The Sunny Side of the Street
SUNDAY
NIGHT - July 06, 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:
- The bounce off the springboard put the index above the midline Sunny_Band, and makes it a buy in my book. With the top Sunny_Band at 9260, that gives another 100+ points up before hitting the top band.
The Dow opened at 9141 and chopped its way lower for the early holiday close at 10:15am closing at 9070.
Basically the day undid the headway made by the previous day. On the charts, the movement left the charts basically the same. So, because preholiday closings tend to get reversed on the day next open, I expect Monday's action to move upward, heading for the top Sunny band.
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Figure 2a: SPY Daily
Only a half day of trading on July 3rd just means that everyone headed out of town on vacation and doesn't yield any significant patterns, as to my view. Again, holidays usually reverse themselves on the next open day, so Monday should be an up day.
Figure 3a: QQQ Daily
The daily QQQ is still touching the top Sunny_Band, giving credence to my supposition that Monday will be an up day. Even the downward movement of the pre-holiday trading didn't move the QQQ off the upper band.
Figure 3b: 15-minute intraday
For most of the day (1/2 day, I should say) the Sunny_Bands_Pro stayed green, keeping practitioners of this method long. Toward the end of the trading session the bars turned black (neutral) but noticeably not red. This chart too makes me think that Monday's session will be to the upside. The only thing that worries me is the bearish divergence in the RSI versus price, but I think that was played out in the session on the 3rd with the RSI hitting the 40 mark.
Figure 4a: EMini 15-minute intraday bars
The trading session on the 3rd concluded with an important formation: price on the EMini simultaneously touched two markers of support. Downward price action stopped at the horizontal line lying at 982.5 and at the same time touched the top of the downsloping parallel lines.
Usually when I see this configuration I also see a quick bounce following the conjunction. Although the conjunction usually produces a sharp move, there's no way to tell which way it will spring. I am going to be ready for either direction and yet I expect upward to be the preferred move.
Figure 5a: EuroDollar Daily - Sunday night commentary only
The
current signal on the EuroDollar model is still short, with nothing yet to
confirm the signal. My interest in
shorting this market will only come if the EuroDollar drops below 98.88.
Until then, I stand neutral.
Stay sharp and on your toes. Moves can reverse on a dime, anytime. Let the market speak to you. If the market is going down, by golly ignore my commentary from the night before and know that the market is going down.
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.