The Sunny Side of the Street
TECHNICAL ANALYSIS EDUCATION: EXPLAINED AND DECIPHERED FOR NEW AND
VETERAN TECHNICAL ANALYSTS ALIKE.
SUNDAY EVENING - August
24, 2003
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Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)
Figure 2a: Dow Industrials on a daily basis
Surprises in a bull market are to the upside; surprises in a bear market are to the downside. Was Friday up or down? The market opened with a nice gap up, taking it into new high territory, and then spent the rest of the day falling back down. Nevertheless, prices stayed above the Attractor at 9345, keeping my view positive for current movement. The market behaved like a down day, but in fact put in a new high, so that poses a quizzical riddle. I still think we are in a 5th wave, climbing a wall of worry as we edge up higher.
Figure 2a: QQQ Daily
The daily QQQ gapped open above the Attractor at 32.79, giving a sharply positive reading. Yet, like the Dow, it spent the remainder of the day going down. On the positive side, even with the downdraft, the closing price stayed above the top Sunny_Band. That says we are still pushing upward in positive territory. I am now looking for the QQQ to hit the Attractor at 33.88, on the daily chart. The next logical Attractor I see after that is at 36.85, giving a 3 point run up in the making. For the short term the prognosis would be the current close plus on Average True Range, giving a goal of 33.03 for Monday.
Figure 2b: QQQ 15-minute Intraday
Intraday the QQQ gapped open almost exactly one ATR from the previous day's close. The astute analyst who noticed that fact could have put in a short sale at the beginning of the day and held on until the close for a tidy profit. Sharp opening gaps like that are usually tested, so with a tight stop above the market action, that would have been a pretty safe bet.
RSI on the 15-minute chart is now below 40, which leads me to think the next move will be to head upward. Another clue leading to the same conclusion is that the Sunny_DMA_Histogram is about as low as it goes, before turning back around. Further, if indeed we are in a 5th wave, the motion should be upward. For these reasons, I am looking for a move back up to the top of the gap over the next day or two.
Figure 3a: EMini Intraday and Daily
WIth an ATR of 2 points on the EMini, the opening gap on Friday moved from the high of Thursday at 1009.50 to an open of 1011.75, almost exactly the 2 points ATR. From there, since the "goal" for the day was already met, the only choice was down. In a raging bull market this would not be true, but in the sideways market we have been in it makes sense. The Sunny_DynamicMovingAverage gave a sell signal midday after 7.5 days in a buy signal. The RSI is in oversold territory, so I am discounting this sell signal until the EMini breaks below the Attractor at 991.27. If it doesn't break that boundary, I'll ignore the signal. On the daily EMini chart, price is above the upper Sunny_Bands poised to go downward because of the downward movement intraday on Friday. Because of its position on the Sunny_Bands the sell signal could easily be a valid and powerful move, carrying on down to the lower Sunny_Band, which currently lies at 954.09.
Figure 5a: EuroDollar Weekly
The long-term nature of trends in currencies still has us short the Euro. Bit by bit it keeps drifting on downward, but nothing in a hurry. In the general nature of currencies, this trend is taking a long time to get established and a long time in the trending.
This commentary is meant only for EDUCATIONAL PURPOSES. It is to help you see how a Technical Analyst reads the signs in the markets.
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.