You Cannot Impose Your Will On The Market
Let’s
get right to the point. The market is taking the bad news in stride
and grinding higher. While to logical
people this may seem a bit odd, don’t forget, we are traders, and for the most
part, traders don’t get paid to ponder, be logical or get overly opinionated. In fact, as
of two years ago, CNBC was officially muted during trading hours in my office,
although we now mute Bloomberg, because they don’t talk about charts, they
talk about stuff that rarely assists us in making money as traders.
Bearing this in mind, forget
about Intel’s
(
INTC |
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PowerRating) earnings from last night. A 50-50 bet is not what I
look for when I am trading. As Mark
Douglas states perfectly in his book Trading In The Zone, “you cannot
impose your will on the market." This
is why analysts fail so dismally. Unless
the rest of the market participants share that analyst’s view of what price a
stock should trade at, the information is meaningless.
That being said, let’s get
right to those charts. Despite yesterday’s
run in the S&Ps, they could not manage to close above 1221, nor could the Nasdaq
close above 1757. My opinion (there is
that nasty word) is that the market needs a few closes above these numbers in
order to sustain any upside momentum.
Today’s session will provide more clues as to future direction.
Keep an ear out for Greenspan’s speech before Congress.
This will most likely provide some wonderful range breakout trades, as
well as an indication as to how the economy really is.
As of this morning, the futures
are lower early on, with the S&Ps and Nasdaq trading below their daily pivot
numbers of 1214.8 and 1727 respectively.yes”> The true test of this market will be if it can avoid a close below
1191 and 1674, the last visible support on the daily charts.
If the market does in fact
continue to trade lower, keep an eye on the bank stocks in light of American
Express’
(
AXP |
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PowerRating) and Fleet Financials’
(
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PowerRating) dismal
earnings report and the fact that the bank sector has been so strong in the last
few sessions. The chip sector will
obviously be in play after the Intel report, as well as upgrades and downgrades
within the sector.
Today’s lesson provides
another useful example of knowing when to apply the brakes while trading.
The last hour yesterday provided little if any opportunities for
“scalpers." As the chart
below shows, we had sideways price action, but more importantly, were not able
to make a meaningful move to either side of the elusive 1221.
It should be noted that during the summer is when traders need to be most
aware of when to keep their powder dry. More
than likely as we get past Labor Day, there will be much more action.
It is then that your patience during the summer will pay off handsomely
as you approach the market with money in your trading account and are well
rested from not trying to make things happen when there was nothing there to
begin with.
Feel free to send me your
comments and questions, davef@tradingmarkets.com.
Dave