The Sunny Side of the Street
MONDAY
NIGHT - August 11, 2003
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Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)
Figure 1a: INDU Daily chart
Since the Dow is still in its narrow 300 point trading range, a channel trader's delight, I decided this evening to take a longer viewpoint on the chart.
Figure 1a above, shows an extended view of the Dow. On the chart you can clearly see what I have been talking about--sideways action. The Dow has spent 9 weeks moving slowly back and forth between these two Attractors.
What's next? I think this is a 4-wave correction. And because the 2-wave correction was steep and lengthy, I expected the 4-wave to be shallow and lengthy. The lengthy part isn't over yet. In fact, it should last for about another 2 weeks.
Again, wait for the breakout one direction or the other before making your mind up technically.
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Figure 2a: QQQ Daily
The daily QQQ is moving sideways underneath the Sunny_Bands, pushing only gently against support at the 29.74 level. There is now a Head-and-Shoulders pattern evident that calls for a little further correction down as low as 28.64. That's not very far, and not far from the current Attractor, so that could easily happen and scare a few folks out of the market. That would also put price right at the high of Dec 2002, so it makes sense.
I am still (unless proven wrong in my analysis) thinking this is a 4-wave correction and am thus still looking for the 5th wave upward.
Keep in mind that any good analyst will jump to the next conclusion if proven wrong! By that I mean that if Technical evidence shows up that proves my current theory wrong, I will quickly reanalyze my positions and get out of current holdings. I say this to warn readers as a matter of policy not to hold on too long wishing for something to happen. Better to take small losses and move on.
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Figure 4: EMini intraday
The system signal on the EMini is the best of the choices between the timeframes and the vehicles, with the intraday EMini being long for two days. Nevertheless, with the movement being so slow and nearly sideways, there is not much profit in it, unless you have on LOTS of contracts.
Figure 5a: EuroDollar Daily - Sunday night commentary only
The next Attractor is now down at 98.7, which could be a nice profit taking opportunity. Why? Because the RSI has been so low that I would expect a bounce when that level is tested. The RSI itself has had a little bounce, but I expect it will use the 40 level as resistance and drop a little further from here.
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.
5. This commentary is for educational purposes only, and is meant only to teach readers about my indicators, other technical indicators, and how I read them.
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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.