This Week's Battle Plan

More Markets...

Now, let's move onto the Momentum 10 Technology list. More good names. Guidant (GDT), Electronic Data Systems (EDS), Boston Scientific (BSX) (also mentioned in Dave Landry's Outlook this weekend), and Computer Sciences (CSC) lead the list. Again, the money is going into solid names, not speculative junk.

All this brings us to the same conclusion we came to two months ago: the economy is far healthier than anyone is giving it credit. This real story is being told by the retailing stocks, it's being told by by the semis, it's being told by the brokers, it's being told by the bond market, and it's even being told by the base forming and/or price increases we are seeing in industrial commodities (see Mark Boucher's piece for more of this.) The shorts and the writers can continue making their "we're going to zero" case over and over again. But, if you're going to make money at this game, it's far smarter to follow the price movement in correlated and cross-correlated industries than to follow a bunch of opinions. There is much less risk of falling off a cliff that way.

Sentiment

Even though solid signs for the future continue, on a shorter-term basis, one must acknowledge that some complacency has set into the marketplace. First, the VIX ($VIX.X) is at it a level that hasn't been seen since last  August 29. At that time, the market then proceeded to lose ground 11 of the next 12 days. This does not necessarily mean this will happen again. It simply means that the fear factor, which fuels rallies, is missing today. Second, look at OEX options prices. The 40 point out-of-the-money puts are priced about 2 1/2 - 3 times the 40 point out-of-the-money calls. Goldman Sachs did a study a few years ago showing that such levels usually precede short-term sell-offs. Again, not a reason to sell the ranch, but it should caution you that a short-term correction may be approaching.

A "Nightly To-Do List"

Here is a way to improve your daily trading results. Let's go back to our nightly indicators lists. Combined, the names on these lists tell you repeatedly where we are headed. No opinion, no biases, just good information. If you want to incorporate this information into your trading, here is a "nightly to-do list" that can help you:

1. Begin with the Nightly Market Bias page. Look for multiple signals in the same direction. Many of the combined CVR signals have correctly predicted 2-3 day S&P market direction 62-67% of the time. This is a solid edge and a good place to start.

2. Look at the Proprietary Momentum lists. Look for companies from the same industries on the list. This tells you where the money is flowing. And more importantly, look for the industries whose price action is in direct conflict with Main Street views. That is where your biggest advantage will lie.

3. Then move onto the strongest/weakest sectors for the past 5 days list. They will also tell you where the money is flowing. And again, look for those industries and stocks that are moving in the opposite direction of where they are "supposed to be" moving. Remember, one of the main keys to successful trading is the ability to think and execute counter-intuitively. These lists get you there.

4. If you are looking for a staple of good names to focus on, both to the long side and to the short side, Mark Boucher's lists is a great place to start. Here you will find the best performing stocks with solid fundamentals to the upside. You will also find poor-performing stocks with weakening fundamentals to short to the downside.

5. End each evening by looking at the nightly TradingMarkets Reports, on the home page. No opinions in these reports. Just a nightly "briefing" and "focus lists" for you to use for the next day of trading. The Reports key on the best and worst-performing stocks (and options and futures) from our lists that have significant patterns or had significant price and volume movement. These reports are available to you each evening at 7 pm EST.

By doing the above five steps on a nightly basis, you will gain a large edge over many traders and investors on Wall Street who trade without a plan and wing it everyday. Try this plan nightly for the next four weeks...I suspect you'll be happy with the results.

On The TM Front...

There are a couple of spots left for the Mark Douglas "Mental Toughness" workshop this upcoming weekend in Los Angeles. I've said it before, solid trading strategies are a must, and combining these trading strategies with proper mental training will make your results even more substantial. Click here for the details of Mark's workshop.

We have added four new trading services to TradingSubscriptions.com. The new services include a daytrading service from Kevin Haggerty,  two options services from Tony Saliba, and a daily VIX and Volatility Alert service from myself. Click here for more details on each.

We have a number of "how to use the TM site" lessons coming up in the pipeline. TradingMarkets has now grown to over 3000 pages of information and these new lessons will teach you the best ways to use this information to your trading advantage.

Until next week, best of luck with your trading!

Larry Connors and Brice Wightman