The Sunny Side of the Street
THURSDAY
NIGHT - June 26, 2003
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Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)
Figure 1b: INDU Daily
In last time's commentary I said:
- We have probably started the 4th wave, by my count, and should move in a large triangle as I said in last Sunday night's commentary.
Today's play on that theme was to take the market up a little bit (68 points), forming an inside bar sitting right on top of support--which currently lies at 9000. I wasn't impressed, favorably or negatively. I just wasn't impressed. While the move looked like an up move on the intraday charts, it just looks like an inside bar on the daily chart.
So, we'll see what tomorrow brings. The 4th wave, by my calculations today, could go as low as 8836 on the Dow and still qualify as a sideways move. But, I am expecting things more like a bounce from 9000 and then a turn back down, and then another bounce and another turn before the 5th wave up begins. And then, the 5th wave should culminate at 9612, by several of my various means of calculation.
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Figure 2a: SPY Daily
Today's SPY expanded the range a bit, reaching down to 96.96 without closing above yesterday's high. Nevertheless it counts as an up day because today's close was higher than yesterday's close.
So what? It doesn't look like an up day in reality, with the range expansion being to the downside. The exploration almost got the SPY down to the next Attractor at 96.38, but not quite. So, I think that tomorrow might make that push, even if it is once again done just through exploration and not on a closing basis.
The 4th wave on the SPY should look like a contracting triangle, just as it should if I am correct about the formation for the QQQ and the Dow as well. As it does that, it will take several days, to weeks, and could go as low as 93.60, but the more likely stopping place from my view would be at about 95.03.
Figure 3a: QQQ Daily
Today's QQQ bar is the only one of these three that really looks like an up bar, with the open higher than yesterday's low and the close higher than yesterday's high.
And, on top of that, the closing on the QQQ was back above the midline on the Sunny_Bands, which is a positive accomplishment.
The RSI on the QQQ turned back up from above the 40 line, which is a bullish formation and one that makes me question my conviction about the 4th wave formation. But, on further inspection, I see a bearish divergence between price and RSI that swings me back into the sideways 4th wave correction camp again.
Ultimately I think we will see 33 on the QQQ at the end of the 5th wave, but that is still a few weeks away. As a matter of fact, it is probably a couple of months away.
Figure 4a: EMini Daily bars
Figure 4b: EMini 15-minute intraday bars
It is of interest to note that the low of this morning on the EMini touched the extension of the neckline from the Head-and-Shoulders pattern that I have been talking to you about for several weeks. It is of even more interest that it did not break that line, but rather bounced off and headed back upward.
But, the most interesting part to me is that if you draw a line parallel to the neckline, so that it is on top of the shoulders, and not supporting them from underneath, that said line forms pretty strong resistance. And, in fact, today's action did not get above that mark. If I am right about the 4th wave sideways action, tomorrow should stay within the bounds of the two parallel lines--first moving up to touch the line and then down in corrective fashion.
Figure 5a: EuroDollar Daily - Sunday night commentary only
The
current signal on the EuroDollar model is long, from 6/17/2003. It's
not much of a signal yet, but rather a continuation of a long sideways
period. The RSI has been unable to reach above the 65 line
demonstrating bullishness, nor has it gone very low demonstrating
bearishness. Basically, we are still looking at a sideways market.
Stay sharp and on your toes. We have had several up-days in a row, and a correction could come in the near future. But, as long as the markets are going up, they are going up--so I'm sticking with it.
RULES OF THUMB:
0. 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. For this reason, I don't always comment on every index. Analysis of one speaks highly for the same analysis for each of the other indexes.
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.