See You At The Trough, Say Around 9:30 AM EST?

July 1, 2002
Dave Floyd

The
beginning of the holiday trading week, and I
suspect that despite the short week, we are going to pack a lot of action into
today, tomorrow and the opening on Wednesday. If you are trading after the first
hour-and-half on Wednesday, you need to check yourself into an AA program for
traders. Get a head start on the long holiday. After the last couple of weeks,
we will all need a break.

Today, we look forward to the release
of The ISM Index, as well as
Construction Spending at 10 AM EST.
Frankly, I could care less what the numbers say about the economy, but as you
know as well as I, several people seem to make their investment decisions upon
them, as is witnessed by the extreme volatility when they miss the so-called
“consensus” estimate, also known as the area on the dartboard where the dart
hit. Nonetheless, these little announcements make for wonderful
HVT opportunities. If you are quick,
decisive and do not think, easy money is
made. The key is to only play the numbers that deviate substantially from the
consensus.

Sticking with the theme from last
week, “Stay At The Trough.” There appears to be more volatility in store as news
story after news story is stirring the pot (see

Larry Connor’s piece). Again, great, bring it on. These are certainly
pleasant markets, given we are heading into the thick of summer, a notoriously
slow time.

Also keep an eye on the gold
stocks. If you noticed last week, they showed absolutely no signs of strength
when our markets were being sold off. This is atypical of recent weeks, when for
every decent sell-off in the futures you could go long the gold stocks and make
money pretty easily. If my hunch is correct and we get a decent move to the
upside in the days to come, the hammer really could come down on the gold
stocks.

The same logic applies with HVT. Many times, I will get long a stock for
say the third or fourth time in a nice rally, and suddenly it just lies there,
despite the market continuing higher. The stock is talking to me at that point.
It is telling me, “I have had enough.” I will usually be short when the futures
flame out, and it drops very quickly. The gold stocks
are talking very loudly right now; do not ignore them.

Additionally, with the increased
volatility, there are some longer-term trades setting up, off of hourly charts
that you may want to keep an eye on. Setting up again is Network Appliance
(
NTAP |
Quote |
Chart |
News |
PowerRating)
which on Friday also had a very nice long side setup
which I had mentioned, for a
pop of almost .50 cents. This setup also looks promising, so keep you eyes
peeled.