"There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily--or sufficient knowledge to make his play an intelligent play."
So said the pseudonymous Larry Livingstone in REMINISCENCES OF A STOCK OPERATOR. Are you being a Wall Street fool by insisting on entering new positions in this trading environment? As John Beyers and other have commented in the Monitor, both fundamental and technical traders have been finding trading a treacherous venture the last two weeks. As a technical trader, I see perfect technical trades setting up, only to see markets immediately reverse. Fundamental traders also suffer from whiplash, the same as technical traders do.
I offer an alternative. If you've ever thought of trading futures, but haven't had the time to investigate the technique, read the futures commentary and perhaps even try some paper trades. If you're a "the bottom has been put in" trader, spend the time investigating companies that might be good performers on any rebound and ready your list. Mark Phillips offered an exercise in this process in last night's newsletter. If you've always wondered how technical analysis works, use the time to read some of Leigh's articles on technical analysis, found in the archives. If Jeff's updates on P&F charts interest you, and you'd like to learn more about this charting system, now's the time to do it. Steve's commentary on market direction might be good reading, as you mull over that topic. If you've thought you'd like to try some spreads or other combo positions, paper trade those and see how they perform as markets gyrate and the VIX cycles up and down. The perfect trade will occur again, but perhaps not today.
What's happening today? After an early retest of support levels, the markets quickly moved up to next resistance, with the OEX, SPX, and DJI being stopped by their simple 100-dma's, their 60-minute 21-pma's, and 50% retracements of yesterday's move, all converging. The NDX faced a slightly different hurdle--its exponential 200-dma. Through the middle of the trading day, markets tested those levels, but were unable to sustain moves above them, despite strongly positive volume patterns. War news perhaps impacts trader psychology, as one coalition spokesperson after another has appeared on television.
Volume stands at 920 million shares for the NYSE and 1.04 billion shares for the Nasdaq. Adv/dec ratios are positive, with a 2.74 for NYSE-traded issues and 1.97 for the Nasdaq-traded issues. New highs outnumber new lows. Up volume swamps down volume.
The airline index (XAL.X) is an outperformer today, up more than 4% at one point. The index moved up after Senate Majority Leader Bill Frist mentioned his expectation that Congress would pass a relief package for the airline industry. President Bush's $75 billion emergency spending proposal to cover the costs of the war in Iraq did not include aid to the airlines, so it is unclear at this time whether the proposal will come in the form of a supplemental budget request or in some other form.
Airlines predict that the war with Iraq will cost them up to $4 billion and 70,000 job cuts. Their relief request totals $9 billion in taxes and fees.
While Frist mentioned to seek the help of Senators John McCain, chairman of the Senate Commerce Committee, and Trent Lott, chairman of the aviation subcommittee, he may face difficulties persuading other senators, such as Senator Ted Stevens, chairman of the Senate Appropriations Committee. Stevens is said to favor aid to the airlines, but doesn't want a relief package attached to the wartime spending package, as that attempt might slow down approval of the wartime package.
Ahead of tomorrow's release of February new homes sales at 10 ET, the Dow Jones Homebuilders (DJUSHB) has traded up through most of the day, but has lagged the SPX. As I type, the DJUSHB is up .92%, while the SPX is up 1.23%. January new home sales numbered 914K, and the market expects a 927K number for February.