Now What?
So
we got a 25 basis point rate cut from the Fed and the
market reaction as usual was not one of euphoria. Primarily because of
the statement that the Fed issued "Household demand has been
sustained, but business profits and capital spending continue to
weaken and growth abroad is slowing, weighing on the U.S. economy”
leaving open the possibility of future rate cuts.
Now that this is behind us,
I am sure the markets are waiting to see what the European Central
Bank is going to do next week. Ideally, what we would like to see is
the ECB to cut rates, as it may help expedite the global markets
economic recovery.
Okay with that said, what
should we do? Continue to trade defensively using tight stops and
being very selective on the trades we take. Don’t over welcome your
stay and remember cash is good. So keep your powder dry or until you
can’t stand it (As my buddy Dave Landry would say).
Duramed (DRMD)
looks interesting. The stock is setting up a low volatility situation
in a pseudo symmetrical triangle pattern. Earnings for the
generic drug maker have been climbing (107%, 111%, 160% and 999%).
SRI Surgical Express (STRC)
is also trading in a high level symmetrical triangle and is in a low–volatility
situation. It should be noted its 50 day average volume is 56,0000
shares. The surgical services company has shown some nice growth over
the last four
quarters (25%, 213%, 120% and 33%) with the quarter ended 6/30 beating
the prior quarter. Note that STRC closed at its 20 period moving
average and as you know with volatility we don’t know which way it
will be heading.
Among the ETFs moving higher
in the session, the Wilshire REIT
Index Fund (RWR)
closed higher 2.5%.
The DJ US Large Cap Value
Street Tracks fund (ELV)
gained 2.2%.
And the WEBS-Sweden
Benchmark Fund (EWD)
closed up 1.9%. Just a thought, Sweden’s central bank, the Riksbank,
is meeting Friday. Now speculation is that there won’t be any change
in monetary policy this meeting. Could the move up in the EWD today
indicate traders counting on a rate cut?
On the downside the Ishares
DJ U.S. Internet Trust (IYV)
lost 4.9%.
Also shedding points was the
B2B Internets HOLDRS Trust (BHH)
sliding 4.8%.
And the Semiconductor HOLDRS
Trust (SMH)
closed lower by 4.7%
The Nasdaq 100 Index
Tracking Stock (QQQ)
fell 4.1%
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.
Greg