From Bell To Bell
The market has spoken,
and it was not pretty. The only silver lining was the support
level the S&Ps found late in the day at 1098. Absent that, it was a
pretty ugly day for longs. It appears that the whole “buzz”
surrounding corporate accounting is beginning to take its toll. However, with
the State of the Union last night and a Fed meeting wrapping up, it is anyone’s
guess where we go from here. At the time of this writing, 5:30 PM on Tuesday,
Tokyo was off about 1.45% and trading below 10,000. This may have a
spillover effect on our markets this morning, especially if Europe takes it on
the chin.
I saw a great quote last night from Richard
Russell in his column. It sums up this whole accounting issue quite clearly:
“For the first three quarters of 2001, the 100 companies that make up the
Nasdaq 100 reported $82.3 billion in combined losses to the Securities and
Exchange Commission. For the same period, these companies reported $19.1 billion
in combined profits to shareholders via headline ‘pro forma’ earnings reports —
a difference of $101.4 billion, or over $1 billion per company.”
I don’t know about you, but I do not think this
issue is going to go away. Witness the carnage yesterday in Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating) and PNC Financial
(
PNC |
Quote |
Chart |
News |
PowerRating). Tyco
was so out of control yesterday, I traded it from bell to bell, something I
don’t normally do. That is certainly an indication of just how volatile it was
yesterday. Traditional approaches to trading the “story” stocks are
not the most effective, however. Yes, there are some technical setups, but the
most effective approach on these trades is old-fashioned tape reading. If you
focus intently on the price action, you will pick up subtle clues that go
unnoticed on a one-minute chart.
There were other setups, however. I pointed out
in TradersWire a
setup on the hourly chart of Household
International
(
HI |
Quote |
Chart |
News |
PowerRating). I have been negative on this stock for
some time; this past weekend’s article in Barron’s seemed to be the catalyst
which started its decline. It appears as though it is forming yet another bear
flag, and a drop below $48.85 may repeat yesterday’s price action. I will keep
you updated in TradersWire of setups like these when possible.
So, looking ahead to Wednesday’s
session, it is imperative to be decisive and assertive on the opening. I suspect
there will be plenty of excellent setups, especially in “story
stocks” that revolve around accounting. (I suspect this list will
grow with each passing day.) However, given the Fed meeting and the comments
that follow the announcement, I would not be surprised to see some sort of a
minor rally. That being said, absent any “bombshells,” the market
should be pretty quiet going into the Fed announcement. As I indicated in
yesterday’s column, I will be playing the move after the Fed announcement very
carefully. I highly doubt I will trade the first move — rather I will wait and
play the continuation/reversal moves.
Key Technical
Numbers
| S&Ps | Nasdaq |
| 1142.70 | 1602 |
| 1136-37 (big resistance) |
1582 (big resistance) |
| 1130 | 1574 |
| 1124-25 | 1552 |
| 1120 | 1542 (confluence) |
| 1112 | 1510-13 (confluence) |
| 1098 (big support) | 1498 |
| 1091 | 1470 |
| 1086 | 1434 (very key) |
| 1064 | 1424 |
As always, feel free to send me
your comments and questions. See you in TradersWire.