The Sunny Side of the Street

SUNDAY EVENING - Nov 09, 2003
Archives of Past Commentaries  .  How Did We Do?

$66,989 in Stock Picks to date!  Click Here to view.

A little bit up, followed by a sharp down is what we saw on Friday.  Only the sharpest of scalpers could have made spare change from the ups and downs that took place for most of the day.

Figure 2: 1 minute EMini

The EMini showed the same pattern as the QQQ, with slightly more of a bent toward the downside.  The only short-term play would have been to go short at the open and hold until the close.

Figure 3: Daily QQQ

Figure 4: Daily ES

On the Daily charts, both the EMini and the QQQ are still riding the top band of the Sunny_Bands, showing us continued strength as the markets continue their climb upward toward their Attractor goals of 37.41 and 1081 respectively.  I am thinking it might just be best to set the position in place long and leave it alone until it meets the goal, or breaks down.  Any break below the lower Attractors would negate my inclinations.  The lower Attractors are at 33.90 on the QQQ, and 1040 on the EMini.  Unless these levels are broken on a closing basis, it looks to me like the markets will experience slow, back and forth but steady growth on the way up.

The ugly part about the way the current environment moves is that each day seems to consist of two moves: one up and one down, netting a day that is slightly up (and sometimes slightly down).  It makes for very difficult trading intraday.  So, the current best bet seems to pick a longer-term chart and hold on tight.

The other way one could technically play an intraday market as rough as this one would be to mark the opening range and trade the direction above or below that zone.  Taking profits at the ATR of the next higher degree also seems to make sense, rather than getting greedy, because moves of great proportion are not happening.  By that I mean, if you are trading an intraday chart, use the ATR on the daily chart; if you are using a daily chart, use the ATR from the weekly chart.

Figure 4: Daily EuroDollar

Still in the same sell signal that has been place since 10/21, they say currencies trend.  This one is trending nicely sideways, and has stayed in the channel drawn above for months.

Figure 5: US Tbond Daily

The TBond chart showed a nice buy signal on 9/15 which produced a nice run up until it was above the Sunny_Bands.  When it exceeded the bands was time for all reasonable folks to exit and take profits.  Remember, the market tends to do what it tends to do; so when it does something out of the norm, you need to take advantage of it right away.  The plunge that followed might or might not have been taken, depending on whether you were trading strict Sunny_Bands or my Dynamic_Moving_Average.  If you were following the moving average, you would have regarded this movement as sideways and would have ignored it.  If you had been following the bands, you would more than likely have gotten chopped up in the whipsaw.  Even bonds don't trend all the time.

For tomorrow, it once again looks like we will have the same kind of day: up and down.  As I've said previously, it looks like the QQQ is making a run for 37.41, and I expect this run to continue for a while longer. 

Keep your senses about you and use strict discipline in trading.  Trading is a risky business.
 

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.