This Week’s Battle Plan
Who Cares About The
Oscars!
In a few hours we’ll know who will join Oklahoma and Indiana in the
Final Four. And in a few minutes we’ll find out who won the “Where
Was Kevin Haggerty Last Monday” contest. What a Sunday!
But First…
Let’s digress and get down to the business at hand. Last week we
discussed the higher-than-average likelihood that the market would correct.
Not kill the longer-term uptrend, simply a pullback. The bullishness
and lack of complacency signaled by the VIX told us so.
And the Dow dropped nearly 200 points for the week. And what did our
fear indicator
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) do while the market declined? The
opposite of what you would expect. It dropped. It dropped to levels we
have not seen since the late summer of 2000 (which preceded one wicked
hit on the averages).
So, one of the first questions I get
asked on E-Trade Radio on Friday is “Does the VIX still
work?” Work in what way? ‘Buy the market at a VIX reading of 30
and sell it when it hits the low 20s,’ as the press and many traders
like to say? Well, then my answer is the same it has been for
years…”No.” It’s never worked like that. And it never
will! But if you ask, “Does it work within the context of its
recent levels,” then I say, “Yes.”
For those of you who use our Market
Bias page or subscribe to my nightly
service, you know we have had few CVR
signals in the past few weeks, and
more importantly, fewer multiple signals. But, when these sell signals
occur, they will likely occur in waves. And with us reaching VIX
extremes (it’s now a month under its 20-day ma) we’ll likely get an
even bigger correction than the nearly 200-point drop we saw this
week. The key is to wait for the signals and keep your stops tight (as
you should do with every trade).
That’s Not To
Say…
I’m bearish, because I absolutely am not. And, as I have tried
to point out since October, we continue to get more and more signals
that a valid bull market is underway. This week, we had a report that
equity fund in-flows are running 20% ahead of last year (in spite of
the fact that money is coming out of technology funds). This net
increase into mutual funds will be put to work. And this precedes
further upside to the market.
But, very shorter term, I’m much less confident due to this
complacency we are seeing, and I am looking for reasons to be short
the futures. I found a few small reasons this week and was rewarded.
I’m flat as I write this, but I’ll be looking to be short them again
this week. But, not without CVR sell signals to guide me.
Look at our Market
Bias page every night. It’s been there since TM’s inception, is
statistically backed, and has stood the test of time. It’s nowhere
near perfect, but it has proven to give an edge. And an edge is better
than listening to the random, unproven guesses of most others.Â
“Because He
Is A Big Smart Tough Guy And Can Do Whatever The Hell He Wants To Do”
Now, even though the markets are very
important, let’s move on to something even more important…the “Where
Was Kevin Haggerty Last Monday” contest.
When I posted the question, I expected maybe 20 or 30 responses.
Instead, my email box was filled with hundreds and hundreds of
answers.
First, I want to thank everyone who sent in an answer. And I
especially want to thank the many of you who sent me personal notes
about your trading success because of TradingMarkets. I smile at each
of these letters.
Second, if you answered “he’s celebrating St. Patrick’s Day,
“he’s hung-over” or something to that effect, you were
correct. But, as I have preached here weekly, you will never make
money by trading the obvious. And you will never win a contest of mine
by answering the obvious. Fade the obvious! It works in trading and it
works even better in contests with me!
So now let’s get down to the winners. Last week, I said I would give a
six-month subscription to my nightly VIX
and Volatilty Trading Service ($795 value) to the best answer.
Well, there were so many good answers, I’m going to give away more.
Four runner-up contestants will get a one-month subscription, the
second-place contestant gets a three-month subscription, and of course
the winner gets the Grand Prize.
Runner Ups
The first of the runner-ups is TM
member Ed Hunter. Ed created a “Top Ten Reasons Why Haggerty Is
Out” list. Reason number 10 was, “He spent Sunday night
in jail for cow tipping.” (Ed, even though two-thirds of the
country has no clue what you’re talking about, you’ve brought back
fond memories of my college days at Syracuse University). And it ended
with the number-one reason being that “It takes until the
weekend after St. Patty’s Day for Kevin to realize that ‘Drink Canada
Dry’ is a slogan and not a personal challenge!” Thanks Ed,
and maybe you and I can go cow-tipping some day (in your pickup truck,
not mine.)
The next runner-up winner on the
list is TM member Mary Ellen Cronin. Mary Ellen, your answer was good
(“after swimming in a vat of green beer all day, it will take
Kevin at least a day to get the dye out of his hair). But that
didn’t win you the prize. What won this for you is the amazement you
brought us. We still can’t figure out how in the world you read the
entire column, then read the contest, came up with the answer and was
able to get it into my email box, all in under two minutes. You
must be one hell of a daytrader! Congratulations.
And the final runner-up winner goes to
SK900. His or her answer made the obvious, obvious. An instant way to
be disqualified. But, he (she) found my weakness and took advantage of
it…they flattered me.
“TM is the GREATEST site on the
internet. I have read every document on the site. I am a long-term
subscriber and will never terminate my membership. In fact, I hardly
go to other sites now. You guys are all great. I have learned a ton
and made good money. God bless you all and keep you all safe for us.
I’m writing this from the bottom of my heart. I don’t care if I win
the contest. I don’t care if you don’t enter my name. I just had to
tell you from the bottom of my heart.”
SK900, thank you, and congratulations. In fact, feel free to come to
dinner this week if you’re in town. My wife is a great cook and can
make anything you like. Italian, Chinese — just let her know. And
while we’re on the subject of flattery, I’m also giving a one-month
subscription to TM member Natalie Wells who, after taking mine and
Mark Boucher’s course on market timing, wrote “I apologize for
not recognizing your genius sooner.” Natalie, not only do you
get one month free of my service, you too are invited to dinner this
week with SK900.
Second Place
And now to the second prize. This award goes to Todd Bossart, who
writes, “Any analytical opinion offered up by Haggerty in the
hours immediately following St. Patty’s is likely to be consistent
with the remarks you might expect to hear from Greenspan after
stage-diving into the mash-pit at a Lollapalooza concert playing Tommy
Lee in a two-week Pamela Anderson private video shoot! Hope this
clears any confusion.” Clears it perfectly, Todd. And you
have a three-month subscription to my service. And I’m hopeful that by
the end of your subscription, I can understand even further what the
hell you’re talking about.
And Now To Our
Winner…
As you know, Kevin is a former officer in the Marines who fought in
Vietnam and is a no-nonsense type of guy when it comes to the markets
and trading. And the winner had to have a straight to the point answer
in order to live up to the Haggerty standards. And from this
pre-requisite, the winner was easy to choose. It was TM member Cay L.,
who who wrote me “Because he is a big smart guy and he can do
whatever the hell he wants to do. And he doesn’t need any shit from us
so we are not gonna complain or piss him off! Hope you have a good
week.”
No nonsense. Right to the point. Pure
Haggerty. And he was nice enough to wish me a good week on top of
all that! What else could be offered from a winning answer?
Congratulations Cay! I hope you enjoy and profit from the six-month
subscription.
And before we leave the contest, I need to mention one more email that
came in. At 7:30 am ET on Monday, as the responses were popping into
my box, one came in from an email address I recognized. And it was
from Kevin Haggerty himself! He wrote: “Rumor has it that
Haggerty was last seen in the Irish Village in Cape Cod doing a few
steps on the dance floor.”
Well Kev, your answer may be the truth, but many, many members had
better answers, so you’ll just have to continue paying for my service.
But I do admire your ability to stay up all night and send me this
answer from the dance floor at 7:30 am Monday morning. One of the
members wrote me that he and his wife look up to you. Well, so do I. A
belated Happy St. Patrick’s Day to you, and I encourage you to try
your luck again in next year’s contest!
Back To
Work…More Market
As I mentioned above, the VIX (implied volatility) is at the same low
levels as it was before it exploded higher in August 2000 (and prices
collapsed). That means options are priced very cheaply. And this is
when you want to be a buyer of them, not a seller. For those of you
looking at a fairly low-risk way to play any sell-off, you may want to
look at the OEX April 575-555 put spread (buy the 575’s, sell the
555’s). The spread can be put on in the $5.50 range. Should the market
drop sharply, you will likely see at least a doubling of the spread
price and should the OEX be under 555 in the third Friday of April,
you’ll make better than 150% return on your investment.
This Week at
TM
1. As much as I kid Kevin, he is still the best and most successful
stock trader I know. And his course remains the best-selling course we
offer. On May 17-19, Kevin will be doing his once-a-year seminar, this
year at the Le Merigot Hotel on the beaches of Santa Monica,
California. Kevin has added an extra half-day (Friday night) to this
year’s seminar to assure he can fit everything in he plans on teaching
you, including new strategies he’s added to his repertoire. His
seminars in 2000 and 2001 sold out, and we expect this one will too.
Kevin is only letting 90 traders attend to assure he can give you a
maximum amount of personal training. I’ll be attending for sure, and
if you would like to attend, click
here for all the details.
2. Dave Floyd just posted the first
column in his four-part series on trading the SSFs. They’re coming
in April and Dave will be trading them and will be sharing his
knowledge of trading them with us going forward.
3. Don Miller’s School was launched two weeks ago, and the feedback
has been very positive. If you’d like to learn how to trade the QQQs
for a living, click
here.
Have a great week trading!
If your name was mentioned above, someone from TM will be in touch
with you Monday about your prize.
Until next
week,
Larry
Connors and
Brice Wightman
Larry Connors is CEO and
co-founder of TradingMarkets. He is also the author of four books on
trading, including “Street
Smarts,” co-written with Linda Raschke, “Connors
on Advanced Trading Strategies“, and his latest release,
“Trading
Connors VIX Reversals.“
Brice Wightman is a Market
Analyst at TradingMarkets.com.