The Sunny Side of the Street

SUNDAY EVENING - Sept 14, 2003
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Friday's action was what I was expecting on Thursday, so I guess I was just a day early.  The markets dropped on the open on Friday and bounced back nicely the rest of the day.

The open and the close were very close together, giving us a hammer formation, which is generally though of as bullish.  Thus, let's expect an up day on Monday, hopefully breaking through overhead resistance which lies at the high of Friday.  Amazing how those Attractors work, isn't it?

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)

Daily QQQs passed through and closed above the midline of the Sunny_Bands, giving a buy signal basis the daily chart.  The sharp drop in the morning made the day look like more of an up day than it was if you compare it to yesterday's close. (See Figure 1a, above).

The bullish close on the daily chart, with the RSI near the bullish line at 60 tells me that tomorrow could easily be another bullish day.  On an intraday basis I would expect the

Figure 2b: QQQ 15-minute Intraday

QQQ to head for the upper Sunny_Band, which in Figure 2b is sitting at 34.41, just above the Attractor at 34.22.  Hitting that line would also put the QQQ at current price plus 1 ATR.  There are three reason that I expect tomorrow to be up around the 34.22-34.49 range.

LAST TIME I SAID: The next Attractor on the EMini is downward, at the 1011 level. 

And, the down turn did us one better, it went on down to the Attractor at 1004, right after the open.  It didn't take long for prices to move back up to the 1011 level and spend most of the day there, testing that resistance area.  Near the close, the EMinis got some strength up and went right back up to the Attractor at 1018.20.  Amazing how those Attractors work!

The final close was off the Attractor just a bit, closing at 1016.75, giving room for Monday to move up again to the Attractor and test the resistance.

RSI is at 62, right above the bullish line, which says to me that Monday will be an up day, taking the RSI even higher into bullish territory.

The next Attractor on the upside lies at about 1027, which is probably too far for a single day's run, as it is beyond 1 ATR from the current close.  So, I'm expecting an up day, but only half way up to the next Attractor.

Bonds prices moved nicely above the Attractor on an intraday basis, but moved back down to the Attractor for the close.

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.