This Week’s Battle Plan
This week’s piece was written by Larry
Connors with the assistance of Brice Wightman.
Dear TM member:
Let’s play a game called, “Where is the Market
Heading?” And let’s say today is September 10, 2001.The S&P
is standing at 1092.54. The market has been in a major 16-month major decline.
The economy is bad and its worsening by the week. Billions of dollars have been
lost due to the stock market’s decline. And today, someone told you that
tomorrow the World Trade Center would be destroyed by terrorists, killing
thousands of people, the Pentagon would be attacked, full-scale war was going to
break out in Afghanistan and likely Iraq, deadly anthrax would be mailed to the
Senate, the CIA, the Supreme Court and major news organizations killing innocent
people, the economy would worsen even further, unemployment claims would reach
their second highest level in 9 years, and the stock market would be forced to
close for nearly a week. And with all this information, you are told you can
only make one bet…put on one position that can only be exited on October 26,
six and a half weeks from today. If you said you would go long S&P
futures, you either write earnings releases for publicly traded companies or
your mother accidentally dropped you on your head when you were young.
There is no way a market prediction of “higher”
could have been made knowing the above. But the market does what the market
does. And no rationalization from journalists who just don’t get it or anyone
else can change the fact that the stock market is higher in the face of these
events. And, as we talked about last week, if it goes up with this news, what is
going to happen when some good news comes into the picture? As I’ve stated
before, I have no clue where prices will be 3, 6 or 12 months from now. But
re-read the events listed above and ask yourself…if this news can’t knock the
averages down, what can?
STOCK WATCH
If you looked at Mark
Boucher’s Top RS and EPS New Highs List from Thursday night you saw seven of
the 14 names on the list were “consumer industry stocks.” And
tonight’s list has another consumer name added to it. Good information, and it
tells you one heck of a story that no one is talking about.
By the way, focus on this list nightly (in fact, I’d
strongly recommend focusing on anything Mark publishes). Mark’s lists
tell you where the money is heading and also tell you where the economy is
likely heading.
VIX WATCH
After this past weeks rally, we are in neutral territory
on the weekly charts. On the dailies, the bias
is slightly lower. The S&Ps are up almost 20% from Sept. 17. It needs to
walk off this overbought condition for a few days, and the daily VIX is telling
us this may be near.
COMING THIS WEEK
Six months ago, Tony Saliba and I decided to go into
business together. We both felt that there was a shortage of solid options
training programs for individual traders. There is plenty of excellent
information for stock traders, but in our opinion, that same level of excellence
is not matched in the options world.
After a half year of continuous work and collaboration,
the TM team and the Saliba team are ready to launch “Saliba Options,”
an online interactive options training, education and information site. The
first course, “Real World Options,” launches within 10 days.
If you would like to be notified when we go live (we are
down to final approval from the CBOE) go to www.salibaoptions.com
and type in your email address.
One more thing: I interviewed Michael Steinhardt this past
Friday. For those of you who do not recognize the name, Michael is one of the
most successful hedge fund managers in the history of Wall Street. $100,000
invested with him when he launched his fund in 1967 grew to $48,100,000 (not a
typo!) when he retired in 1995. In two weeks, you will learn how he did it.
Best of luck with your trading! We’ll see you 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 with
TradingMarkets.
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