The Sunny Side of the Street

TUESDAY NIGHT - June 10, 2003
Archives of Past Commentaries  .  How Did We Do?

I keep the chart in Figure 1a on each day's commentary simply to illustrate how much in tandem the 4 indexes I watch actually are.

Figure 1b: INDU Daily

In last time's commentary I said:

"At this time the SBPro lines are all green, indicating that it is still a good time to be long on the daily chart.  However, today's bar from a candlestick interpretation was a solid bar (or red if you are using colors) indicating that the movement for the day was downward."

And, today's action proved out that supposition, giving an up day in the markets, with the Dow moving from 8980 up to 9054.  However, the up-day forms an inside bar with yesterday's bar, speaking for a reversal day tomorrow.

Even though it was an up-day, it was a very choppy one, with most of the action again centering on the SDMA lines.  This doesn't present much of an opportunity for short-term traders, as the market went nowhere, and got there slowly.

The after market trading stepped up a bit, climbing to the next level of resistance, but that doesn't necessarily mean anything for tomorrow's markets.  I have seen the day market reverse the night's activity and I have seen it confirm the night's activity.  It goes both ways.

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Figure 3b: QQQ Intraday 15-minute bars

The intraday QQQs gave a buy signal this morning on the model, which paid off by the end of the day, but was a slow grind getting there.  It seemed like nothing much more than a sideways day for the most part.  RSI stayed in the midrange until the end of the day, and the Average True Range continued to decline.  But, there were no divergences so the confirmation kept us believing in the movement.

Like the other markets we study, the EMini moved generally sideways today until near the end of the day, when it moved upwards sharply enough to produce a profitable trade.  The SDMA crossed over in the morning, giving a buy signal which didn't look very exciting for most of the day.

It still looks like people are afraid to make a move.  For the most part, the markets are still experiencing sideways, narrow range motion.

Because of the Island Reversal on all the daily charts, I am still expecting further downside activity in the next few days.

Don't you just hate it when markets get into those choppy sideways periods?  There is nothing much you can do but wait for a trend to emerge.

The bulk of the evidence weighs heavily on the side of expecting a correction, but nevertheless being in place to go long at a moment's notice.  So, be sharp and on your toes.

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.

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.