Market Shugs Off Sharks And Anthrax
On Tuesday, the Nasdaq rallied early, reversed, but then
recovered to close well. This action tacks on about 1 1/2 percent.
The S&P also recovered to close well and in the plus
column after some early morning gyrations.
Except for the fact that the markets still remain choppy,
Tuesday is another positive day. This is especially true when you consider the
fact that the market continues to shrug off bad news. The (implied) spin today
was that sharks kill more people than Anthrax. So, if you receive a shark in the
mail, DON’T OPEN IT!*
I guess us Americans just don’t buy this terrorism thing.
So what do we do? As
mentioned recently, the short-term momentum appears to be up. True, the market
is overbought, but you can’t fight the tape. Therefore, once again, continue to
focus on the long side. There’s no need to bet the farm,
though. Continue to keep it on the light side and above all, wait for entries
and honor your stops. If you ever get tired of me saying that, don’t wait for
entries and don’t honor your stops. I imagine that I’ll make a believer out of
you sooner or later.
Looking to potential setups, Aon Corp. (AOC),
in the strong insurance ($IUX.X)
sector, appears to be holding up well after its recent correction. This action
sets up a high-level micro double bottom and suggests that its uptrend remains
intact.
Example Time
As you may know, large price
moves often follow low volatility situations as volatility reverts to its mean.
The problem is, this move can be in either direction. Therefore, when
faced with a low–volatility
situation, I like to rely on other technicals to help me determine the likely
direction of the breakout. Imclone Systems (IMCL)
provides a good example. Notice the low volatility situation (a) occurs during a
strong uptrend and a pullback. This action suggests that the move will be
higher as volatility reverts to its mean. For more on how to incorporate
volatility into your trading, see my articles under Traders
Lessons (free) or my book
(far from free).
Best of luck with your trading
on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
*To those new to this column, please be advised
that the joke flag is almost always flying. Here, I’m poking fun at the media
and am not trying to minimize the seriousness of what these whackos (the
terrorists,
not the media) have done. I know this is obvious to most, but its easier to
explain it to all versus writing individual e–mails
late into the night.
"..While on
the road I take your book and read it again and again in the evenings. It is a
bible that should be read by all traders (and I’ve been in the business for 30
years). Oh, how I wish I would have had your book 30 years ago….. keep up the
good work!
Bill B.
No risk, 30-day, money
back guarantee.