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"The Sunny Side of the Street"
WEDNESDAY NIGHT--February 19, 2003
 Figure 1 -15 minute INDU chart [click to enlarge] Yesterday I said that I suspected an up morning followed by a sideway to down rest of the day. Today's markets gave only a tiny little up move before following through with the downward remainder of the day. As the morning was pretty quick to turn down, the models of INDU, QQQ and SPY all are now short. [more...] |
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Even though the movement today was generally down, it only slightly dipped below the yellow box I have been watching on the daily chart.
The linear regression line on the right edge of the chart (blue) is sloping upward, which is counter to the intraday models' short positions. To me that would say that we are in for some more sideways action as the bulls and bears butt heads.
I just noticed another indicator on the chart in Figure 2 that could be of some importance. There is a pennant inside the yellow box. If you extend the line across the bottom of the pennant, you will see that we are just now hitting that line acting as resistance. That would mean that we should try again tomorrow to break through resistance and either make a clean break -- or fail and fall back down to the 24.43 support.
Technically speaking, RSI has not gone below the 40 line appreciably into bearish territory; it sneaks a peek into that zone and immediately withdraws. On the other hand, it doesn't get into bullish territory either, being turned back every time it comes up to the 65 zone. On the daily chart, for the past 3 months, every time RSI touches 59 it turns back down. That is a show of great weakness. So, technically we can't say the market is weak, and we can't say it is strong either.
Today's market was turned back by the Attractor at the bottom of the most recent pennant, at 25.13. (Figure 3). And the top of yesterday's candle body stopped at the same place.
Figure 3 - QQQ Daily showing most recent pennant
You can also see on this chart that price is right on top of the midlines in the Sunny_Bands. In other words, all these technical indicators show we are at a very important junction, where the market needs to show its hand and go one way or the other. That's when it is time for breakout traders to step up to the plate. Be ware and on your toes, ready for the breakout to go either way. This is where I put limit orders on both sides of the market and let the market get me into the trade by breaking out. Then I cancel the other order.
Figure 4 - INDU long-term overlapping cycles
We haven't talked about these overlapping cycles for a while. Looking a Figure 4, you can see that both cycles are in downturn mode, putting extra pressure on the market to go down. The smaller cycle peaked on 1/20/2003 and began the slow grind downward. As they join in and get steeper as the near the conjunction, more pressure should result and the markets should continue to worsen over the next 2-3 months. That is where I think we will hit a bottom, with the Dow at about 7250. Each of the new lows on the weekly chart is accompanied by a volume surge, which to me shows capitulation and is essentially a positive note.
Average True Range is usually at its highest when the market hits these new lows, and then interest lags and ATR drops. ATR shows a pretty cyclical nature to its evolution, and it is now nearing another low. That says to me that we will soon see another leg up, but not before finishing the current move down within the cycle boundaries.
On the 15-minute SPY chart, today's price at the closing touched the top Sunny_Band in a virtually sideways Sunny_Band pattern. For the most part, the SPY followed the lower band on down, until at 12:30pPT it jumped straight up into and then past the midline and right on to the upper band. That was a show of strength making me alert to a possible run up, on the SPY, to 85.68. Because of the mixed signals on the QQQ, INDU and SPY, anything is possible. I think this is one of those times where they get out of synch temporarily.
Take profits when you see them. I think they will be small and short-lived for the next few days and the markets gyrate back into synch.
So, as always, stay nimble, humble and take small losses and big wins.
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Weekly Stock Picks for the week beginning 2/17/2003:
| Symbol | Breakout | Stop Loss | Goal | Close if Triggered | Profit/Loss |
| ADI | 27.026 | 24.48 | 29.78 | ||
| AGN | 61.5 | 59.26 | 65 | ||
| ADM | 12.232 | 11.91 | 12.75 | ||
| APD | 40.98 | 40 | 43 | ||
| ASH | 28.096 | 26.89 | 29.82 | ||
| BBBY | 31.62 | 30.5 | 35.75 | ||
| BCC | 26 | 25 | 28 | ||
| TOTAL |
Weekly Stock Picks for the week beginning 2/09/2003:
| Symbol | Breakout | Stop Loss | Goal | Close if Triggered | Profit/Loss |
| ACV | 51.54 | 49.5 | 53.22 | 51.7 | 160 |
| AGN | 62 | 60 | 64 | no | |
| AMGN | 52 | 50 | 54 | 53.96 | 1960 |
| QCOM | 38.37 | 36.67 | 40 | 36.67 | -1700 |
| BDX | 33.5 | 32.5 | 34 | no | |
| BEL | 7.88 | 7.06 | 9.3 | 8.0 | 120 |
| BGG | 43.6 | 42.35 | 45.48 | no | |
| TOTAL | $540 |
