Tape Watching

• February 27, 2002
• Dave Floyd

For those of you who watch the "tape"
all day like I do, you know how much can be learned rather than simply looking
at the charts at the end of the day or catching a market re-cap on TV. 
Yesterday I continued to see a market which not only staged a comeback in the
afternoon, but once again did it kicking and screaming.  Regardless of the
future direction of the market, the recent gains feel quite labored. 
Buyers are participating more out of a fear of being left behind from the big
rally that the so-called "experts" are predicting, rather than from
their own better judgment to sit tight or look for suitable entry points on the
downside.

These observations have served me very well over
the last few sessions.  During most of the up-moves I have been quite
content on the sidelines, waiting patiently for the "easy" money when
the market sells off. Any casual observer of the tape will notice just how
violent the down moves are — a day traders dream.  Witness the half-hour
that proceeded yesterday’s consumer no-confidence number.  Yes, money
can be made on the long side, but it is far easier if you execute off a slightly
longer time frame, say 5, 15 or hourly bars.  Gold stocks are a great
example.  Intra-day however, it appears that there is an ample amount of
selling going on into the quick sharp rallies on the S&Ps.  A good clue
that this is taking place is noticing that offers simply do not disappear, or
take forever to be cleaned out despite that the offer may be for only a few
thousand shares.

You get the point.  Again, I am not making
predictions as it relates to longer time frames, rather simply pointing out the
dynamics that I am encountering each day.  Until things change, I am
aggressively shorting intra-day downtrends and for the most part avoiding the
up-trends. 

This is what makes the market so fascinating and
at times frustrating.  It is a living, breathing entity (figuratively
speaking); observing it on the time frame that I do offers insights that the
casual observer will never notice.

So, until there is an incredible dose of
"substantiated optimism," tread carefully on the long side.

Look for some great volatility spikes at 10 AM
EST, as Alan Greenspan will be commenting on interest rate policy as well as
offering some insights on the overall health of the economy.  These
scenarios usually offer great set-ups, so keep your ears and eyes alert.

Key Technical
Numbers (futures)

As always, feel free to send me your comments and
questions. See you in TradersWire.

Dave