The Sunny Side of the Street

TUESDAY EVENING - Nov 11, 2003
Archives of Past Commentaries  .  How Did We Do?

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

Today was another slow drip down.  Today's drop, however, was even less productive and a slower grind than yesterday's.  The only event worth playing (other than pure scalping) was the short right after the open, and that only for a few minutes.  About the most one could have pulled out of today's move down was 11cents by holding short all day from open to close, or 40cents if you were adroit enough to short at the high and exit at the low first thing this morning.

Again, the long-term charts are where the action is, and watching the daily chart has become my mainstay.

Figure 2: QQQ Daily

On the daily chart, the low of the day touched the midline Sunny_Band again.  In fact, that's about all it touched, not moving very far either direction.  This narrow range day makes me suspicious of a bigger move to come.  And, I'm thinking it's going to be in the down direction.  It only makes sense as the little cycles in the chart above show.  The market has been going up and down in little humps lasting about 20 days for a full cycle, or 10 days for the half cycle.  If that's the case, then we are already 2 days into the half cycle down move, and should probably hit the bottom band within the next 8 days.

Figure 4: Emini daily

As with the QQQ, the EMini also touched the midline today, in a narrow moving day.  The EMini, however, also touched the 1040 Attractor again, testing and retesting the level to see whether it would break through or stick.  Because of the cycle effect evident on both the EMini and the QQQ, it makes sense here too for the movement to continue on down just a little further before making another run up.

Be ready.  If the EMini goes above 1057 or the QQQ above 35.86, then we are looking at long plays again.  For now, watch carefully tomorrow, as it might be the day to go short.  If the markets move down below the middle Sunny_Band (1041 on the EMini and 34.76 on the QQQ), then I'm going to try a short play to the bottom band. 

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.