MomentumCycles

MomentumCycles commentary for the open of Tuesday,January 19,1999:

To review...5 consecutive put/call ratios at topping values nailed the 1987 top,and 5 consecutive similar values nailed the January 9-11 top,in addition to our other overbought indicators.{This is not to imply that January 11 was THE top,rather a predicted short term top.}Thursday last week was in the oversold area "where only 5% of such values are seen",and we advised daytraders a rally was highly likely from the area "between the 21 day moving average and the lower 3.5% trading band,where we ended Thursday".More on this,and post holiday trading, in paragraph 8 below...

Thanks to Gitanshu Buch for the following commitment of traders analysis:{Note that these positions interpret intermediate and longer term commercial hedger positions and are not designed for short term trade advice.However,the commercials are in the main right on trends and often shift positions prior to important trend changes.}

"Commercial buying into US Bonds and British Pound is the major highlight for the past fortnight. SnP indicates cross-currents with a bullish bias, and US Dollar, Canadian Dollar and Japanese Yen indicate massive liquidation by Commercials going into next week. The Japanese Yen has formed a bearish Outside Day reversal to boot on the Weekly chart. Commodities are mixed, with no "All Clear" being yet sounded for a bull phase to begin. Commercials are still taking the opportunity of every price increase to turn sellers of physicals. For the present, the dominant deflationary price trends in physical commodities, and the uptrend in US Equity/Fixed Income markets are here to stay, if the Commercials are right."

Concerning our recommendation of long positions in DBCC at 16.75...

Online business news provider CBS Marketwatch.com (MKTW) rocketed 474 percent on Friday from its initial public offering price of $17 per share, making this the second largest stock gain for an IPO on its first day of trading in history. Its stock closed up $80.50, at $97.50.

The company, jointly owned by CBS Corp. (CBS) and Data Broadcasting Corp., was the first major IPO of 1999, offering 2.75 million shares led by BT Alex Brown, raising $47 million. The stock performance ranked second only to Theglobe.com Inc.(TGLO), which rose 606 percent on its first day of trading.

Currently, Marketwatch.com derives most of its revenue from advertising on the web site. In the quarter ended June 30, it posted a net loss of $1.6 million on revenue of $1.5 million. It plans to boost revenue through content licensing, electronic commerce relationships and subscription fees. The name recognition of CBS was a big help.

Data Broadcasting (DBCC) was the most active stock on the New York Stock Exchange last week, falling 4.60 to $21.75 on 128 million shares. During the week it touched $50 a share.The stock{not the option!} was recommended here at 16.75.Common trading practice at this site is on a double to sell half the position,and many readers have consistently followed that advice,to their benefit.By doing so,readers in effect,have what is called a "free trade".

For Tuesday, we will look at the current OB/OS status, and expiration trading. Currently our intermediate term price/breadth/NHNL system is still in the Exit or flat mode. An improvement in new highs would be required to put it back in Buy mode. Where do we stand short term after being correctly bearish last week until before the expiration pop on Friday?

More importantly, how could Friday have been traded by day traders? The latter is worth examining because it repeats every month in a similar way. Typical pattern is the high volume pop on the SPX settlement Friday opening, then a lull into mid day, then another push upward in the last hour. The OEYAA, OEYAB, Candle Volume, OEX PIVOT and CONE INTRADAY, illustrate this pattern. A trade done by Travis in the Elliot Wave section of OEXTRADER is detailed on the OEYAB chart. The close left the OEX in somewhat of a neutral to slightly oversold posture as evidenced by the AMOSS, MOSS, McOsc and NHNL. VIX system generated a buy signal on Friday. OEX Fib Ret bounced off the 2/3 yellow retracement line. OEX Fib starts the week on the weekly balance line with the Ratio oscillator crawling along the oversold line. Again, the week starts off in a neutral to oversold posture.

Here are the rest of the charts:

ADHL CHART. CODI CHART. CONE CHART. CYCLE CHART. DJWM CHART. INDU CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEYBA CHART. RSISTO CHART. SUPERT CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Wednesday, January 20, 1999:

Using a time series analysis of the NASDAQ one week rate of change,lows often cluster in the period January 19-21,which includes the possibility of a 3rd week of the month"cursed Thursday".This time series analysis projects a rally from the January 19-21 lows {which are caused by selling due to delayed tax considerations from the previous year after the capture of seasonal bonus monies from the start of the new year}.

Bearish in the longer term are the recent series of high put/call ratios,which were followed by a 5 day series of only marginally basing days,and the beginning Tuesday of what may be another series of topping ratios which likely will culminate in a selloff after the present rally loses steam.Also worrisome longer term is the rise in bullish advisory sentiment,and the recent move in the option premium ratio from 1.52 to .67,setting up for the next rally top to be at a lower OPR level than the previous premium level,which would be a bearish non confirmation.{But that would require a rally to get that bearish nonconfirmation.}

Meanwhile,Microsoft came out with earnings above estimates,which may help techs short term.See the discussion of our other short term indicators in the following paragraph.

Starting with the Sentiment chart we see that pessimism is dipping into the buy calls go long territory. EquityCP shows an oversold price stochastic and favorable C/P ratio to support more upward movement once the post expiration activity is over. The latter can have surprises in both directions in the week following expiration. Seems like the market is always at a moment of truth, but it is never more true than when the McOsc is flirting with the zero line as it is at the moment. A strong cross above zero can re-energize the bull fans. A failure here and downturn gives the bears renewed hope. AMOSS and MOSS are also dead center neutral and a continued upward zone crossing is a bullish event. CODI is not at an extreme so it isn't of much help at this stage. VIX is retreating from an elevated level and this coincides with price uptrends. All the components of Momentum Cycles are in neutral zones with trends that support higher index prices. So, the conclusion for Wednesday is the same as for Tuesday, the overall view is one of a neutral level with conditions supporting further upside price action. The March S and P futures is at a critical level of 1260. A move above this portends a trip back to the previous high at a minimum. NHNL percent is above zero and increasing, also in agreement with a positive price trend.

Here are more charts:

ADHL CHART. CONE CHART. DBCC CHART. INDU CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX PIVOT CHART. OEYBA CHART. OEYBC CHART. OEYNC CHART. RSISTO CHART. SUPERT CHART.

MomentumCycles commentary for the open of Thursday,January 21,1999:

Long time readers of MomentumCycles know that Wednesday is considered "W" day for the reason that it tends to have the intraday high of the week, Up, Down, Up, Down, Up. They also know that Thursdays have the highest probability, 70%, of VIX closing in the high end of its daily range. This also means Thursdays are down days and selling comes in Wednesday afternoon, thus the late day fade Wednesday,January 20. At least that is one cyclical reason.For that reason,we reminded readers before Wednesday's action,that while momentum of price looked good for rally continuation short term into part{or all} of Wednesday,Thursday could well be "cursed Thursday",being the 3rd Thursday of the month,which is normally a weak part of the monthly cycle.

NHNL is still looking pretty good and ADHL is still flat yet improving. AMOSS is still dead center neutral as is CODI. McOsc is having big trouble getting up to the zero line and overall may have just formed the left shoulder of a complex bottom pattern. If that is the case, then the INDU is destined to retest the 50 day average. Note that its OBV is not rallying and the bands are pinching. Even the OEX regression channel on the CODI chart is an excellent view of how these outer bands and center lines act as support and resistance. It has become common practice to expect price to work around these levels before establishing trend. OEX Fib Ret has another view of overhead resistance. Previous highs are expected to be probed for price facilitation. INDU is just about where it should be according to the SuperT indicator. The spoilsport in the picture is the Breadth. Moon Tide has closed below the hourly, daily and two day trendlines. Price indexes will not advance much unless the Tide is still rising. Option sentiment is giving a mixed picture. Equity C/P is bordering on the Sell level, but needs to pivot downward first. It will move up in concert with price and then turn down before price. So it is premature for a down red arrow, but justifies a yellow caution. Sentiment on the call side was short lived and is now back in the Buy Puts area.It could extend further before pivoting downward. Perhaps we will see the Equity C/P turn down and then the Sentiment bottom and turn before we get a decent continuation of the uptrend. Let's not jump the gun here as a larger correction/consolidation is in order.

XAU momentum of price of 7 versus 35 days,and 5 versus 21 days,is falling.STO 15 and 20 are not in the oversold zone,although shorter term STO is.Failure was seen at the recent test of the declining multi month trendline.

Here are more charts:

CONE CHART. CYCLE CHART. DSP9H CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX PIVOT CHART. OEYBA CHART. OEYBC CHART. OEYNC CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, January 22,1999:

Recent rapid oscillations in the equity put call ratio and the option premium ratio have been showing unusual changes in short term investor sentiment. Fear of missing out on a continuing rally is now battling suspicion of the dangers of excessive speculation.Money flow out of mutual funds in January{normally a month that sees very strong inflows}may have gone into Internet issues and IPOs that have recently seen yearly % moves in days.But those Internet issues can move more rapidly down than up ,unlike the senior issues of the Dow,perhaps explaining the DJIA's relative strength Thursday versus the IIX.The two classes of equities have different investor profiles.Normally continued high relative strength in NASDAQ versus the DJIA shows investor and speculator confidence,and a strong DJIA versus the NASDAQ shows fear.Several days of this type of action does not make a trend, but it is worth monitoring if it continues.

The premium ratio topped at 1.52 during the January rally and recently has been oscillating between the .60's,.70's and .80's,even at recent all time highs in NASDAQ.High volatility in the premium ratio at these levels often leads to declines,which made us speculate Tuesday and Wednesday that "cursed Thursday" was highly probable{in addition to its placement as the 3rd Thursday of the month}.In fact, a day trade from the Thursday morning S and P or NASDAQ highs to the afternoon lows would have been quite profitable.

Positive money flow from pension reinvestment normally starts mid-week in the last week of January,and that would be supported by basing action in the premium ratio and put call ratio in the next several days,if it can bring out enough fear.We had excessive confidence for two days {topping ratios} on 1/19 and 1/20,and Thursday's trading was not quite at basing levels.So the requisite consecutive days of put /call basing levels using that particular method have not yet occurred for a perfect long setup.One of the best series of basing levels was seen October 8,1998 with 7 consecutive basing days.The rally that followed was memorable.

On to Thursday's internals...

Sentiment and EquityCP are still in the put mode. The OEX mechanical call trades posted lasted week timed out today and exited. It behooves any oex trader to use some kind of intraday stop and not wait for and end of day signal.Thursday early a.m. still had relatively good prices. Moontide is still going out and probably near a trough in the next few days preparing for the February call trade. Intermediate term system ADHL is still in a Flat or Short depending on your style and it is bordering on generating another Buy signal if things don't deteriorate further as all three components are in buy zones. There is a time filter that prevents entry too soon after a recent sell signal. SuperT has generated some decent short term buy signals in the past and is in the process of developing another one as the SuperT approaches the green alert line. Momentum Cycles, AMOSS, and CODI are all still neutral looking. Even the Projection Oscillator on the Cone chart is in decision mode.

Here are more charts:

FIBRET CHART. INDU CHART. MCOSC CHART. NHNL CHART. NYA CHART. OEX FIB CHART. OEX PIVOT CHART. OEYBB CHART. OEYBC CHART. OEYBT CHART. OEYNC CHART. RSISTO CHART. VIX CHART. XAU CHART.