The Sunny Side of the Street

THURSDAY EVENING - Sept 11, 2003
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Well, I was off on that one!  I thought for sure there would be a little more correction today, but the bull is so strong that it didn't even correct the RSI before turning back up!  Keep that in mind when trying to short.  The short trades have lasted far less time than the long trades.

On the daily chart you can readily see the technicals at work, with today's high on the intraday Dow perfectly hitting the Attractor at 9504 before retracing its steps, right back down to the Attractor at 9460.  (Well, actually the high was 9502, but that's extremely close.)

RSI is pointing downward, ATR is weak, and the Dow is sitting on an Attractor.  Following the premise that the market is behaving bullishly, price tomorrow should bounce off the Attractor in the morning and move back up toward the 9504 range.  With the daily ATR at 100, we could expect a move from today's close at 9460 plus 100 points to 9560.  The next Attractor on the upside is at 9682, but I don't think it will move that far in a single day, unless (since it's Friday) there is a lot of short-covering.

Figure 2b: Dow intraday 15-minute chart

Attractor:  a level to which prices seem to be drawn, like a magnet.  Usually these are lines of support or resistance from previous highs and lows, but can also be an important level on an indicator, or the edge of a Sunny_Band.

RSI:  Relative Strength Index (TradeStation function)

My system called for a buy on the open of the QQQs, but was not confirmed as the price did not close above the Sunny_DMA before the exit signal was given.  The exit signal came in at 8:15amPT and was soon followed by another buy signal, re-entering at 8:45 at 33.29.  The buy signal held until 12:45, when price was at 33.56, giving a profit of 27cents, or $1350 on 5000 shares.

At the end of the day the system moved into neutral mode, with a sell bias and so I am not holding any positions overnight.  However, if price turns around in the morning and goes above 33.80 (the high of today), I will take a long position on re-entry.

On the other hand, if price moves down below the SDMA, currently at 33.48, the I will be looking for short positions.  The most likely Attractor is currently at 33.33, so I am expecting a little move down in the morning, at least to touch the Attractor.  After that, unless there is bearish news on hand, I expect the market will bounce off the Attractor and head back upward.

Daily ATR is .64, which from today's close would take the QQQ to 34.29 tomorrow, if we head upward.  The next Attractor is up at 34.22, so that's my vote.

Figure 2b: QQQ 15-minute Intraday

The next Attractor on the EMini is downward, at the 1011 level.  RSI has turned upward, above the 40 level, which is quite bullish, and the SDMA is now in a buy signal.  It would indeed be very bullish for the EMini to take off upward from here without touching the 1011 mark.  But, the RSI is confirming the price action, there is no divergence and the formation looks like a very long winded, complex Head-and-Shoulders pattern.  Therefore, I think tomorrow will move a bit downward before moving up.

There is a firm Attractor at the 1018.20 level on the EMini, which is calling to price to move in that direction, with the next Attractor upward being at 1025.92.  So, I'm thinking we might see a little down move, followed by a larger upward move tomorrow.

I am keeping the commentary about bonds in place, as it still stands.  Today reflected off of the Attractor at 107.97, holding the "backing and filling" part of yesterday's commentary true.

The suggestion from the commentary of the past week seem to be panning out!  I was thinking that a rounded bottom was forming, and indeed, we now have a buy signal on the model.

Price is currently right on the Attractor at 107.97, so in all likelihood there should be some testing and retesting going on for the next several days to weeks.  The market will want to see just how solid this Attractor is.  Backing and filling is likely.

If the Attractor holds tight, and I think it will, the next step would be for price to head on upward to the next Attractor, which is at 112.80.  Stops placed for protection could nicely be put at the SDMA (Sunny_Dynamic Moving Average) line which is currently right at 105.91.

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.