Volatility Gets Muzzled

• September 25, 2001
• Dave Floyd

Volatility was a bit
muted yesterday. After the gap opening, the afternoon session only
offered one or two reasonable trade setups. The futures are a bit higher as of
5:15 a.m. PST, but the 7:00 a.m. release of existing home sales and consumer
confidence will certainly set the tone for the morning session. I suspect some
great trading off of these numbers.  

It may be possible to establish some slightly
longer-term positions in homebuilding stocks depending on what the numbers
reveal. I will be keeping an eye on Clayton Homes
(
CMH |
Quote |
Chart |
News |
PowerRating), Lennar
(
LEN |
Quote |
Chart |
News |
PowerRating), as well as the granddaddy of single family mortgages, Fannie Mae
(
FNM |
Quote |
Chart |
News |
PowerRating). Fannie Mae is interesting from a technical standpoint. It is finding
support at 75, but has to contend with its 50-day moving average at 78.63; a
breakout to either side will offer an excellent run. The consumer confidence
numbers are probably factored into the market in quite a negative way, so any
deviation to the upside may cause an explosive spike to the upside. The market
is expecting 109 vs. 114 from the prior release.

Now that trader/investor emotions have tapered
off a bit, the market is back to trading more technically. It is essential that
you go back to the basics of trading with the trend and be fully aware of
technical level on your stocks and the futures. A little chart work after the
close or before the open will pay rich dividends.

Key Technical Numbers:
(futures)

Thought For The Week:

Aspiring
traders must perfect their methodology to the point where it becomes robotic.
Once you reach that point, where reflexive actions take the place of
thought, you then become a great trader.

Feel
free to send me your comments and questions. I am looking for some response on
my commentary on longer-term plays. Are you finding this helpful? I appreciate
all constructive feedback.

Have a
great day.

Dave

P.S.
I’m looking forward to sharing the nuts and bolts of how I trade at TM2001
in early October. You’ll learn the two big keys to my trading: 1)
How to define a powerful intraday trend; and 2) The precise
parameters that tell you where to enter your trade in the midst of that trend.
I will also explain to you the “feel and rhythm” that enables me to
trade with
consistency. This is one element of my trading that I could
never convey on paper through a set of rules or a formula. You’ll just have to
meet me in Las Vegas, and you’ll know what I mean!