Back To Blue Arrows?

Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.

Heads up! After the close, Cisco announced an earnings
shortfall for the third quarter. The stock is getting creamed in early after
hours trading–down around 14%. This will likely weigh heavily on Tuesday’s

Monday, the Nasdaq lapped lower and continued lower early on. It then rallied
for most of the day before finding its high late in the afternoon. From there, it
sold off hard, probing below the 1900 level. It did bounce slightly going into the close but this
probably doesn’t mean much in light of the Cisco
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2000 still looks
like a likely resistance level, especially when you consider that we now have
pivot highs in that area.

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The fact that the market could not continue the rally that
began on Thursday combined with the after-hours Cisco news suggests that we will
once again head in the direction of the big blue arrow. It’s too early to tell
if this will be a corrective leg from the leg up from lows or another trip to
the old lows. So far, I’m leaning towards the latter. It just seemed all too
pat, the media celebrates a bottom late last week and everyone starts kissing
each other.

So what do we do? Tuesday’s open will likely be little
dicey. The media is trying to play down the impact of Cisco, but I can’t imagine
that it won’t force stocks lower. Therefore, use caution should you decide
to trade around the open. The short side still seems like the logical choice to
me. However, I still think it’ll be choppy. Therefore, continue to keep
positions on the light side. Remember, the name of the game is long-term
survival. Save some cash for when conditions are clearer.

Looking to potential setups, Bausch & Lomb
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, mentioned recently, still
looks vulnerable.

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National Instruments
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also mentioned recently, looks poised to make another leg lower.

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Random Thoughts

This morning, some guy on
TV said that if you buy a stock at
$80 and you
rode it down to $15, then, provided its a good company, you should buy more. He then acted like there was no
downside below $15. I’m no math major, but if a stock is going to 0, it has to pass below
15. True, he did say “good” companies but, a “good” stock
does not go from $80 to $15 after you buy it. Buy stocks that go up. If they
don’t go up, don’t buy them. And if you do buy a “bad” stock, don’t
place a stop $70 away from your entry (side note, this was written before
Cisco, a “good stock,” announced an earnings shortfall).

Today, I was talking with a
hedge fund
manager about how many people were picking a bottom in here. Ironically, the
market began to roll over as we were talking. It was at this point he said “that’s good for those bottom pickers
(implying that these
individuals are new to trading), they should have to suffer just like the rest
of us (experienced, longer-term money managers).” My point in sharing this
with you is that although trading is not rocket science, it’s NOT as easy as the
media might have you believe.

of luck with your trading on Tuesday!

Dave Landry

P.S. Reminder:
Protective stops on every trade!

“…You have definitely developed some very clear and concise methodologies,

which can be used in the real world of trading…..”

Randy B.

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