Will Today Make It Three In A Row?
A negative close on
Friday once again offers the potential for some sort of an
intermediate term pull-back. The last two times we had a negative Friday close,
there was zero follow through. Will today make it three in a row? The best we
can hope for is good price action regardless of direction. As mentioned in my
recent columns we have officially entered Summer Trading. In the last 10 years
only two summers offered standout trading, 1998 (LTCM and Russian Crisis) and
2002. The others were like most things summer, slow and lazy. The fact is most
institutions have a disproportionate amount of their people taking vacation and
finances take a back seat to sun and sand. Do yourself a favor, go with the
flow, you cannot beat a dead tape, I have seen too many traders over the years
piss away perfectly good money trading during the summer. That does not mean
there are not trades, just be selective and if it is quiet on any given day,
accept it and call it a day. The market will be there the next day and more
importantly after Labor Day.
Naturally the trader in me looks for clues that
perhaps there is a catalyst out there like last summer that will crank up the
volatility factor. So far, there is one, but it has not had much of an impact
on the market thus far, Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating)
and its big sister, Fannie Mae
(
FNM |
Quote |
Chart |
News |
PowerRating).Â
In fact in Richard Russell’s most recent comments he considers “FNM
to be the most important stock presently.” As FNM
goes so will the market, given that what meager signs of life there are in the
economy, it is represented by housing. Each day last week I was fixated on the
price action in both, in fact they even offered up some good “crisis” trades
(known in the past as Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating),
Enron
(
ENE |
Quote |
Chart |
News |
PowerRating) and
Calpine
(
CPN |
Quote |
Chart |
News |
PowerRating). It takes a special feel for these trades but they
can be immensely profitable. My point however is that
FNM and FRE may eventually
matter. You will recall that Enron and WorldCom were brushed aside at first
blush, only to come roaring on to the radar screens and make a rather sad mark
on history. In everything I have read about these two behemoths of the mortgage
industry over the last year or so, something just ain’t right. Someone will be
proven right in the end, the trader in me is rooting for the folks who have
smelled a rat, unfortunately that outcome will only offer some incredible
short-term trading, the longer-term implications are something I would rather
not think about.
Going into today’s session, these are the stocks
that I have been finding offer the best intra-day price action (HVT) in recent
sessions, C, FRE,
FNM, AIG
and CPN.
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In the “In Case You Are Interested Department”, I
will be conducting and interview tomorrow (Tuesday) at 12:30 PM EST with long
time trading colleague, Mike Kestler. The topic will be order routing and
specifically how to use ECN’s to trade listed securities. I invite you to join
me for this, please click here for more information,
https://tradingmarkets.comsubscriptions/details.cfm?item=6058&subcat=dtÂ
The sign up form is in the upper right hand corner of the page.
As always, feel free to send me your comments and
questions.
Dave