This Week's Battle Plan

This Week's Lesson: Thinking Of Banging Bids For A Living? Think Again

In spite of the upward bias from the last half of the week, we remain very oversold. And combine this with a market that at least for three days last week said "I've already factored in this negative stuff in and I'm shrugging it off and going higher." And this is a heck of a lot healthier behavior than the behavior we have seen previously where, for example, the President and Greenspan tried to talk this market up. But the market was not ready to listen to them. It ignored them and moved lower. Late this week it did the opposite. It ignored the bad news and moved higher. There are few magic bullets in this game. Few magic rules. But one of these rules is that "it pays to listen." Markets like to talk. And Thursday the market talked loudly. Yes, the trend is down. Anyone can see this. But maybe, with Thursday's reaction to all the negative news, it will lead us to more days like Wednesday, a day that was long overdue. A day the butcher killed the lamb and killed all the short-sellers who told us how easy it is to simply short stocks and make a great living. Yup, do nothing else but bang bids for a living. Sorry, but markets don't work that way. Markets behave in a predictable one-way manner for short periods of time. Just as they have over the past four months. And when this occurs, too many people come to believe that this is the only way that markets always behave. There is nothing further from the truth. Yes, they many times do behave in a predictable one-way manner. Until they completely change the rules and start to behave differently. Wednesday, Thursday, and Friday they started to behave differently.

Online Traders Expo

On August 9, 10 and 11, The Online Traders Expo is having their annual event in Anaheim, California. This has turned into one of the premier weekend events for traders. If you plan on attending, both Don Miller and Dave Landry will each be conducting a seven-hour seminar. Don will be teaching how he trades the QQQ's (and now the SPY's) for a living, and Dave will be teaching his swing trading methods. If you would like to attend, you can get more information at the Online Traders Expo site. Also, I'll be there on Saturday morning at the TradingMarkets booth. If you get a chance, please stop by and say hello.

This Week

As we discussed, we are still oversold. And volatility is still at extremes. But Wednesday was good and Thursday was even better. When you combine these things, it gives us an upward bias for the week. This bias will be better read with all the economic news coming in this week. Should the news be good and the market declines, it will tell us the market likely has another leg lower. But, should the news be bad and we rally...well, you'll know what to do. You'll again bet again on the butcher. And hopefully get returns like you saw on Wednesday.

Have a great week trading (and remember, once in a great while, four points really can mean more than 480 points)!

Larry Connors and Brice Wightman

Larry Connors is CEO and co-founder of TradingMarkets. He is also the author of four books on trading, including "Street Smarts," co-written with Linda Raschke, "Connors on Advanced Trading Strategies", and "Trading Connors VIX Reversals." Larry also recently released the video course ''Buy The Fear, Sell The Greed: Timing The Market Every Day For The Rest Of Your Life.”

Brice Wightman is a Market Analyst at TradingMarkets.com