Good Sign For Fall

First of all,
I want to thank everyone who sent me an e-mail requesting further clarification
on
my Trading Lesson.
The positive comments were nice also. I will address each
e-mail individually (be patient), but I will also have a follow-up in tomorrow’s
column which will tie everything together.

The major indices still seem to be offering us no
long-term clues for market direction, and the usual overhead resistance and
support numbers continue to keep this market in a range. Friday’s close brought
the S&Ps to within a few points of a close above the 20-day moving average
(1211.27), but well short of the 50-day average (1227.70). The Nasdaq also fell
short of a close above the 20-day moving average (1706). The 50-day average is
still within striking distance (1765). The same can be said for the Dow, the 20-
and 50-day moving averages are 10,474 and 10,565, respectively.

Trading has been surprisingly good intraday,
although the best action is in the morning, which is encouraging given that
summer is notoriously slow. I see this as a good sign for the fall. As I
mentioned in my Trading Lesson this weekend, stay away from sideways
(non-trending) markets as indicated on a one-minute chart. Friday afternoon was
a perfect illustration of how unproductive that time was.

The major trading stocks, like the averages, are
also up against some key technical areas. Morgan Stanley
(
MWD |
Quote |
Chart |
News |
PowerRating)
is
sitting just below the 20- and 50-day averages (59.89 & 61.55), Micron
Technology

(
MU |
Quote |
Chart |
News |
PowerRating)
, Analog Devices
(
ADI |
Quote |
Chart |
News |
PowerRating)
and Celestica
(
CLS |
Quote |
Chart |
News |
PowerRating)

are quite interesting, all three are within striking distance of their 200-day
averages, 42.85, 49.45 and 50.43, respectively. Do you see a trend with these
last three stocks? All are in the chip sector.

Looking at some longer-term plays, I wanted to
revisit National City Corp.
(
NCC |
Quote |
Chart |
News |
PowerRating)
, it broke out to a new high on Friday
(Chart 1), accompanied by a potential cross to the upside in the MACD and OBV
confirming the move. Doral Financial
(
DORL |
Quote |
Chart |
News |
PowerRating)
(Chart 2) is also interesting
after successfully holding the pullback to the 50-day average and closing above
the 20-day average on Friday with very positive OBV.

Key Technical Numbers:

S&Ps: NASDAQ:
1227.70   
1727
1222.03   
1715
1215.87   
1710
1211.27   
1706
1208.03  
1689
1201.87

Thought For The Week:

Loyalty
may be a virtue in family, friends and pets, but it is a fatal flaw for a
trader. Never have loyalty to a position.
The novice trader will have lots of loyalty to his original position.
He will ignore signs that he is on the wrong side of the market, riding
his trade into a large loss while hoping for the best.
The more experienced trader, having learned the importance of money
management, will exit quickly once it is apparent that he has made a bad trade.
However, the truly skilled trader will do a 180-degree turn, reversing
his position at a loss if market behavior points to such a course of action.

Feel
free to send me your comments and questions. Have a great trading day.

Dave