What Is The Market Telling Us?

• December 6, 2001
• Dave Floyd

The rally
continues, and from a technical standpoint, it was quite impressive.
The downside was that intraday scalps were very tough to come by, with the
exception of the activity after the release of the NAPM Services Number. Now I
know what many of you are saying, “We had a straight run up, how could
there be no good “scalp” opportunities?”

Take a look at the chart of the
one-minute chart of the S&P futures below. It depicts a segment of yesterday
afternoon’s session. Remember the criteria which I use to establish and exit
trades on a “scalp” basis:

• 3-5 point move on each pull-back
  and subsequent rally. Vice versa for short sale setups.
• An exit takes place once the
  initial run to the upside / downside is complete.

As a result, the one-minute time frame
is far too choppy to trade in the current environment. It is boiling down to a
game of hit and miss. Some days “scalps” are obvious and unfold
according to plan. Other days, like yesterday, you needed to extend your time
frame a bit and take your cues from a 5- or 10-minute chart. All in all
this price action is keeping traders on their toes and forcing them to adapt day
to day.

You will notice that the 5-minute
chart is far less noisy and has a far better pay-off. Obviously you need to use
a wider stop. Bottom line, adjust to what the market is telling you.

Given that the path of least
resistance currently is to the upside, consider the following selections for
longer term trades (several days/weeks):

Photon Dynamics
(
PHTN |
Quote |
Chart |
News |
PowerRating)

Microchip Technology Incorporated
(
MCHP |
Quote |
Chart |
News |
PowerRating)

Key
Technical Numbers

Regular readers know that my column is
designed to offer insights on intraday trading with the occasional selection of
longer-term trades. I don’t get into forecasting, given the inherent difficulty
involved. However, from time to time, I come across items, that regardless of
your time frame as an investor trader, offer important insights.

At the risk of filling my morning
column with other journalists’ words, I offer you a piece I read last evening by
Thomas K. Brown at BankStocks.com. It is a fine piece and clearly points
out some of the accounting shenanigans that led to the demise of Enron
(
ENE |
Quote |
Chart |
News |
PowerRating).
I trust you will find it insightful and of some use next time you are analyzing
a balance sheet for your next investment. Are those numbers real, or are there
some items not being added into the mix? Remember the cockroach theory;
where there is one, there are hundreds more.

Say It Ain’t So,
Joe

Andersen CEO Berardino’s op-ed piece on Enron leaves a lot to be desired

By Thomas K. Brown

You’ll forgive me
if I’m not entirely convinced by the
op-ed piece/apologia by Joe Berardino, CEO of Enron’s
auditor, Arthur Andersen, in this morning’s Wall Street Journal. It’s
understandable that Berardino should jump to his firm’s defense—