The Sunny Side of the Street

MONDAY EVENING - Sept 22, 2003
Archives of Past Commentaries  .  How Did We Do?

$56,893 in Stock Picks to date!  Click Here to view.

One of your fellow readers submitted a chart of the daily Dow, suggesting that I look, I presume, at the channels he had drawn.  If you will note the two downsloping parallel lines which seem to bound nearly every up move and down move for many months, you would conclude that the up move we are currently in is about over.  You would also conclude that there is a little farther left to go on the upside.  Markets like to turn a conjunctions of trendlines, and the two that are in a showdown will likely either result in a stronger move up, or a turn-around move down in about a week or so. 

If this plays out purely technically, then the INDU will be above the current resistance before turning back down, and should retrace back down to the 8500 level.

That would also be one scenario for this being a three wave and the 4th wave correction would move down to about 8500.  Of course, since the two wave was a sharp downward correction, that often calls for a sideways fourth, so the correction could be shallow.

In the meantime, price is carrying the Sunny_Bands on upward, heading for the Attractor at 9682 on a closing basis.  Watch carefully for any break below the mid-band, as a time to take profits or get on the sidelines.

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)

Friday was sideways and choppy, and so was today.  I had thought we would move up some today after a dull Friday, but the total move for the day was down, when you include the opening gap.

So, 33.58 is now the downside Attractor and the next level upward is at 38.84.  Looks like we have some exciting weeks coming up, but they will probably be climbing the wall of worry, inching their way up and correcting downward every other day all the way up.
Figure 2b: QQQ 15-minute Intraday

Friday was essentially a stand in place, if you don't count the gap down, sideways move so the commentary still stands.  It was in fact a tricky day, barely moving in a 5 point range between 1023 and 1018.

Because of today's down day, the Upper Attractor is now back to being the recent previous high.

My Sunny_Band strategy gave a buy signal on the ES near the end of the day, which hopefully will last through the day tomorrow, carrying the ES up to 1033 or so.

The US fell today, back to the Attractor at 107.97.  There should be some backing and filling now for several days as the market tests to see whether this level will hold.

Bonds moving up means interest rates moving down, which is good for the equities markets, so let's hope bonds continue to climb a little further.  Interest rates moving down usually means equity prices will rise.  So, that's a good thing.

Watch closely and be wary incase the breakout shows itself to be false.  Then if the profits begin to build, put a trailing stop under the ride up, 1.5 ATRs away from price.

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.