Pushing On A String

• October 2, 2001
• Dave Floyd

Another Fed
day is upon us.  As a result I suspect the morning will offer
some great trading, but will taper off early ahead of the 11:15 AM EST
announcement.  Like most of the previous Fed announcements, playing the
initial move is an act in futility. The better strategy is to let the market
react and then play the pull-backs or rallies that proceed. The one exception
being a completely unexpected move:

1.  No rate cut, I suspect this
would be interpreted quite negatively, as a result, I would be seeking to short
aggressively

2.  A half point cut, not widely
expected,  would be viewed as quite bullish in the short-term.

Trading aside, I believe the interest
rate policy is essentially "pushing on a string," the problems both
economic and psychological are not going to be cured by accommodative fiscal
policies. That is all I will say since this topic could keep me writing for a
long time. Perhaps an upcoming piece.

Given the chaotic price action of
late, it is essential that traders properly "position size." 
Essentially, this means trading larger when activity permits, and scaling back
or not trading at all when activity is low.  I know these are basic points,
however, quiet markets have a tendency to lure in traders…don’t fall for that
game.

Key
Technical Numbers:

As always, 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
this weekend. 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 with consistency. 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