The Sunny Side of the Street

TUESDAY EVENING - Oct 21, 2003
Archives of Past Commentaries  .  How Did We Do?

$57,979 in Stock Picks to date!  Click Here to view.

If you simply look at the motion on today's 1-min chart of the Dow, you would probably say it was a sideways day.  At least, I would.  All day long the market went up to the top of the channel at and near 9776 and then fell back to the bottom of the channel at or near 9729 and then turned around and played the game vice versa.  Back and forth all day. 

But, when you draw the chart with a trendline starting at today's open and ending at today's close, we find it was a fairly decent down day after all.  It's hard to envision, but today's trade was a short from open to close.  There was really no way to catch any of those fast little moves all day long on a one-minute or 3-min chart.  The market has been making little right-angle reversals off of the previous day's trendline. 

That's the Dow.  On the other hand, the QQQ played a different game today, with the long trade actually starting yesterday afternoon and ending this afternoon, as marked on the chart below.  The QQQ market is still working on reaching for the Attractor at 35.60.

Figure 1b: QQQ 15-min

Gold appears to be taking a little bounce upward, showing some overall hesitance in the economy and the market in general, while inflation still does not seem to be threatening.  We get a mixed message from that reaction.  Further, there is a pennant formation on the SDMA_Histogram chart, showing congestion and a potential price erruption coming soon.

The EMini chart, above, is pushing up against the Attractor at 1050, and has yielded a bit over the past few days.  This is one of those charts that will be a "told you so" in the next month or two when prices break above the 1050 line and head on upward for 1180.  It's likely to be rugged along the way since the line is fairly weak and the ride will be full of hesitation, but it is the ride we are on.  Watch carefully for breaks below the midline Sunny_Band as excuses to jump out and breaks above as reasons to take profits.S

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.

PHW:  Potential Hourly Wage.  A term coined by Sunny to examine whether trading for a living is really worth it when compared to the minimum wage standard.  Before considering a trading system to be a success, it should pass the PHW test.

RSI:  Relative Strength Index (TradeStation function)

SDMA:  Sunny's Dynamic Moving Average (proprietary)

Shooting Star: A candlestick pattern discussed further under Reference, Candlesticks.

SDMA_Hst:  Sunny's Dynamic Moving Average presented in a histogram format where the line representing the difference between the two SDMA lines turns from red to green when the two SDMA lines cross each other (the difference is zero).  The yellow line is an average of the histogram line.

Sunny_Band:  Sunny's Dynamic Moving Average plus 1.5 ATR and minus 1.5 ATR, creating a band on either side of the SDMA.

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.