Wednesday, December 17, 2003
Issue Contents:
| 08:46 | Good Morning Headlines and Reaction. |
| 09:00 | Daily Swing Trade Today's stock setup. |
| 16:16 | Active Trader Transcript Real time forum log. |
The family is still down for the count with a bad cold, and work outside market hours has been suspended for now. Hopefully, we can use the downtime around the holidays to full recover. Sorry for any inconvenience.
Yesterday's core CPI number was a blowout. This morning, are treated to two sentences in one headline at WSJ:
The U.S. farm economy is booming amid a robust price rally in grain, livestock and other agricultural commodities. Core consumer prices fell last month for the first time since 1982, bringing the underlying inflation rate to a 40-year low.
The word that comes to mind when we read these two sentence together is: oxymoron. I mean, how does that first sentence work with the second? It goes back to the item structure of the Consumer Price Index:
The changes in the 1998 market basket will reflect and anticipate shifts in the consumer marketplace. This revision will result in more substantial changes to the item structure. Not only will there be new components for new goods and a reduction of the structure for less important ones, but a reorganization of sectors of the market basket such as "food away from home," "medical care," and "communications" will be undertaken to account for the modern views of these areas. This article summarizes the changes being made and their impact on the Consumer Price Index.
Take some time out to read the full text, and you'll be stunned at the assumptions being made. The idea is that the core inflation rate should reflect items that are non-volatile, but if we end up leaving out all the things that people actually need in real life, what kind of calculation is that? Personally, I believe the number has been engineered so that inflation-indexed pensioners get short-changed. Ever the cynic.
by Teresa Lo
Let's update yesterday's picks.
MO opened gap down under our trigger price, so the order was cancelled. We need it to actually trade through the alert price in order to trigger the trade because if you think about it, this is the opposite of the "gap and crap".
In trading language, "gap and crap" means that a stock opens up above yesterday's high, and then falls back into yesterday's trading range. Often you'll see stocks open gap down, only to jam up through yesterday's low and then continue on. Perhaps they should call this "gap and jam" but I think Larry Williams already coined a name for it: The Oops Trade.
When a gap takes place on the open, we need to see what happens if traders make an attempt to test it. For example, with MO, as price started up after the gap down, we would be looking at the previous day's low to see what happens. The only thing we know about the previous day's low is that it was a place where buyers showed up before. Once broken, we need to see if broken support has become new overhead resistance. It basically forces a swing trader to enter intraday, and therefore, if you are not in position to enter intraday, the best thing is to cancel your standing order on a gap up or gap down.
The sell stop on MMM was not elected, as it did not trade under Monday's low.
I was in bed early, trying to shake this bad cold, so I don't have any picks for today.
Real time forum log.
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