The Sunny Side of the Street
TECHNICAL ANALYSIS EDUCATION: EXPLAINED AND DECIPHERED FOR NEW AND
VETERAN TECHNICAL ANALYSTS ALIKE.
THURSDAY EVENING - August
28, 2003
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Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)
Figure 2a: Dow Industrials on a daily basis
The Dow jumped immediately
upward this morning to reach the Attractor at 9345, and the fell back like
holding a hot potato. After a straight drop to 9264, the direction was
up for the remainder of the day, to close at 9376. Looked at from the
bottom of the drop, there was a 100 point move today, showing market
strength and helping to ease the divergence between RSI and price.
Nevertheless, the divergence is still there and will likely be what starts a
pullback in the next day or two.
Figure 2a: QQQ Daily
The high on the QQQ for the day was 33.15. I was looking for the QQQs to meet the Attractor at 33.33 today, and it almost made it there, but not quite. I think it will have to make that mark and more tomorrow.
Figure 2b: QQQ 5-minute Intraday
Ultimately I am looking for the QQQs to get to 36.97, so that certainly means they will pass through the 33.33 Attractor in reaching the 36.97 mark.
I think it will most likely be one more up day and then a bit of a pullback for a few days. The markets need to catch a breath after a long period of running upward.
Figure 3a: EMini Intraday and Daily
Last night I said: "...and with the ATR at about 10 points on the daily chart it should be able to make that mark by tomorrow intraday."
And, in fact the opening gap put the ES right at 999. The reaction to hitting the Attractor looked like touching a hot stove, with a fast and sharp pullback. But, the pullback stopped immediately as it hit the lower Attractor at 991. From there, the rest of the day was upward. Upside action stopped at the end of the day at the 1004 Attractor, and pulled back slightly
Tomorrow will likely be one more upward day heading for the Attractor at 1010. Then we should see a little bit of downward action after that, testing each of the attractors that the markets have just exceeded.
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.