The Sunny Side of the Street

TECHNICAL ANALYSIS EDUCATION: EXPLAINED AND DECIPHERED FOR NEW AND VETERAN TECHNICAL ANALYSTS ALIKE.
 

WEDNESDAY EVENING - Sept 3, 2003
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Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)

True to last night's commentary, the Dow went up today while the QQQ went down.  The RSI however went down, putting the Dow and its RSI in divergence on the intraday chart.  Tomorrow should now show some intraday correction to offset the divergence.

Upward movement on the Dow stopped at the resistance Attractor I had drawn at 9560, in fact closing at 9568.  The line was drawn from a considerable distance back in 2/2002.

It's probably about time for a little rest before continuing the climb to 9802.

Breakout levels are: 9585 on the upside and 9525 on the downside.  Stay nimble.
 

The QQQ closed today at 33.85, pushing its RSI on upward to almost 74.  No divergence here on the daily chart, just strength.  However, I am a bit worried about the steepness of the curve on the daily chart, with price moving up and up and up.  There usually has to be a correction from that type of motion, and I think a small correction is imminent.

Figure 2b: QQQ 15-minute Intraday

Yesterday's warnings about the RSI being in overbought territory and 4 days in a single long trade panned out today with the QQQ heading south after the morning's gap upward.  So, if you were holding long overnight and got out at the 34.19 Attractor, which was also at the top of the Sunny_Band, then you could have captured some profit. 

From there it was downhill for the remainder of the day until the sell signal. 

It looks like the correction I expected to start yesterday started today instead.  For the most part it was a sideways day, unless you were long overnight and thus caught the morning gap, but it was nevertheless the beginning of a correction.  And at the end of the day, on the final bar, the QQQ and the SPY gave sell signals.  The EMini system is generally a tad better in its signals than the others, and doesn't tend to get whipsawed as often, but I wouldn't be surprised if tomorrow doesn't go further for a little correction and give a sell signal as well.

I told you the RSI was getting a bit overbought.  And, today was the reaction I've been looking for.  Furthermore, RSI is now in bearish divergence with price, so that would lead me to expect correction tomorrow as well.

The breakouts would be at: 1021.63 on the lower side and 1029.29 on the upper side.  Keep on your toes and watch for these two levels.

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.