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Index Wrap

Desperately Seeking Conviction

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        08-13-2001        High      Low     Volume Advance/Decline
DJIA    10415.90 -  0.40 10445.80 10367.10  842 mln   1661/1425	
NASDAQ   1982.20 + 25.80  1986.33  1951.46 1.13 bln   2013/1669
S&P 100   610.49 -  0.92   612.46   607.88   totals   3674/3094
S&P 500  1191.29 +  1.13  1193.82  1185.12           
RUS 2000  477.60 +  2.08   478.89   474.88
DJ TRANS 2935.41 - 25.36  2964.47  2815.45
VIX        23.24 +  0.43    23.86    23.08
Put/Call Ratio      0.54

Desperately Seeking Conviction
Austin Passamonte

Firmly entrenched in the heart of August doldrums, these are very trying times for traders. With money in the account and finger at the ready, many players are angst to just trade anything. Show them a moving target, any target will do. Each micro-move looks like the next bonafide entry, several times a day.

Bullish, bearish, bullish, bearish... so the emotions sway back and forth along with rhythmic market chop. Rest assured that more than a few trigger-happy traders were in and out of one or more directions today with less than favorable results so far.

I remember very well the feeling of having cash burning a hole in an account while desperate for markets to move. That usually leads to pressed entries which in turn lead to equity drawdown, lack of discipline and breakdown of confidence in one's ability to trade. I remember all of that very well, too.

Meanwhile, patience will pay eventually. Tomorrow? Soon? Let's try to figure out what lies ahead. First let me note that all daily-chart stochastic signals have begun clear bullish reversals up from oversold extremes and suggest price action will chop its way higher ahead. But what about tomorrow?

(60/30 - Minute Charts: SPX)

During today's session we had a mini-breakout from bullish patterns off session lows. What did it amount to? Very little and may not go much further. Stochastic values are within overbought extreme in 60-minute chart (left) and won't remain there much longer. When they cycle back down towards oversold it will be due to lower prices taking them there.

More on these current chart patterns later in the OEX example.

(60/30 - Minute Charts: Dow)

The Dow's 60-minute chart is climbing an ascending pennant, which is a bearish pattern on its face. The 30-minute chart depicts today's "breakout" for what it was worth. Both stochastic values are looking weak at best from here.

(60/30 - Minute Charts: QQQ)

Same story for the QQQ, which continues to post ascending bearish pennants as well. Stochastic values are even weaker here which suggest lower prices soon.

(60/30 - Minute Charts: OEX)

First thing to note is our stochastic settings of 5(3)3 which are faster than 10(3)5 that are normally used. Compare this chart to the SPX: See how the 60-minute stochastics gave a buy signal on the dip today? Looked real good from about the 608 level but stalled right out just three paltry points higher. Speed often kills and in sideways markets like this one can have too much of a fast thing.

I get lots of email asking which setting is better for short- term charts and the answer is whichever one YOU become accustomed to! Learning the relative behavior and "feel" of a specific setting makes all the difference between success and lack thereof. Most new traders hate that fact, because they desire something easily quantified in black & white. Ah, if only such a thing existed in the real trading world!

Market Guess
More sideways agony. Daily signals say up, 60/30's say down first which means nobody can agree. That usually means all of them agree nothing decisive is on the verge of taking place.

CNBC analysts are now asking every hapless guess who appears where we go next, when and what the catalyst will be. Like anyone knows! I sure would love to go on that show just one time... it would be tremendous fun! And once is probably about all that they would have me for, too.

Expiration week has an upside bias which supports daily chart belief. A selloff before next Tuesday's FOMC event is highly unlikely as well. If I were a betting man it's have to be up between now and Friday's close. Wednesday 8/22 could be another matter indeed.

We will do our best with markets we have to work with around here, which isn't much. There promise to be one or two solid entries before long and hitting them square remains the goal.

Tuesday Night Seminar
A slew of questions arrived concerning the Day Trade seminar content tomorrow night. For those who may be interested, it is 90% new material from the previous seminar that will focus on anticipating & identifying potential setups, specific entry points detailed and how to manage things from there. It has more content than Day Trade I seminar did and I would call it an intermediate approach to the study.

Looking forward to visiting with many of you then. About all I have to do with the process is show up and start talking, once I get past endless hours of building the PowerPoint presentation first! But covering many of the "little things" interactive fashion does make a big difference in my opinion.

Summation
Our best chances for solid entries during expiration week are usually Wednesday & Thursday, but let's hope the show gets started early tomorrow. Slow summer action doesn't mean it will be completely dead... does it?

Nah - no way!

Best Trading Wishes,

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