The Sunny Side of the Street

THURSDAY EVENING - Dec 31, 2003
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Figure 1: Dow weekly

Today's trading session put in another up day, plugging along after a gap down first thing in the morning on the EMini.

There were several small pops up to catch on the 1-minute charts, but no way to tell that the entire day would be upward.  As usual, the middle of the day put in a sideways section, which would have likely scared out all but the most brave.

Figure 2: QQQ 1 minute intraday

The QQQ stepped out above its opening horizontal line fairly early in the day, giving us the clue that the session would be an upward one.

Figure 3: EMini 1 minute intraday

But, the EMini was so choppy that I would have avoided it altogether today, missing the up move altogether.

Figure 4: QQQ Daily

The best clue as to direction remains in the Sunny_Bands, with the chart in Figure 4 showing a long position since last Dec 10.  From the current position of the RSI and previous support/resistance levels, it looks like we could soon be entering a small topping phase.  I took off my long position today, waiting to see what tomorrow will bring.  If we continue on upward, I will reenter long; if tomorrow starts a bit of a down move, I will wait for the market to bounce off the middle Sunny_Band before reentering long.

Figure 5: EMini Daily

The EMini is also approaching a previous Attractor which could signal a bit of hesitation in the upward march.  At 1128 on the EMini is a small amount of resistance that could cause the hesitation.  Otherwise, the main Attractor is still looming large above the EMini at 1172.  That's still a long way up and a lot of profit potential on the long side.

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.