The Sunny Side of the Street

WEDNESDAY EVENING - Nov 05, 2003
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From a trader's view, today was quite a volatile day.  The markets started out as if they might be going up, and then turned on a dime and went sharply downward.  Both the QQQ and the EMini took a decided bounce at 7:57amPT, and spent the remainder of the day edging upward.  By the "deciding hour" (the last hour of the day) the steam had built up and the markets took a decided march to the upside, moving sharply upward.  It was one of those days that again didn't have a single direction, but went rather sharply in both directions.

Nevertheless, the net for the day was an upday, as it has been so often over the past few months.  That's how we have been getting the net move to the upside, a little step at a time. 

Figure 2: QQQ 01 minute

Figure 3: EMini Daily

Figure 4: QQQ Daily

On the daily charts, we continue to see the kind of progress you often see in a traders' equity chart: a little up followed by a little down, hopefully overall making progress over time.  The nice thing about it is it is a nice steady gain for long-term traders; the disadvantage is it is next to impossible to trade intraday, unless you're trading a very disciplined method.

For the intermediate term, if the QQQ breaks below 33.90, then all upside bets are off, and we will be looking at a downside correction of some magnitude; for the upside, it looks like a strong, steady continued growth over quite a long time.  The next near target is at 37.41, as shown in Figure 4.

For the EMini, the stop to watch is at  1040 and the goal at 1076.  As with the QQQ, if we break below 1040, watchout for some quick downside correction.

In general, stay in touch with the Sunny_Bands.  As long as price is in the upper half of the bands, I like to be long.  If price passes below the half way mark, I like to be short.  Any wavering indecision around the halfway marker makes me on the alert, and stay 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.

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.