The Sunny Side of the Street
WEDNESDAY NIGHT - March 26, 2003

Figure 1- INDU 15-minute

C 8230  H 8246  L 8229 

The market dropped 8 points from last night's close to tonight's close basis the Dow Jones.  In last night's commentary I said:

"My guess is that (barring any dynamic news event like Saddam Hussein's body has been found) the QQQs will drop slightly to the Attractor at 26.37 and then bounce up to the upper SunnyBand.  Again, barring any catastrophic news, the QQQs will encounter difficulty at the upper band and after a little staggering should head back down to the lower SunnyBand.  And then it might happen one more time before the day is over."

and that's just what it did today.  As the day went along, the band got more and more narrow, and the swings diminished in strength as well.

Today's intraday RSI turned down before ever reaching as high as 65.  In fact, it got only to 58 and then turned back down.  On the daily basis, the RSI peaked at 69 on 3/21 and has been moving downward since.


Figure 2- INDU Daily chart

On the daily chart, the Average True Range is widening, but that is the effect of the averaging of 14 days, not a picture of what happened today and yesterday.  These past two days have both been very narrow range, choppy days with no discernable trend.

 
Figure 3- QQQ 15-minute Chart

Two scenarios present themselves for tomorrow: (a) the market could make a short run upward to touch the trendline that you can see descending on the chart in Figure 2, (b) the market could make a short drop down to the midlines in the SunnyBands shown in Figure 2.  Either way, the move is only about a hundred points.  That's what I think will take place tomorrow.  We've had several days of indecision, with the range narrowing, and it is now time to take a direction, even if only for a day.  My vote is for the down move to happen rather than the up move.  With the eight days of solid up movement always comes retracement; and in this case the retracement to the SunnyBands midline would be a 38.2% retracement of the eight day move up, landing at 8084.  That's why I think it the most likely direction: the retracement needs to be completed.  For the quick and nimble, it could be a 100 point short play that might be worthwhile.

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