The Sunny Side of the Street

SUNDAY EVENING - Nov 23, 2003
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Today (again) just couldn't have been much more of a sideways day from an intraday trader's perspective.

Figure 1: Dow 01 minute Intraday

The Dow just drifted along, with a dip and a rise every so often, but basically not going much of anywhere.  In my way of thinking, however, this was another very positive sign.  The Dow did not head south and go quickly down!  The fact that the markets are holding steadily at their main Attractors has to be a strong positive event.

Figure 2: EMini 01 minute Intraday

Figure 3: QQQ 01 minute Intraday

The remarkable happening, however, is that the QQQ is now above its critical Attractor of 33.90, while the EMini is below its Attractor at 1040.  And, to show even more strength in the NASDAQ, the QQQ didn't really go sideways, it actually went upward!  I like that.

On the intraday charts, the RSI is now at the top of the range, so most likely on Monday morning we will experience a bit of a down move to take the pressure off the RSI.  But, I don't expect it to be heavy pressure, because there is a slight positive divergence in the RSI in Figure 2, with prices nearly flat and RSI moving upward.

My guess is that after a quick little move down, it will be followed by upward motion that should carry the Dow and the EMini up to their Attractors.  That could either leave the QQQ flat, or move it up past the Attractor and on up into recovery territory around the 34.70 mark.  The 34.70 mark also just happens to be the midline of the Sunny_Bands on the daily chart, so that would make sense.

Figure 4: QQQ Daily

On the daily chart the QQQ once again touched the 33.90 Attractor, but didn't really move much below it.  And the close was very nicely above the Attractor.  A further positive sign is the formation of the RSI.  Prices are low and so is the RSI.  With the strong showing Friday of not dipping below the Attractor on a closing basis, I would expect the daily prices now to start moving back up toward the midline of the Sunny_Bands.  That would put price at about 34.70 on the QQQ and 1042 on the EMini.

The upsloping trendline on the EMini has me a little bit concerned in this scenario, however.  As price hits the trendline it is likely to stumble about for a few bars, and then either blast through it, or be repelled and go back down.  That's the one caveat I see in what I otherwise think will be a nice move upward.

The upper Sunny_Band on the EMini is currently at 1059--which is the ultimate goal.  If these little cycles keep repeating then it should take about 10 days for it to get there.  Be patient.

Figure 5: US TBonds Daily

Bonds are still rising, probably heading for the Attractor I have drawn at 113.  It is not very far away, and is likely to repel prices when they get there.  Bonds are in one of those sideways, choppy periods like the one from 10/7/02 to 4/14/03.  Unless you are scalping and very proficient at intraday trading, this is a good time to be on the sidelines regarding bonds.  Let's see, however, what the intraday chart looks like.

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.