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"The Sunny Side of the Street"
TUESDAY NIGHT--11/26/2002:
 Figure 1 |
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Friday will only be a half day for traders, as the equities markets are closing at 10:15am PT (12:15pm CT). As far back as I can remember, the day after Thanksgiving, and the day after Christmas have been volatile days. The attendance on the floor as well as individual and institutional participation is thin, and without much attendance we get wildly gyrating prices. I usually stay out of the markets on those days, or if I feel I must trade, I do a bit of scalping.
Wednesday the 27th was an up day, with most of the action contained in the opening gap. After the opening gap and a brief follow through, the rest of the day was essentially sideways, skimming along at the 28 level. (Figure 2)
Figure 2
On the Dow (Figure 1) the market made a fine attempt to hit the 9000 level, but didn't quite make it. Because of 20+ years of experience watching holiday trading, my guess is that tomorrow (Friday 11/29) the markets will attempt to close that remaining distance, and make it on up to the 9000 level. Whatever the market does on Friday, it usually reverses on the Monday after a holiday, so don't get over loaded (pun intended).
My models on both the daily and the intraday charts are long.
Figure 3
If you will enlarge Figure 3 by clicking on it and take a look at the trendlines I have drawn, it is easy to see a very simple model of why I am long. The downsloping trendline was nicely broken on 10/15/2002 with a gap skipping right over it, and then retested the following day, bouncing off. We have now formed an upsloping trendline that has been tested and will probably be retested. It is that retest that I will be watching out for.
In the meantime, the Attractor that lies at 28.705 on the QQQ is calling out for prices to make a run to that level. It is not very far away, but the market is straining to get there. Three times over the past 4 trading days, the QQQ made it as high as 28.20 without being able to go further. Sometimes that is ominous, sometimes it causes a gap jump to the Attractor. Either way, I am fairly certain that the QQQ will make it to that 28.705 level.
The rounded cup formation that has formed over the past 5 months calls for a handle. By that I mean that I am now looking for some retracement. With RSI on the daily chart sitting at about 65 and sitting just below 60 on the intraday charts, it would be only natural for the markets to take a small cooling off period.
Figure 4
In Figure 4 you can see the conjunction of the horizontal line at 925 and the upsloping trendline. That often signals a turning point.
INVESTORS
On the long-term charts I said to exit long positions and wait on the sidelines if we hit 27.40 on the QQQs. The market did hit 27.40, and bounced right back upward. The compelling reason to go long again will be if the QQQs break above 28.705. Otherwise, I am keeping my long-term money off the table.
TRADERS
Traders following my Dynamic Moving Average will have gotten long on Wednesday right after the gap opening. Because the day was virtually sideways after the gap open, there really isn't much profit as yet in the trade. I do expect the QQQs to venture on up to 28.705 for just a little more profit, but from there I will be on careful lookout. That level is important resistance on the daily chart, because of the Sept 2001 lows. If the markets make it successfully past that level, expect follow through and then a pullback before marching on upward toward a new bull market.
Many happy returns! And, stay nimble.
Weekly Stock Picks for the week beginning 11/24/2002:
| symbol | breakout | stop loss | goal | close if triggered? |
profit/ loss |
| WEN | 28.00 | 27.5 | 29.0 | yes | |
| KO | 46.50 | 44.25 | 50 | ||
| ACK | 1.90 | 1.28 | 2.67 | ||
| MCD | 19.33 | 18 | 22 | ||
| G | 31.50 | 30.50 | 33 | ||
| T | 28.11 | 27.74 | 28.6 | ||
| YHOO | 18.40 | 16.80 | 20.53 | ||
| COST | 33.07 | 31.57 | 34.57 | ||
| CIEN | 5.7 | 5.31 | 10 | yes | |
| JDSU | 3.3 | 3.02 | 5 | yes | |
| TOTAL | |||||
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