Better Late Than Never

• September 6, 2001
• Dave Floyd

Another day
of volatility, per my request from early June. Heck, better late than
never. The market served up many intraday setups, especially off KTNs. A
late-day announcement from
(
MSFT |
Quote |
Chart |
News |
PowerRating) pushed the market higher, then sold off,
and then finished a few points off the highs. All and all, a good day from a
trader’s point of view. Just think what it will be like with a bit more
volatility! We may just get some today, as European indices deteriorate and our
market waits for the release of Initial Claims for unemployment and the
release of the NAPM Services report at 10:00 a.m. ET. The NAPM report
should provide some excellent trade setups.

The indices are still within striking
distance of the April lows, and the most hyped sector, Chip Stocks, is starting
to show signs of cracking. Witness the charts of
(
MU |
Quote |
Chart |
News |
PowerRating),
(
KLAC |
Quote |
Chart |
News |
PowerRating),
(
NVLS |
Quote |
Chart |
News |
PowerRating)
and of course the
(
$SOX.X |
Quote |
Chart |
News |
PowerRating). We all know about the horrible business cycle
the sector is in (I just bought 256K of RAM for $28) and the valuations are just
beyond comprehension. Perhaps the bears will finally have their day in this
sector. I plan on shorting these stocks, but not until the market retraces a
bit.

Short-term the market is oversold, so
waiting for a brief rally will optimize the entry point. I leave you with this
quote from Bill Fleckenstein on the chip sector: “Take the even more
commodity-oriented DRAM business. Given the state of its losses and ineptitude,
how Micron can command a market cap approaching that of General Motors is
staggering. If you’ve been looking for further proof of people’s infatuation
with technology, your search is over. GM’s market cap is about $29 billion and
Micron’s is about $22 billion. Yes, you read that right. Of course, now we’ve
got to remember that this quarter, Micron is going to have revenues of maybe
$500 million, and on those revenues they’ll probably lose about $400 or $500
million. This quarter, GM is only going to have revenues of something on the
order of, oh, shall we say $46 billion. It makes you wonder what possesses the
people at Fidelity to accumulate a position of north of 10% in a pig like this.
But hey, it’s not their money, right?”

Key
Technical Numbers: (futures)

I wanted to send out my
appreciation to all of you who participate in TradersWire
Interactive, you all make it very useful for everyone involved. For
those of you who do not currently use TradersWire,
I encourage you to do so. Not only do I share with you additional KTNs
that are calculated after the opening (1137 and 1131 were excellent setup
numbers yesterday) but you have input from many other talented traders who trade
on different time frames. All in all, I find it quite helpful, and I trust you
will also.

As always, feel free to
send me your comments and questions. Have a great trading day.

Dave

P.S. I’m looking
forward to sharing the nuts and bolts of how I trade at TM2001 in early October. You’ll learn the two big keys to my trading: 1) How to
define a powerful intraday trend; and 2) The precise
parameters that tell you where to enter your trade in the midst of that
trend. I will also explain to you the “feel and rhythm”
that enables me to trade like a “machine.” This is one element of my
trading that I could never convey on paper through a set of rules or a
formula. You’ll just have to meet me in Las Vegas, and you’ll know what I mean!