Blacked Out And The Beige Book

 

Blackouts
on the East Coast have hindered my search
for some viable
candidates today as I am working on limited battery supply on a
laptop. However with the deteriorating market conditions it really
doesn’t matter what we look at…at least for today. The Semiconductor
Index ($SOX.X)
slipped below its 50
and
200
-day
moving average
,
which is NOT GOOD.

There are some key support
levels we should monitor on the broader markets. The Nasdaq could test
1935, the S&P 500 support level is in the 1160 range and the Dow
at 10150. Any closes below these levels on high volume would be
detrimental for the markets as we will be likely to test the lows made
back in April.

Beige book numbers which
normally don’t move the markets had a big impact on the session as it
showed slow growth in the economy and possible lateral movement for
the future. Nothing was really positive in the report including the
outlook on retail sales, which ironically are being reported tomorrow. 

I
highly recommend you look at

the Market
Bias Page
on the website

every day
.
On August 1 we got a CVR III sell signal and the next day two more
sell signals triggered
,
giving a pretty good indication on which way the market was heading.
With that type information along with the other market bias indicators
(if you were trading) you would have known to focus your efforts on
the short side.

In this column I showed you
a stock called Apogee Enterprises (APOG).
I stated that it was setting up a low
volatility
situation which could go either way. What I want to point out is that
with a low
volatility
situation it tends to indicate a potential move is imminent and could
be very explosive.

On August 6 we had an inside
day with low volatility
,
a pattern that Larry Connors published in his "Street
Smarts"
book which was co-authored by Linda Raschke. 

So in essence what I am
trying to point out is that whether you are a short, intermediate or a
long term trader, you should be cognizant of what the volatility
reading is for stocks that you may consider trading. I often use
volatility to adjust my position size in addition to where I place my
protective stops.

I did find a stock that is
showing some good fundamentals and held up fairly well in the session.
Software maker Cerner (CERN)
is creeping up the right side of a multi-month base. The company is
showing some acceleration in earnings (750%, 133%, 143% and 183%) with
a decent debt level of 30%.

Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops
where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.

Greg

P.S.
Sorry for the abbreviated version of the IT-Trader today, but with no
power and limited battery supply I must conserve energy. I hope
tomorrow will be a better day….although I highly doubt it for both
the markets and the heat index.