Don’t Force It

• November 6, 2001
• Dave Floyd

Limited
action was evident yesterday as the market prepared for Cisco’s

(
CSCO |
Quote |
Chart |
News |
PowerRating) earnings and Tuesday’s FOMC
meeting. For the most part I was on the sidelines, as were most of the traders
in our office, awaiting better price action tomorrow. The 1107 level put a lid
on further upward price action. The five-minute chart of the S&Ps below tells
the tale, a nine-point range for the whole day.

After last week’s good intraday
action, a slow day ahead of big numbers is not uncommon. Traders simply need to
sit tight and wait for great setups. If they do not materialize, don’t force the
trade. Trading is one of the few professions where you don’t always need to be
working diligently (in terms of always trading) to be successful.

I suspect that trading this morning
will be excellent on the heels of Cisco’s earnings, but dry up after the first
hour as the market goes into FOMC watch. As I have stated in the past, the Fed
announcement trades, like most things in life, are not as predictable or
lucrative as they used to be. My approach now with Fed announcements is to
simply trade the announcement if it is unexpected. For instance, the market has
priced in a 100% chance of a 1/4 point cut and also factored in the possibility
of a 1/2 point cut, given the poor economic numbers that have been released
lately (that is why the market rallied all last week, lol). As a result, either
of those two outcomes will force me to sit on my hands for a few minutes after
the announcement. An unexpected move will be the move I will play, say no action
at all, or a 75-basis-point cut.

Tomorrow, I will revisit some of the
stocks which I have highlighted as longer-term plays and offer some further
insights now that the indices have shown amazing resiliency in the face of poor
economic numbers.

Thought For The
Week

Just
when you think you have it all figured out and you are clever enough to simply
know where the market is going and when,
reality will come along and slap you in the face.
You then go back to the basics, never forgetting to respect the
market’s own sense of timing.
 

Key
Technical Numbers

As
always, feel free to send me your comments and questions. I will be in TradersWire sharing
observations throughout the morning and afternoon sessions.

Dave