Making Use Of Quiet Time
Nothing new has appeared
on the price action front. Low volume, barely trading more than 1
billion shares per day, combined with continued terrorist threats, war prospects
between Pakistan and India, waning confidence in economic prospects, and the
fact that it is the summer indicate that this price action will be evident for
some time going forward. Naturally, some sort of a major crisis may shake things
up for a short period, but overall, the US markets are not facing anything
different that any other summer session.
The good news is that every trader can get
through these periods. Remember, there are roughly 240 trading days each year,
missing a few dozen is far more beneficial to your trading account than trying
to hammer away at something that is not there to begin with. My suggestion is
very simple: get your quick and assertive trading out of the way in the first
hour, then look to manage longer-term positions the remainder of the day. I am
using these quiet periods to hone my skills on longer-term trades on 5- and
15-minute bar charts. This part of my trading approach is not my bread-and-butter
at present, but for me, it is the next phase on my evolution as a trader. These
markets, while perhaps not the best for any time frame, allow you to learn.
As I have said many times, “What does not
kill you, will only make you stronger.” If you can come away from
these markets showing a profit, you will have refined your skills to such a
level that any noticeable up-tick in volatility will allow you to profit
handsomely.
The one thing that is still hanging over our
market is the dollar. While it appears to be a bit oversold presently, the trend
is clearly down. This is not a good sign going forward, as is reflected in the
current performance of our markets. It will be vitally important going forward
for this to correct itself in order to avoid further economic woes. Our capital
markets are far too reliant on foreign capital, and a weak dollar jeopardizes
that capital in-flow. A weak dollar also puts pressure on Japan from an export
standpoint, as suddenly their goods are a bit pricier for us. Witness the
feverish pace at which Japan has been intervening in the currency markets.
Unfortunately, intervention never works in the long run.
I actually find the current market environment
interesting. For the most part, traders ignore fundamental and political
“noise,” and while I agree that that stuff makes no difference when a
trade lasts no more than a few minutes, it still has a huge impact on the big
picture. With all of the events currently, there lies the real possibility of
some very volatile markets ahead. However, if most of these issues simply pass,
our markets seem due for a very quiet summer.
On a lighter note, with the World Cup officially
kicked off last Friday, you can be sure that trading activity throughout Europe
will be nonexistent. Since their markets typically do not “move” our
markets, I don’t expect a ripple effect, but lighter trading volume in London,
Paris and Frankfurt, just adds one more negative.Â
The quotes below are from an article in the
weekend edition of The Financial Times:
“Trading volumes are
expected to falter in the City of London, where dealers, typically men in
their 20s, are likely to have one eye on the television for the 7.30 am
matches.”
“The British
government, which has issued guidelines for employers, aims to practice what
it preaches. Managers at the Department of Trade and Industry have been told
not to schedule meetings during the England games, but to bring in televisions
for staff.”
“Richard Greenwood, a
CEBR economist, said: “The effect will be negligible in the US, which
does not have much interest in football.”
“Italy could lose a net
0.75 percentage points of reduced staffing during the Italian matches. In
Ireland, some employers have accepted the need to adjust working
practices.”
Looking at a trade from a
longer-term perspective, take a look at the chart of KLA-Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating). To me it seems like a reasonable long provided you use a tight stop
loss around $51. It is sitting on support (KTN)
and appears oversold for the moment.
For me, the opening today
will be about one thing, Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating). The chairman is stepping down for “personal reasons” he
says. However, an article in the paper over the weekend indicated that his tax
returns were being audited. Regardless of the outcome, and frankly it does not
matter, the stock will be very active on the opening and should offer some good
trading setups. Many times when there is a big news item associated with the
stock, technical levels become less important. Nonetheless, keep an eye on: 22.10,
21 and 20.60
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 1098 | 1258 |
| 1087-88 | 1251 (confluence) |
| 1077-79 | 1235-36 |
| 1069 | 1221-26 |
| 1060 (confluence) | 1194 |
| 1052 | 1184 |
| 1045 (contract low) | 1151-52 |
| 1020 (critical support) | 1140 (contract low) |
Thought For The Week:
“Aspiring
traders must perfect their methodology to the point where it becomes robotic.
Once you reach that point, where reflexive actions take the place of
thought, you then become a great trader.”
As always, feel free to send me your comments and
questions. See you in TradersWire.