Wanted: Conviction

• February 26, 2002
• Dave Floyd

Two hundred points in the Dow, 12 in the futures and 55 in the Nasdaq, yet the
trading yesterday, in my opinion, was not nearly as robust as the final box
scores were. Granted, the last hour perked up a bit as it became readily
apparent that the rally had some legs. Prior to that there was very little
conviction or correlation on the moves, making trading the underlying stocks
very difficult. Yet again, I was back to extending my time frame until the
market settles into something which resembles a tradable pattern. Until
there is a move with conviction either way, there is not a whole lot to
report. Shifting between quick “scalps” (HVT) and trading off
five,
15 and hourly bars appears to be the best way to play.

I have noticed this symptom a lot lately. I can draw some conclusions,
but they have very little impact on what I do intraday, but are important if
you are playing the market on a longer time frame. Only time will tell
whether or not this recent leg up will continue. From a technical
standpoint the major indices are making some progress, but from a daily
standpoint the trend is still clearly down with the exception of the Dow which
broke through its 200-day moving average of 9979. The most recent push
higher in the Dow, however, has not been accompanied by increasing volume — in
fact, volume has been on the decline since 2/19.

Given that the market remains in this range, the
KTNs are becoming all too
familiar. Nonetheless, participants are taking their cues from these
levels as well as other levels derived from different sources.

A couple of numbers however stand out, which I feel will be pivotal going
forward. On the Dow, keep an eye on 10,300 and on the S&Ps, 1124.

Key
Technical Numbers (futures)

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

Dave