The Sunny Side of the Street

THURSDAY NIGHT - July 24, 2003
Archives of Past Commentaries  .  How Did We Do?

Figure 1b: INDU Daily

LAST TIME I SAID:

 

The market is still flat, even though intraday it seems to move a bit. 

I am watching the top band and bottom band for the market to make a touch before deciding that it is no longer flat.

 

Tomorrow I expect a bit more of a push to the upside, although I don't know whether it will last all day. 

TODAY:  Whew!  A double-dipper.  The bar for today looks, at first glance, to have touched both the top Sunny_Band and the midline in a single bar.  But, on closer inspection (by enlarging the chart) I can see that neither band was actually touched. 

So...once again, the Dow is still going sideways.  I know I sound like a broken record, but I calls 'em like I sees 'em.  Intraday is a different story, but for Outer-day traders (aka "long-term", aka "intermediate-term").

A solid break of 9327 on the upside would make me watch for long trades; a solid break of 9000 on the downside would make me watch for short trades.  There it is again.

And, BTW, notice that call!  The market went up today, but it didn't last all day!

Second verse, same as the first.  Only, the bar for the day on the SPY is sitting astraddle the Sunny_Bands midline.

So, in short, the SPY is still going sideways, and we are watching for a breakout of 102.10 on the top or 96.38 on the bottom.  Everything else is sideways.

Notice how the bottom of the bar today stopped right at the 98.42 Attractor.  Magic!

And, the same goes for the QQQ daily bars--it is still moving sideways, only today just a bit wider.

That, in itself, calls for something to happen soon.  The widening range calls for a possible volatility breakout, and you just need to know the direction.  That's the easy part.

Watch the Sunny_DMA for a crossover, watch for prices to move to the bottom Sunny_Band, and watch for RSI to drop below 40--these would all be signs to get short.  Alternately, if the QQQ closes above the top Sunny_Band, that would be reason to consider long plays.

Now, on to the juicy stuff--the intraday chart of the QQQs.

Figure 3b: QQQ 15-minute IntraDay bars

In last night's commentary I suggested that while there was still some room on the upside, I didn't think it would last all day.  And, that's what happened!

The long signal from the SDMA on 7/22 was taken out today by several signals according to my rules of thumb.

First clue--the SDMA_Histogram crossed over into a short position in the morning, just after the top.  (See the red arrow on the bottom-most subgraph window.) 

Second clue--RSI crossed below 65 after having been above 65.  This, too, happened right near the top of the day.

Thirdly--and this is where I actually read it--price crossed under the Sunny_Band midline at the same time it crossed under the Attractor at 31.77.  That was the clear warning to take profits and stand aside.

Once price cleared the lower Sunny_Band (2 bars later), it was time to get short.  At that point the SDMA also crossed over into the sell posture.

As for tomorrow, we probably have a little cleaning up to do from short orders placed after today's close--and that will take the market down a bit further.  Probably to the next Attractor down, which is at 30.94.

After that, I'm hesitating to call it, but it looks like we could be in for a sharp correction in the next few days.  The wave structure looks suspicious and the Heads and Shoulders patterns are all over the place, both normal and inverted.  Those factors make me a bit worried about the stability of the current market.

The current signal on the EuroDollar model is still short, with nothing yet to confirm or deny the signal.  My interest in shorting this market will only come if the EuroDollar drops below 98.88.  Until then, I stand neutral.  This commentary still holds, three(!) weeks later, with the ED moving ever so slowly sideways.

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.

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.