Moving Forward

• September 18, 2001
• Dave Floyd

I suppose I should have known trading would be a bit muted. Whenever
everyone, including myself,  is expecting something, in this case extreme
volatility, it never pans out.  No volatility you say?  The S&Ps
and Nasdaq futures had intra-day ranges of around 30 and 60 points respectively. 
True, and for traders with a slightly longer time frame than myself, perhaps
yesterday offered some great setups.  On my time frame however, there were
no sharp intraday movements that we hyperactive daytraders thrive on. 
The one consolation I had were the short positions I had in other accounts
coming into yesterday’s session.  Other than that I am sad to say, I had a
pretty lousy day.  You can’t bat 1000, that is the nature of this business. 
When you come in, like I did, expecting things, as opposed to simply getting in
synch with the market, you typically walk away with little to show for your
efforts as well as a bruised ego. 

It is easy to get out of synch with the market. I could make many
excuses, the bombing, being idle for several days, training new traders,
reviewing my traders risk intraday.  The bottom line, yes the markets were
challenging yesterday, but several of my traders did pretty well.  They
were focused.  I wasn’t.

But that was yesterday.  Today offers new opportunities.  Hopefully
it will offer a bit more in the way of intra-day range.  Take a look at
yesterday’s 5-minute chart of the S&Ps.  Were some of you wondering
why the afternoon was so dull?  The S&Ps were trapped between their
40% and 50% retracements (1041 & 1036) of the high and low. Texas
Instruments
(
TXN |
Quote |
Chart |
News |
PowerRating), exhibits a similar pattern. Notice that there was never a
continuation move outside that narrow range? The S&P’s will need to break
this channel before I enter into any trades this morning. The Nasdaq however
closed right near the lows as did the Dow. 

As I mentioned yesterday, the traditional set-ups I look for are not the only
way to play a market under the current circumstances.  Buying pull-backs in
up-trends and selling rallies in downtrends is still viable, but you need to
play off the emotions which are circulating in this market.  This is a bit
more of an art than a science.  These set-ups are usually found after sharp
sell-offs or rallies, or especially off “round” numbers in the
indices, Dow 9000 for instance.  Normally I will not “fade” these
moves, but when the volatilty kicks back in, these trades pay dividends. 
They also carry a higher degree of risk.  Keep your eyes peeled over the
next few sessions for these set-ups.

The SOX Index is continuing to show signs of breaking down even
further.  We all know how stubborn this index and its components have been
to succumb to market and valuation pressures, but it finally appears there will
be some “adjustments” made in this sector to more realistic price
levels.  These stocks will offer excellent intra-day setups as well as
longer-term plays.  Stocks like Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) & Applied
Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating) offer good range and liquidity.

The retailers continued to take it on the chin yesterday.
The S&P
Retailing Index
(
$RLX.X |
Quote |
Chart |
News |
PowerRating) was down 54 points (7%) for the day.  Concerns
over further retrenchment from the consumer was a serious concern.  Regular
readers will know I have been very negative on this sector for a few weeks now. 
The events last week only solidified my view of this group going forward. 
Best
Buy
(
BBY |
Quote |
Chart |
News |
PowerRating) is reporting earnings today, the company statements will be very
interesting.  Best Buy offers good range intra-day and should be considered
for intraday setups.

As we move forward over the next few sessions and the emotions that are
playing out in the market die down, technical levels will become the norm again,
so pay close attention.  Today’s Key Technical Numbers, as well as
future KTNs will offer a wide range.  I believe over the next few
sessions that the markets will be quite volatile, so I want to supply you with
as much information as possible.

Key Technical Numbers: (futures)

Have a great day.  Feel free to send me your comments and questions.

Dave

P.S.
I’m looking forward to sharing the nuts and bolts of how I trade at TM2001
in early October. You’ll learn the two big keys to my trading: 1)
How to define a powerful intraday trend; and 2) The precise
parameters that tell you where to enter your trade in the midst of that trend.
I will also explain to you the “feel and rhythm” that enables me to
trade like a “machine.” This is one element of my trading that I could
never convey on paper through a set of rules or a formula. You’ll just have to
meet me in Las Vegas, and you’ll know what I mean!