Complacency?
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.
face=”Arial, Helvetica”>For those of you planning to attend
the TradingMarkets 2000 conference at the Venetian Hotel
Resort and Casino in Las Vegas on October 13-15, I’ll be
speaking on Saturday afternoon following Jay Leno. I’ll also
be at the cocktail party Friday night. Sign up soon, as
space is limited.
my latest trading lesson.
At the time this
is being published, the Globex S&P futures are unchanged
and the bond market is trading down 1 tick.
face=”Arial, Helvetica”>On Tuesday, the Nasdaq lapped
slightly higher and began to drift ahead of the Fed
announcement. Then, after some gyrations that pushed the
index above the psychological 4,000 level, it reversed to
close poorly.
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face=”Arial, Helvetica”>As you know, I’ve been writing about
the low VIX readings for quite some time. This suggests that
there is complacency in the market. Often, after such
complacency, the market tends to correct.
face=”Arial, Helvetica”>On Tuesday, the VIX hit its lowest
level since July 19, 1999.
width=”470″ height=”320″>
face=”Arial, Helvetica”>Just for fun (I know: I need a
life!), I went back to July 19, 1999, to see what happened
then. This turned out to be the exact high, right before a
correction in which the S&P lost over 10% of its value
in a little more than three weeks. During the same period,
the Nasdaq dropped over 400 points — a 15% loss.
face=”Arial, Helvetica”>Of course, a low VIX reading, in and
of itself, doesn’t mean that the market will correct
immediately; it just suggests that the potential is
there.
face=”Arial, Helvetica”>Therefore, in light of the above,
you might want to tread lightly on the long side and
continue to consider some candidates on the short side.
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face=”Arial, Helvetica”>Looking to potential setups,
Providian
(
PVN |
Quote |
Chart |
News |
PowerRating), mentioned recently and in the strong
financials
(
$SPF.X |
Quote |
Chart |
News |
PowerRating), began to rally out of a pullback
on Tuesday and still looks interesting to me.
width=”470″ height=”320″>
face=”Arial, Helvetica”>Continuing on the pullback theme,
CIGNA Corp.
(
CI |
Quote |
Chart |
News |
PowerRating), in the strong financial/insurance
sector
(
$IUX.X |
Quote |
Chart |
News |
PowerRating) and also mentioned recently, still
looks like it has the potential to rally out of its
pullback. Just wait for follow-through here, as it did close
off its highs on Tuesday.
face=”Arial, Helvetica”>GreenPoint Financial
(
GPT |
Quote |
Chart |
News |
PowerRating), on
the
From Highs List, rallied nicely on Tuesday, reversing
Monday’s sell-off. This suggests that its uptrend remains
intact.
On
the short side, BroadVision
(
BVSN |
Quote |
Chart |
News |
PowerRating), on the
From Lows List, looks poised to challenge its recent
lows. Techne Corp.
(
TECH |
Quote |
Chart |
News |
PowerRating), on the
10 Technology List, looks poised to resume its strong
downtrend.
Best
of luck with your trading on Wednesday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!