer and Fall of 2000. During that time, HVT did not pick
up until mid-November, very unusual price behavior. Rather than
continually fighting the noise and indecisiveness of the market, it is better to
be a bit more flexible and play the “bigger” picture. Eventually
there will be some event(s) that will juice things up, in the meantime, there
are trades, you just need to be patient and forego the immediate gratification
that HVT provides.
Yesterday I mentioned my outlook on
the Housing Stocks and indicated my inclination to short the Housing
Holders, (IYR) upon deterioration in the overall market. Well
that did play out, and I am short the IYR’s
in my non-trading accounts. As further evidence of what MAY
happen within this sector, I will leave you with a quote from none other than
the chief economist of the National Association of Homebuilders from late July
2002:
“The time has
come to put this issue to rest. The nation’s homebuilders have said it, the
realtors have said it, and Alan Greenspan has said it once again, in no
uncertain terms:Â There is no such thing as a current or impending house-price
bubble.”
Time will tell, but with foreclosure
rates at 30-year highs, it appears that at the very least the pace at which
prices are increasing is sure to slow.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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* indicates a level that
is more significant
As always, feel free to
send me your comments and questions. See you in TradersWire.
Dave