Guerrilla Warfare
Kevin Haggerty is on vacation for two weeks. During this time, we’ve asked
Joe Corona, Senior Trader for Tony Saliba, to write the lead morning piece.
Kevin will return on August 9.
It appears that we are now heading into a
period of the late-summer chop that we all know and love. Yesterday the market
told you that something has changed. Looking at the market profile of the
Diamonds (below), we can see that the market
opened higher and had the immediate rejection and sell off that has been the
trademark of this bear market. But then something different happened. The
sellers ran out of juice, and after putting in a new low for the day in ‘K’
period the buyers reversed the flow in ‘L’ period when they took out the highs
of ‘C’ through ‘K’ periods, breaking the back of the bears and turning the
bulls loose.
 
This would not
have happened a week ago, so we now recognize that something has changed, and
we now have to deal with the fact that this market might either be headed into
a) a consolidation phase, or b) a bullish phase. Rejecting the down move
yesterday was important, now we need to see if buyers are willing to step up to
the plate and pursue prices higher. I think an attack on the July 30 /31 highs
is likely, but I still remain in observation mode.
I think it would be wise in here to slip into “guerrilla warfare” mode, making
quick hit-and-run trades, and keeping the powder dry until the market decides
what it is going to do. Daytrading for chip shots in both directions is
probably the game plan for the next couple of weeks. Option traders may once
again look to establish short volatility positions as well. Also, keep in mind
that it is August, and sometimes the best trade is the one you don’t make!
Joe
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