The Sunny Side of the Street

WEDNESDAY EVENING - Oct 29, 2003
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Today's chart was like a little more icing on the cake.  The Dow appears to be continuing a nice, solid move upward.
 

The Dow appears, on the weekly chart above, to be continuing to hold firmly above the Sunny_Bands and above the descending trendline.  Both indicators show strong signals for the Dow making further upward progress.  Both say to me that we should be taking another bounce upward tomorrow.

On the 15-minute QQQ chart above, we appear to be struggling near 35.45 area, which is an Attractor that goes back more than two years.  If we break that area is should be like the slice of a knife, firm and swiftly upward.  If we don't break it that was soon, then we will fall downward instead, creating a 4th wave downward.

The area then that the 4th wave will be playing in will be the 35-28 range.  I doubt that the drop will be more than to 30, however, as the market has been playing a pretty strong hand.

The same commentary goes for the EMini, with the zones differing somewhat.

The upper Attractor, with which we are now battling, is at 1050.  The lower zone could take us as low as 947, but it is more likely that any down move would stop by about 1003, where all the previous congestion lies.

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.