How To Play Both Sides Of The Market

September 4, 2001
Marc Dupee

Stock index futures went on a roller coaster ride in the first session
following the Labor Day weekend. Index futures got going early after
the National Association of Purchasing Management’s index (NAPM) posted its
biggest gain in 10 months, bringing buyers out who believed the report shows
the economy and the manufacturing recession may have
bottomed.

But bears showed they remain in control once key resistance was hit,
driving the S&Ps down the same 28 handles to leave the September
contract down 4.50 on the session at 1131.00. Nasdaq futures undercut
Thursday’s lows and leave the contract within a day’s range of contract
lows.

The five collective up signals from the Market
Bias Indicators Page gave you the upside bias, but what were the clues at
the session highs in the S&Ps to play the short-side as well? One
effective way is to locate key areas with Fibonacci ratios. The 50%
retracement of the recent swing down from Aug 28 occurred at 1157.50.
Retracements such as the 38.2%, 50% and 61.8% levels are often key areas
for a market turnaround, especially if there is a clustering of Fibonacci
levels.

In her intraday S&Ps Price Action Levels service available at
TradingSubscriptions.com, Carolyn Boroden provides these Fibonacci clusters
and today’s setup worked out well. In an intraday update before the market
hit, Carolyn notified subscribers that the “60-minute work has 1157.50-1159.40”
as resistance.” The S&Ps hit 1158.00, within the cluster, and fell
quickly lower from there.

An improving economy reduces the chance the Fed will continue to cut
interest rates. Just two days ago, the federal funds futures
(
FFV1 |
Quote |
Chart |
News |
PowerRating)
were pricing in an 86% chance of another 25-basis-point cut by the October
FOMC meeting. Today the FFV1 is down sharply, reducing the odds of a cut to
3.25% to 40%.

Also in the currencies, the
British pound
(
BPU1 |
Quote |
Chart |
News |
PowerRating) made good on its
Turtle Soup Plus One
Sell signal, from the Futures Indicators Page. (See the TM website’s education
section to learn how to trade utilizing this strategy).

Topping action in the ECU1 took
it off the Momentum-5
List, a place it had inhabited for weeks. This is key as it served as a
warning that buying pressure had come to a fault. The ECU1 took its biggest
hit of the year on the prospect that the worst isn’t over for the euro,
closing .02390 lower at .88580.

Moving to a new contract high, February 2002 pork bellies
(
PBG2 |
Quote |
Chart |
News |
PowerRating)
surged their daily limit of 3.000 to close at 84.600. Bellies made good on
an Off The Blocks
long setup, an entry strategy from the education section suitable for
contracts on
New 10-Day Highs of Momentum-5 List.

From the
New 10-Day Low List, December cocoa
(
CCZ1 |
Quote |
Chart |
News |
PowerRating) lapped lower,
rebounded to partially fill the gap, and then made good on an Off The Blocks
short when the contract traded below the opening range (the opening five-minute
bar). Cocoa closed down 39 at 910.

How To Play Both Sides Of The Market

BUY THE FEAR, SELL THE GREED

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