Where Do We Go Now?

• August 14, 2001
• Dave Floyd

While yesterday was a
typical summer day by most standards, a closer look revealed a few
trading opportunities for the patient trader. My only good trades yesterday came
by trading off of some of the "Key Technical Levels" I
mentioned in yesterday’s article, every other move either never set up or was
not worth the effort once the trade was complete. One note, however: As we
already know, the market could not get any follow through once certain levels
were breeched. Greedy traders watched profits evaporate, while nimble traders
picked up the few crumbs that the market was offering. I suspect this will be
the way the market will continue to trade given that it is options expiration
and ahead of the Fed meeting next Tuesday. Keep in mind there can always be
unexpected volatility during options expiration week.

Looking at the chart of the S&P futures, the
only two trades I took in the morning that panned out were off the 1192 level.
Point A demonstrates a failure of the 1191 in an already downtrending market.
Notice, though, that the move short and abrupt. Point B offered the opportunity
to enter from the long side as the spooze this time held the 1191 level. Again,
patience was the key yesterday, good trades were limited, and forcing trades was
a quick way to drown yourself in commissions.

Looking ahead to today’s session, I don’t expect
a lot of action unless the market can successfully break out of the 1189-91 to
1200 range for the S&Ps. Additionally, save yourself the frustration and
commission dollars if the market (as defined by the one-minute chart) is trading
sideways, or if there is a trend on the one-minute chart, make sure that each
move up or down is at least three points in duration. Without these two key
points, you are stacking the odds against you tremendously.

Where do we go from here? Tough call. This week
is options expiration, which always is unpredictable. Next week we have the Fed,
which will probably be a non-event. So, we are left to wait until post-Labor Day
trading. Until we have enough participants making a stand in either direction,
this sideways action will continue. I have traded many summers, and this one is
not much different. The good news is that when the market finally does make a
move one way or the other, it will offer some great trading opportunities.

Key Technical Levels:

As always feel free to send me your comments and
questions.

Dave