Tug Of War

• January 10, 2002
• Dave Floyd

It feels as
though the market is about to finally make a
decision on its future. Yesterday’s sharp sell-off, on heavy volume, with
no apparent news catalyst, may give the bears their long-awaited day in the sun.
However, this morning’s release of Jobless Claims gave the bulls something to
cheer about. Where do we go? That is anyone’s guess.

The bright spot yesterday, from a 
trader’s perspective, was the price action. I can’t recall the last time we had
a market where there was good money to be made on both the upside and downside.
I suspect as the tug-of-war continues, the volatility will ramp up. On a
relative measure, trading was indeed better yesterday, but still required
discipline and waiting for almost “perfect” setups, there is still
little margin for error and “shooting from the hip.” Trade with the
trend on the one-minute bars and don’t try pick bottoms and tops.

The increasing number of lay-offs
(Ford
(
F |
Quote |
Chart |
News |
PowerRating) and Merrill Lynch
(
MER |
Quote |
Chart |
News |
PowerRating)) and “hollow” comments
regarding future business conditions from CEOs has to pique one’s curiosity. It
feels as though the market is now looking for hard evidence, not just the
company line that “things are looking better.” What the heck does that
mean?

I am now keeping a close eye on the Retailing
and Consumer Finance sectors if in fact the market does break down.
These sectors are ripe for a fall if the economy does not make the much-needed
recovery in the next couple of months. More to come on individual issues in
these sectors in coming days.

Key
Technical Numbers

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

Dave