Getting Down To Business

• March 18, 2002
• Dave Floyd

Now that Triple Witching has passed us by,
the market can get on to the business of deciding whether or not the recent move
up will resume, or if it will head back down on signs of the economy not living
up to its lofty expectations. All of this will unfold nicely in the week to come
I suspect. However, one more impediment stands in the way of some intraday
volatility: Alan Greenspan. Yes, it seems like he is talking every other day,
and while I do not suspect he will say anything radically different from what he
has already said recently, we need to keep an ear to the Fed stance on monetary
policy going forward.

After reading Larry
Connors’ piece over the weekend, I was even more encouraged that volatility
is on the horizon. The current VIX readings certainly indicate this. However,
like most things in the market, anomalies have a nasty way of not going away
when you would expect them to. (Does the SOX’s or IBM’s recent shrugging off of
improper revenue recognition sound familiar?) In the meantime, trade ’em as you
see ’em. Naturally, the best areas for finding volatility until the market
"loosens" up are the story stocks. For instance, on Friday we played
stocks like Merck
(
MRK |
Quote |
Chart |
News |
PowerRating) and Cryolife
(
CRY |
Quote |
Chart |
News |
PowerRating). Keep your eyes open for other names today.

SOX KTNs

Looking at some intermediate- and longer-term plays, I cannot
take my eyes off of Intel
(
INTC |
Quote |
Chart |
News |
PowerRating).
Technically, this stock is beginning to set up as a nice short, and from a
fundamental standpoint, it has issues. Now I know fundamentals, or
"funnymentals" as some refer to them, have meant absolutely nothing in
recent years. 

Nonetheless, with a deteriorating chart pattern and some pretty lofty
expectations built into it, it needs to be on your radar screen. You will notice
on the chart above that once the neckline was broken on 2/19, the stock offered
better than 2 bucks to the downside. The stock closed Friday just a shade above
its 200-day moving average. While I may short the stock if it breaks $31.44, I
would really like to see a test of the recent low of $28.50. 

The other stock which I think may offer tremendous potential is IBM
(
IBM |
Quote |
Chart |
News |
PowerRating). Technically, it is showing signs of weakness. It can’t seem to clear
its 200-day moving average, and again, from the news front/fundamental
standpoint, it is quite intriguing. The commentary that will follow in tomorrow’s
piece on IBM will be somewhat involved, and I look forward to your feedback. It
is a way for me to share with you what I consider to be something worth taking
note of. 

Other than these two stocks, I am not doing a whole lot. In fact, I only have
two other positions. I need a pullback in order to be interested on the long
side, or some negative news to put out some shorts. Time will tell.

Key Technical
Numbers (futures):

S&Ps	Nasdaq
1216	1585
1204	1566
1193	1544
1188	1522-26 (confluence)
1178 (major confluence)	1515
1168-70	1505
1160 (confluence)	1490-92
1153-54	1485 (key support)
1141-43 (confluence)	1460 (confluence & key support)
1135 (key support)	1455
	1435

With just over a month to go before the launch of Single
Stock Futures (SSFs), I will be starting a four-part series beginning
on March 22, the first part of which will address the following:

Section 1:  Why I will be trading SSFs.

The introduction of SSFs will be a very exciting time for traders. They will
not only offer a new avenue for traders, but more importantly, offer a nice
complement to what many traders, including myself, already do.

Thought For The Week:

“In
trading, just as in archery, whenever there is effort, force, straining,
struggling or trying, it’s wrong. You’re
out of synch; you’re out of harmony with the market.
The perfect trade is one that requires no effort.” 
—Anonymous

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

Dave