The Sunny Side of the Street

MONDAY EVENING - Nov 24, 2003
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Another day like the good ole days!  A gap up with some follow through, midday skidding along sideways and then the end of the day came through with even more follow through in the afternoon.  A nice solid up day, all in all.

Figure 1: QQQ 01 minute Intraday

The nicest part of today's move was the gap and the move that took price right over the midline of the Sunny_Bands.  That was the bounce I was looking for.  It was also a buy signal by my way of reading it.

The 33.90 line on the QQQ has held and acted as great support with the market bouncing right off the line.  To me that is a great show of strength, indicating that the QQQ is now heading for the top Sunny_Band.

At the moment, the top Sunny_Band lies at 35.84 on the daily chart, so that's where I'm looking to put a very tight stop under price (when it gets there).  In the meantime, we still are probably looking now at 9 days to make it to the crest of the cycle, with a little up and a little down movement along the way.

Figure 2: QQQ Daily

We can surmise that the move upward is not yet over, because RSI has just barely picked up off the 40 line in its bounce, and need to get to at least 65 before I start worrying.

Figure 3: EMini Daily

Another really positive sign is that the EMini stepped right up to the trendline and cleanly moved on over it.  That is the kind of test and retest that I like to see.  The low of the day on the EMini was 1040.25, staying above the Attractor all day.  That's what I mean by a  positive sign. 

So, it looks like we are off to the races again.  Not so fast though.  I don't mean to imply that we will get there in a day or two, but more likely in 8-10 days we should be over the high of 11/14 which was at 1064.

Today's close was at 1049.50, so that would give the EMini another 10 points upward.  But, I don't think that is all there will be.  The cycles have be about 10 days in length and about 50 points in height.  That would put the high of the cycle at about 1090, if it continues this pattern.

Likewise with the QQQ, the cycles have been about 3 points in height, which would put the crest of the new cycle at about 36.90.

Watch for a runaway this time.  Usually just about the time people get the patterns figured out, something new happens.  This time I think the switch could be a sharper move upward.  For me that means letting the market take its run, and putting stops under the market at the top Sunny_Band levels.

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.