MORNING WATCH, October 31
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Phillip Wiegand, Optionetics.com
October 31, 2001
October 31, 2001
Traders are preparing for the official indication that the U.S. economy is in a recession. The chatter on the Street is now about how long and deep this recession will be as opposed to whether this country is slipping into recession or not. However, there is some green across the board this morning and the market may be able to shrug off any potentially negative news that hits the tape. There has been some pessimism built into stock prices over the past couple of sessions in anticipation of this economic data, and it is possible that we rally if the numbers are in line with expectations or better than expected. Currently, the S&Ps are higher by 2.60 points and the NASDAQ contract is higher by 16.00 points.
The 3rd quarter GDP report is out and the market likes what it sees. GDP fell by 0.4% and the consensus was for a decline of 1%. This is better than expected and the futures markets are reacting very positively. The Nazz futures are now up 30 and the S&Ps are higher by 9.20. It is remarkable how psychology affects the markets and even though our economy is slowing, the averages could rip higher today because the news was not as bad as expected. It is going to be interesting to see if the optimism lasts for the entire session or the opening prints are the high for the day. Clearly, we need to be well hedged in both directions and prepared for just about anything to happen.
If the market can keep the sell-off from the last couple of days contained, then the charts are going to begin to look bullish from a technical standpoint. We will be looking at the averages making a series of higher highs and higher lows with support providing a foundation for prices to lift. Then the perception will likely be that we have seen the lows, barring another tragic disaster in our country. This will attract more buyers and the shorts will be forced to bring in their positions and the pattern of relentless buying could continue. Of course, this is mere speculation, but it certainly could be the way things play out. That is why it so dangerous to just be short the market. If you are caught leaning the wrong way, then it could be disastrous to your portfolio.
Concentrate on managing your risk and try to eliminate the problem areas on your risk profiles. When you able to accomplish this trading is so much more enjoyable and fun. There is a lot stress involved in a trade when you know that you will make money no matter what happens in the market. This provides time to do more research and find more opportunities that the market is providing at the time.
Have a great morning!
Phillip Wiegand
Senior Writer & Trading Strategist
Optionetics.com ~ Your Options Education Site
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