Should I Stay or Should I Go Now?

October 14, 2002
Dave Floyd

That is certainly the question on my mind,
and naturally now that I wrote this title, this Clash song will be in my head
until I turn in for the evening. But seriously, it is the big question right
now. I had several friends who are not in the business phone me over the weekend
asking if:

Should they get back in?

Should they take what they made since Thursday and move on?

From an investing standpoint, who knows? My guess is stay away, but from a
trading standpoint, this rally looks like it may have some legs. I did establish
some longs in my non-HVT accounts on
Wednesday and Thursday, and I am willing to hang around to see how the S&Ps
handle some of the levels on either side of where they closed on Friday.

The first indication of some higher prices ahead can be seen in the weekly
chart of the S&P cash index (SPX):

Secondly, despite the group being grossly overvalued and not worth the paper
their stock certificates are printed on, the Semiconductors
continue to be the darling of the people who know nothing about trading and
investing, the Wall Street professionals. Nonetheless, they do have the capital
that moves the markets, and if they are buying the chip stocks and that is what
is leading the market, well, then that will be the sector I need to keep my eye
on. Not only from a longer-term trading perspective, but also intraday, since
many times the chip stocks can be the catalyst for rallies in the S&P and
Nasdaq futures. If you are not watching the SOX intraday, you are missing a big
piece of the puzzle.

Technical levels, opinions and economic numbers aside, as traders (HVT)
you need to recognize only one thing right now, the intraday volatility that has
been absent in recent weeks is back. So while the future direction of the market
remains unclear, IT DOES NOT MATTER. There
are buyers back in this market presently and they are aggressive. Intraday
spikes of 8-10 S&P points are once again common (refer to the charts in Friday’s
column), this is what HVT traders need to flourish. If you are new to the
game or feel that you did not take full advantage of the incredible trading back
in late July as the market got hammered, your second chance may now be here. If
Thursday and Friday were any indication, the market probably has a few more
sessions in store for us before settling down again.Â

Pay careful attention to the Support/Resistance
Numbers below. The market continues to trade very technically and has
been respecting many of the levels we have highlighted in recent columns. Most
of the big moves in the last few days have come from them. Knowing these levels
has provided me with some great trades. I trust you capitalized as well.

Key Technical
Numbers (futures):

S&Ps	Nasdaq
872	933
857.50	927.75
847	917
842	910.50
827	899.25
815-16	881.50
805	870.75
	865
	860

* indicates a level which feel is more significant

Keep an eye on Quest Diagnostics (DGX)
today and for the next few days. The stock was hit hard last week and has been
incredibly volatile. While this is not a stock for HVT necessarily, it may offer
some great longer-term trade setups as outlined in the chart below.