Complacency Equals Opportunity

• January 8, 2002
• Dave Floyd

The market
continues to trade quite sluggishly. With each passing day, it
becomes even more clear that the market is on borrowed time. Yes the trend is
up, and I will continue to respect that. However, I have this nagging
observation: The economists who completely missed calling the recession which
started in March 2001 (the same ones who finally said there was a recession
after the 9/11 attacks) are now predicting that within a couple months, the end
is just around the corner. It is simply amazing what will pass for analysis
these days.  Enough espousing. However, it is important — complacency
always leads to opportunity in the market, and the market is certainly stricken
with a severe case of complacency.

The Semiconductor Sector Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating)
has given back a bit of its recent gains, but still holding above its 200-day
moving average, 563.33. I suspect this will still dictate price action going
forward, so keep a close eye on this index.

Choppy is one way to describe the
intraday action lately. Combine that with a relatively narrow intraday range and
you have a situation where as a trader, you need to become a sharpshooter. I was
going over my trade sheets for the last couple of weeks and I noticed something
quite interesting. The afternoon sessions, on the whole, have been a wash, in
terms of my individual trades. Until the indices loosen up in the afternoon
session, I must be very selective when placing trades.

Yesterday afternoon’s session was a
trap for breakout players, the last hour on the 1-minute chart was a 3 point
range with absolutely no trend. It is easy to get sucked into playing these
potential rallies or sell-offs, but unless each individual move up or down is 3
points or better, do not waste your time.

Key
Technical Numbers

As always, feel free to send me your
comments and questions.  See you in TradersWire.

Dave