The Sunny Side of the Street

WEDNESDAY EVENING - Nov 26, 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 Daily

Today was another beautiful move up toward the upper Sunny_Band, "just as planned" if there ever is such a thing.  The lows touched the midline band again for some confirmation.  Again it was a scalping kind of day, the kind that very adroit traders can get a long, then a short, then another long out of.  Take a look at the violence in the intraday chart in Figure 2.

Figure 2: Intraday 1 minute QQQ

The Attractor at 35.36 was one of the keys to today's action.  The other key, which I don't have marked on the chart above, was day before yesterday's lows, which lie at 34.80.  The market today stopped and started between those lines, with one brief tick up to the uppermost Attractor at 35.50.

I am still anticipating about 8 more days reaching the top Sunny_Band, which now lies at 35.85 on the daily chart.  That means that there must be some down days in there somewhere.  Remember, markets don't just go straight up or straight down to their goals, so don't expect this one to either.

In all likelihood, we will see a narrow range day tomorrow, possible toward the downside, to take some of the pressure of the last three days off.  RSI is heading upward and is nearing the upper range before a bullish attack.  That makes me think that some relief should be in order before the attack resumes

Figure 3: EMini Daily

The EMini is showing the same strength by holding above the trendline and above the 1040 at the same time.  This still makes me think there is further strength ahead and I am looking for a one week ATR range upward.

Figure 4: EMini Weekly

The current weekly ATR (see Figure 4 above) is 26 points per week.  So, that's about what I am expecting for the week ahead.  That or a little less, since the ATR keeps getting smaller and smaller as time marches on.

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.