The Sunny Side of the Street

MONDAY EVENING - Sept 8, 2003
Archives of Past Commentaries  .  How Did We Do?

Figure 1a: COMPARISON: DOW vs SPY vs NASDAQ (Intraday)

$44,893 in Stock Picks to date!  Click Here to view.

Today's Dow, just like the SPY and QQQ, created two gappish bars up and then traded in a narrow range for the remainder of the day.

The Dow was unable to move out above the resistance level of the past 3 days, however.  The picture created is one of looking for another day of slight correction.  So, while staying long keep a tight stop in case the market starts down.  Otherwise, let the market keep doing its thing and moving up with you continually moving your stops up with it.

The daily QQQ chart is still performing nicely, even though the RSI is in overbought territory, and could be a warning of a nearby correction to come.  The QQQ has had a nice steady ride up for the past 9 or so weeks, but is at a bit of a steep angle, warning of (a) a blow-off to come or (b) a correction to come.  I don't think the irrational exuberance is there yet for a blow off, so that leaves the possibility of a correction to bring the RSI down from the overbought territory.  Keep playing the market with stops to take you in and stops to take you out.

Figure 2b: QQQ 15-minute Intraday

Last night I gave the following breakout points: "34.22 on the upside and 33.66 on the downside.  There is still no reason to trade a sideways shuffle--wait for a breakout one direction or the other."  And today, the QQQ broke out of the 34.22 range after two 15-minute bars of trading.  The move up took the QQQ to 34.50 on the close, a very nice move indeed.

The buy signal is still in force, with the RSI putting in a slight divergence, so beware.  At this point, the upward movement on the markets is "climbing a wall of worry" moving cautiously, but ever upward. 

The Attractor at 34.22 is now going to be support, so watch out for any drop below that line.

In last night's commentary I said: "The breakouts for Monday would be at: 1018.26 on the lower side and 1025.92 on the upper side.  Without a breakout there's no reason to trade during this sideways period.  Keep on your toes and watch for these two levels to be broken."

In the second bar, of the 15-minute chart, the EMini broke decisively above the 1025.92 mark, sucking in a players who had a buy stop at that level.  The day closed at 1030.75, giving nearly 5 points of profit for the day. 

The interesting thing about the day was that after the first few bars, the market traded in a narrow range between 1029 and 1032.33, with the close just about at midrange.  The RSI now has a slight divergence in it, which could be warning us of a correction to come, so be careful and use tight stops.

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.

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.