How I Uncover Clues
Once again the market showed its fury on the opening before going back into
its usual summer hibernation accompanied by low volume and somewhat random
price movement. Nonetheless, as stated frequently, there are always
opportunities on the opening, and yesterday was no different. In fact, the big move
up ahead of the LEI Number had a real nice
feel. You could sense the intensity in the pit. Myself and my fellow traders as
well as those in my
Trading Room bellied up and pulled down 3 long positions shortly
after the opening, EMC, color=#0000ff>AMD and NEM. We
exited 75% of the position ahead of the LEI and bailed after that when the
reaction was muted. Go back and look at your 5-minute stochastic on the S&P
futures at that time; it clearly indicated further upside was limited, why get
greedy?
AMD and color=#0000ff>EMC? Those stocks do not move. Well, yes, you are
correct, relative to a KLAC or QLGC; however, in a slow grinding market that
last thing I want is a stock that is hyper-sensitive — AIG
also comes to mind. Rather, to make up for the smaller range, you
can trade much larger share size in these issues. In the end, it all balances
out.
I tuned out both mentally and literally after that, I had appointments and
was not about to give back hard-won dollars knowing the tendency of summer
markets. The real action after that was in the FX market.Â
While I do not talk about that here in my column, since it is not the focus,
yesterday’s developments do have an impact and may even indicate that our
markets will continue to improve. The recent route in the Euro versus the
dollar, but more so in the Euro vs Yen has been a bonanza for position oriented
trades (yes, I closed out my short EUR/JPY trade yesterday) indicates an
increasing appetite for US as well as Japanese assets. This will likely lead to
continued upside pressure in both equity markets.
Additionally, it appears as though the bond market is getting its footing and
may be due for a technical bounce. This will ease fears of higher rates putting
the brakes on any rallies, although one should not get too comfortable with that
analysis in the long run. Printing presses running overtime will eventually
have a negative impact.
According to my calendar, we have one more week of summertime trading, I
suspect that like all post Labor Day periods this one will also prove more
exciting. In fact, many traders I know — myself included — have come to dislike
summers (the season that is) now that they are traders. What was once a
fun-filled time of the year in earlier years is now a painful grind, or at the
very least a period where ones adrenaline is simply not “pushed” enough to give
you that rush that trading provides.Â
I for one never stop thinking about the markets, it is an all-consuming thing
with me — however, I believe it sows rewards. It is more a labor of love than
some monotonous “check list” each day. As I learn more about the markets I have
come to realize that probing constantly is what uncovers clues to the “bigger
picture” and “smaller picture” alike, just like I mentioned the other day about
remaining focused on a few stocks while day trading. Clues are only revealed to
those looking for them.
So, on that philosophical note, have a great weekend.Â
** I will not be posting a column next Wednesday, Thursday or Friday as I
will be in Chicago on a business trip. Looking forward to some good steak in
that fine city as well as coming back to my favorite time of the year, the
Fall.
| Support/Resistance Numbers for S&P and Nasdaq Futures | |
| S&Ps | Nasdaq |
| 1020 | 1339 |
| 1015* | 1320 |
| 1006 | 1299 |
| 1002-1003 | 1291 |
| 998 | 1282 |
| 992 | 1273 |
| 988 |
As always, feel free to send me your comments and questions.