The Sunny Side of the Street
WEDNESDAY
NIGHT - May 21, 2003
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Figure 1: Daily Dow
In last night's commentary I said:
- "Perhaps the confusion is just going to result in more sideways action for a few days, because it doesn't appear to be anything real definitive."
And, that's just what happened today. It was a squiggly day with not much action, and certainly not much tradability. The only trade today would have been to go long at the open. And if you did that it might turn out to be a good thing.
Figure 2: Intraday 15-minute INDU
Today's intraday RSI continued to move upward along with price, until it got to the Attractor line I have drawn at 8506. At that point, the Dow took pause and stopped the march upward. But, the rising RSI leads me to believe there is more action pending on the upside. Equally as likely is for the Attractor to act as resistance and stop further progress upward, in which case we should see quite a spill to the downside.
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Figure 3: SPY Daily Chart
The SPY is nearing an important trendline, from a support standpoint. This Attractor, drawn in Figure 3 above, will probably take the SPY on down just a little bit further and then make 3-5 days of "noise" as the trendline is re-tested. Look for some squiggly lines on top of that trendline for the next few days.
The RSI on the SPY is now in overbought territory, turning down, so could portend several days of activity on the downside. Also, ATR is still reaching lower and lower meaning that a sharp move is impending. I think it will be to the downside.
Figure 4: QQQ Daily
The lower exploration by the QQQ intraday took us further into the Yellow Box, and closer to the trendline Attractor I have labeled A in Figure 4. Last week I said that the QQQs lack of ability to rise above the 29.32 line was cause to take profits and wait. The buy signal is overextended and it is too soon for a daily sell signal. If the QQQ breaks the trendline labeled A, then we can expect it to drop onward to the 25.52 line before a bounce. Early birds might consider the scalping risk worth it. But, I am unsure whether to read this as a pause before a bounce, or the beginning of a new correction. I am leaning toward the correction interpretation, however, especially since the RSI is still in divergence with price, and needs to go just a bit further down.
Figure 5: QQQ 15-min Intraday
The intraday movement on the QQQ was just as anticipated in last night's commentary: neither here, nor there. It was just a squiggly line between two narrow Attractors, not moving up or down by very much. That sort of narrow day often produces a large move day following, and that's what I expect for tomorrow. Can't say whether it will be up or down, but it should move sharply. If the QQQ goes above its current close I would look for buying opportunities; if the QQQ goes below the Attractor marked at 27.48 I would look for selling opportunities.
Figure 4: EuroDollar Daily - Sunday night commentary only
Today's strong
upward move on ED rose above the Attractor at 98.85, thus closing any short
positions. Now is time to sit on the sidelines and wait & watch.
Happy trading, and be very cautious.
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.