The Sunny Side of the Street

THURSDAY NIGHT - May 15, 2003
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In yesterday's commentary I said of the E-Mini:

"My model has been short since yesterday morning, and now the RSI is in divergence with price, this time in positive divergence.  To me that says that tomorrow will bring another upward day, wiping out any potential profits from the short play."

That's precisely what happened today. And, nothing much more.

On the daily basis you can see in Figure 1 that this is the third day for trying to make it to the 29.32 level on the QQQ, with no success.  To me that says that the market will get jerked around again tomorrow, after being jerked into a buy position today.  Tomorrow should go into shorting mode on the model.

The only way to play that is to scalp.  Still more scalping.  Meanwhile, the model for the daily chart is Long.

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Once again, the E-Mini chart was virtually untradable on an intraday basis, unless you were scalping.  My model was short yesterday morning, and in last night's commentary I said: "now the RSI is in divergence with price, this time in positive divergence.  To me that says that tomorrow will bring another upward day, wiping out any potential profits from the short play."  That's exactly what it did today, touching the top line from the yellow box.  To me that says that tomorrow will most likely be turned down from that top line and dribble down to the bottom line of the box.

EuroDollar is now beginning to show some reaction to the sell signal of a few weeks ago.  The formation looks like a rounded top now, with an impending down move.  Stay patient.  Unless it goes up, it's going down.
 

I am now very cautiously watching the market for long plays.  Since we tipped barely above the Yellow Box tops, I am alerted to potential continuing up moves.  Nevertheless, I am still cautious about impending failures since the move above the yellow boxes was slight and could easily be retraced.

RULES OF THUMB:

1.  When price is pushing the upper Sunny_Bands upward and then eases off and moves back toward the midline, it's time to take profits.  If it starts moving up and pushing on the Sunny_Bands again, it's time to get back in.  Likewise, if the market is pushing down on the lower Sunny_Band and eases off to move back to the midline, it's time to take profits from the short play.

2.  Divergence of the RSI and price is another good time to take profits and wait for a breakout of price before taking a position.

3.  When the exchange puts in curbs or trading halts on a large move down, it usually (not always) stops the downward motion.  After the market reopens is a good time to take profits from your short position.

4.  The market can't go nowhere forever.  Eventually, who knows how long it will be, there will have to be a breakout-- one direction or the other.

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While it may be true that a picture is worth a thousand words, it is definitely not true that a picture deserves a thousand words.