MomentumCycles

MomentumCycles commentary for the open of Thursday,January 6,2000:

Coming into Wednesday we were expecting the OEX to drop to the lower green cone around 750 where a call trade could be entered, and then exited at the upper green cone near the Classical pivot. There are times when the e mini is better suited for trading, and this is one when implied volatility, VIXpnf, is in the 30ish and above area. Tomorrow being T for "Terrible Thursday", there are several indications that the OEX will test the lower green cone again at 754, or in worst case at 749. Elliot Wave on the OEXEW 30 minute chart suggests that the OEX is in wave 4 and a retest of the Wednesday low would make it wave 5. Then we should get a nice call trade into the ABC bear corrective wave. SuperT bounced at the Corrective level. CODI OEX generated a Buy Alert as did the BR_Momentum. Volatility chart continues to develop the Winter Consolidation as it did in early 1999. This is a very real possibility as the fear of interest rate rises keeps the shrewd investment money on the sidelines for a better buy. PutVolume indicator is close to tagging the signal line. One more good washout would do it. OEXnsync is not really oversold yet and suggests a bottoming around 750. Ideally we would get a close below the Nsync lower band and then a close back inside. That would take at least two more days.

A while back,when FNM first violated previous support,we pointed out that interest rate related instruments were oversold,but that longer term measures were showing confirmations of the lows-that is,weakness would continue.On December 30,30 year T bonds showed rates at 6.426.On January 5,rates hit 6.631.

We also noted that XAU would decline from the upper band,due to numerous short term nonconfirmations.Longer term measures,such as XAU on-balance volume, are still showing slow,patient smart money accumulation.

All the FNM and XAU charts are seen on the sidebar to the left.

MomentumCycles commentary for the open of Friday, January 7, 2000:

Thursday looked pretty good from a breadth standpoint, as the FlowRate and ADV/DECL were both positive. Thus, the McOsc turned up near the zero line. VIXpnf remains on a buy from its downturn at 30. CODI OEX is hinting at BuyAlert status. CONE projection oscillator is bottoming, or at least beginning to move sideways. Thursday was another green cone day, closing indeterminately on the classical pivot for Friday. This means the bull and bear tug of war is pretty much in balance. In order for the first week to end positively, we would have to have a day like Tuesday only in the up direction. We still have a bearish-looking upside down flagpole on the OEX 30 minute chart. INDU ran into resistance at a Midas line as SuperT oscillator rose for another day. Cumulative SuperT appears to be making a double bottom, and it could break above the long white trendline. This would suggest the market is broadening out. This could lead to a broad-based rally. Any positive seasonality has been dwarfed by early year selling. It could be that the fund managers are waiting for price to stop going down and for breadth to improve before committing new cash. It appears as if we are there now, and some call options are in order (purchased at lower cone entries, preferably). The rumor is that big bonus money is late this year and should strike any day now.

Put Volume chart came close to tagging the red signal line. This shows that a bottom is in place. Is it close enough? I just don't know. Sentiment chart has the 3INDX turning up, but the SMI and the LineDot system haven't turned yet. Cautious types will wait on longs here.

FNM was so far below the lower 3.5% band that it returned to tag the lower band.XAU didn't move much.On balance volume of FNM shows selling since the 74 high,so a bounce from 55.5 to 59 is to be expected.Similarly,T bonds were/are short term oversold,but longer term seem to be under distribution.XAU on balance volume,however, hints at longer term accumulation.Charts are to the left on the sidebar.

MomentumCycles commentary for the open of Monday, January 10, 2000:

My college English teacher called it St. Vitus's dance. In market terminology it is a frenzied but synchronized tape such as we had on Friday. Following the VIXpnf Buy signal on 01/05 the early morning dips to the green Cones were to be bought. CODIoex also gave a valid buy signal a few days in advance. Friday was up from "out of the gate", so you had to take what was offered with no chance of an entry at a lower Cone. Indu was up, AdvDecl was up, FlowRate was up. Note how close the INDU60 came to making a Friday close above the previous week's close. As we said last weekend, there would be a strong effort to close the week on a positive note just to satisfy the "New Year- First Week up-all is well" cliche. With that now behind us, they have got to do it for the month. Maybe it won't be without some weakness in between. The broader NYA, OEX, and SPX did not perform as spectacularly, but the INDU is what makes the evening news. Short term, the advice was to buy calls on Friday for a run-up comparable to the run-down earlier in the week to counter the profit taking. UC payroll was late {thus pension money reinvestment} and bonus money was late. We kept saying to expect some positive seasonality, and with the Flow Rate increasingly positive and AdvDecl positive we had the makings of a great call trade. SuperT aided us again with its bounce off the Correction level a few days ago, and now looks a bit on the cautious side. The Modified Option Strategy Spectrum, MOSS, gave us an Extreme Oversold reading three days ago. Seasonality officially ended on Friday, but since it got a late start it could run into the early part of next week. We would like to see the 5 day advancing volume peak and the price oscillators a bit more overbought before considering the Put side.

Now that 30 year T bonds have been given the last rites {and their correlates such as FNM} it wouldn't be surprising to see more upside action,perhaps even to the mid or upper band in declining FNM.The 21 day intraday volume % chart in FNM on the sidebar to the left shows less short term selling pressure,as well as the STOCHASTIC 20 crossover above 20.Longer term,on balance volume is not yet showing positive divergence with price.

XAU and its component HL appear to be under longer term accumulation.Notice how the XAU accumulation chart made a slight dipping formation similar to the present one before the spike to 92 occurred.STOCHASTIC 20 is neither overbought or oversold.Price oscillator,again found at the sidebar to the left,seems to still be rising longer term from the profit taking seen from the 92 high.

Momentumcycles commentary for the open of Tuesday, January 11, 2000:

Monday had a rather anemic AdvDecl and FlowRate in comparison to Friday. From previous commentaries you know that the strongest seasonality occurs in the last four days of the month and the first few days of the following month. Years ago it was the last few days of the month and the first five of the following month. See the "Stock Traders Almanac" for the reason for the shift, i.e., front running by professionals and fund managers' tactics. This January we figure that the seasonality was delayed because of YEAR 2000 profit taking, delayed bonus distribution, and the UC payroll pension fund reinvestment shifted into the first Wednesday of 2000. So, from looking at the AdvDecl and Flow Rate charts it looks like breadth peaked last week. A call bias was recommended last week, and now that the Cone projection oscillator is overbought, issue and volume breadth are weakening, and INDU60 is on a sell, I would be inclined to look for a short term Put entry on Tuesday. Of course, short term to me is a bounce between the cones. For Tuesday I would like to see a failing rally in the first thirty minutes taking us to the green cone above the pivot to about 796.34 or 794.16,which is Monday's high. OEX30 shows trendline resistance at the 796.34 and 800 area so be careful here. We may have to make a couple of entries. We would look for the AdvDecl and FlowRate to be negative or weakening. Then we would look for an exit at the lower green cones or lower red cones {if it occurs}. We might get lucky and get a lower grey cone exit, but that might have to wait for Thursday. AMOSS is overbought and MOSS is nearing overbought. Implied Volatiltiy as measured by VIXpnf is almost to the Sell Alert Zone and it could drop into it in further upside action. SuperT is cautioning about short term overbought. The level alone is not enough for a sell,so be aware that a reversal in VIX is the signal. Anticipating a turn in price is risky business, and actually CODIoex is not at the sell alert by any means. So what we are thinking is that there might be another bout of post 1999 profit taking that pushes CODIoex higher into the Buy Alert area and by this Friday close we might have a good buy signal going into expiration.

EquityCP and Sentiment are back at the Put Alert levels. The 3INDX and SMI trend indicators have moved up to the zero lines. In bearish modes this line would act as resistance. Also note that the high on the OEX hit the underside of the channel lines on these two charts as well as on the CODIoex. These channel lines also act as resistance. The PutVol indicator is giving us a short term overbought indication with its flirtation on the "Shallow Threshold" line. A tag of the Deep Threshold would give us a very good Buy signal. The cyan BRDot line 775.79 will be the PLDot yellow dot for the next day. That is where support is first expected to be found if there is any selling. That is a 15 OEX point drop from Monday's close and is also at the lower Red Cone on the CONE chart.

Well,it looks as if this time we were early in calling for an FNM/T bond rally.Bonds lost .86% today,and FNM was off as well.Perhaps a move to the upper interest rate channel is in the cards,which implies a retest of the recent FNM lows.

XAU made a new OBV low for this move.We still feel an eventual move to the upper band is likely;again,XAU bearishness is rampant.