The Sunny Side of the Street

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

TUESDAY EVENING - Sept 23, 2003
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There we go!  A day with some direction.  I came into the morning long, holding my breath waiting to get beat up another day, and lo and behold an up day happened.

The Dow was up 40 points today, but with ATR at 95 that was only half of what it could have been.  Well, we are up against some formidable obstacles, which is why and where the markets are having difficulty rising at this time.  Take a look at the weekly chart of the INDU:

Figure 1b: Dow Weekly

The two horizontal lines across the chart show two major lines of resistance and support (Attractors) between which the Dow is currently stuck.  And with the down sloping trendline on top of that, we are approaching a high volatility pivot point. 

RSI is up towards the bullish range with a value of 66, which makes it positive, but not yet overbought.  If this move turns out to go higher and break through the resistance it should begin an extended long-term up move.  We have been trading a bear market for three years now, and it's about time for the market to truly turn around.

I'm thinking that tomorrow should be an up day with movement up into the 9638 range, closing the gap that remains open from the 19th-20th.  That would take RSI into the upper range and finish the reaction to the tiny little bullish divergence from yesterday.

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)

SDMA:  Sunny's Dynamic Moving Average (proprietary)

Today's upward action ended on an up note with the close at the highs of the day.  The QQQ was reaching for the highs from three days ago at 34.86, but couldn't quite make it, closing at 34.52.  Almost there.

The QQQ prices have stayed in the upper half of the Sunny_Bands since 8/13, moving continually up since the daily buy signal.  I think the major Attractor above the current QQQs is at 41.77, but is still weeks away.  When we get to that level it will be major pushing and pulling time as both sides try to take control of the market.

In the meantime, we still have seven points left to go on the upside, with the ATR at 0.69 per day.

 
Figure 2b: QQQ 15-minute Intraday

I expect tomorrow to finish the climb up toward 34.86, which is the high from 2-3 days ago before it hesitates too much.

 

Upper Band	Mid Band	Lower Band
34.81	33.78	32.75
	Upper Attractor	Lower Attractor
	36.66	33.63
	Close Plus ATR	Close Minus ATR
	35.24	33.80

LAST TIME: 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.

It didn't quite make it.  And, in fact, the day did not end on the high note, the way the QQQs did.  The ES is reaching for the 1033 mark, but only got as high as the minor Attractor at 1029. 

My Sunny_Band strategy took me out of the long position, but subsequently I re-entered when the market moved back above the middle band.  So, I'm still looking for tomorrow to be an up day, making its way on to the 1033 mark.

The US rose again today, playing with the Attractor at 107.97.  It is a major Attractor and so the market could play with support and resistance several more times before it chooses a direction and heads in that clearly direction.

Prices are in the upper half of the Sunny_Bands, which is bullish, and are beginning to play with the upper band itself, which can be quite bullish.  In fact, usually when markets are doing really well I see price ride the top band for days or weeks at a time.

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.

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.