MomentumCycles

MomentumCycles Commentary for the open of Tuesday, October 13, 1998:

The buy the pre-ex Friday close ,sell into the first sign of strength ex week worked again,in spite of the Friday close being the tail end of an already impressive Thursday/Friday rally in the OEX and NASDAQ.Using a trailing 1.50 profit stop{often referred to here at this page},coincident with multiple clustered +900 ticks Monday a.m.,exits at about a 10 point profit on a representative OEX call on this trade would have been seen.This trade is consistently profitable,often even in bear trends.

So,we hope you sold your Pre E week OEX or NASDAQ calls Monday at R2 on the Classical Pivots and the Red cone on the CONE chart. Projection oscillator is overbought. Market is back into resistance after a large runup from Thursday lows. Best to pocket your winnings and take the rest of the week off. {Just kidding of course!} PT is still indicating a test of the lows 7 trading days out. Keep an eye on the new CODI2 plot. It is a bit clearer than old CODI. It is inverted from Old CODI so the buys are from a turn up from a low and sells a turn down from a high, a bit more logical, in addition to being more precise in timing. XAU made some phenomenal movement on Monday and respected our predetermined support level. Most impressive to say the least.Short term traders had a chance to take profits in XAU mid to late last week near the pre announced target of 86,again at 87+,the following days at 83+,then at 82.5.XAU rally may resume on a return of fear. AstroCast has a slight OEX upward bias into the end of the week where we might get another trade off to take advantage of the coming crash. This last trade shows that you have to be in a day in advance as the big jocks are jamming Globex and not giving you a chance to get in on the day of the big move. Tuesday should be weaker than Monday. If you did not bail on the E week trade on Monday, then do so if you have a chance on any rally attempt on Tuesday.CODI shows near term long risk very high here,unless a return to uptrend/bull mode is in the works, and seasonality and tax selling lowers that probability.We could stretch to 8150,but lets leave some $ for late comers.

No short term trade is currently recommended for the 30 year T bond.Want to see if stop running is attempted slightly into the descending channel of yields above 5.15-5.2.

Here are some charts:

ADHL CHART, DJIA FIB CHART, INDU CHART, MCOSC CHART, NHNL CHART, NYA CHART, OEXJN CHART, OEXWM CHART, RSISTO CHART, SUPERT CHART, XAU CHART, OEX FIB CHART, S AND P 500 FUTURES FIB CHART, OEX PIVOT CHART, S AND P 500 FUTURES PIVOT CHART DJWM ASTROCAST

MomentumCycles Commentary of the open of Wednesday, October 14, 1998:

We had advised selling OEX long calls into any rally for Tuesday,after the Friday /Monday pre-ex /ex trade realized a quick trip into short term overbought and Codi entered deeper into the sell area.A 1.50 trailing profit stop would have gotten you out near Monday's a.m. high at the +900 multiple tick cluster.Late sellers had a chance at 10.30 and 10.45 Tuesday at OEX 492,and 491.70 at 12.40.Close was 490.2,but down 2.37% on NASDAQ,after a 1535 high early a.m.Expiration week gyrations are not providing a clear signal for Wednesday. Monday's exit was fortuitous. Stand aside for the time being.

XAU exits were advised last week at the target of 86,at 87.5,83, and 82.5,subsequently.Today's close was 73.59,at the 21 day moving average.A return to FEAR is needed to spark this index again.A close above the previous double top is needed to reach the next target in the 90's.

30 year T bonds tested 51.5-52, the intersection of support in price on the multimonth trendline last week,and rallied to resistance at under 5%,before settling at 51.06.No trade is currently recommended for T bonds.

Lot of hedge fund and derivative positions yet to be unwound in the yen/dollar /bond carry trade.Japanese need trillions of yen to bail out the banks-may add to dollar weakness longer term.

FNM testing 63.5-65 resistance,and failure was seen before above 65.High is 68.Selling pressure appears in this area.

Here are some of the charts we look at daily:NHNL CONE ADHL INDU OEX fib Super Timer NYA DSP8Z fib Astrocast INDU fib INDU win midas projected price support/resistance{looking for decline near term,see chart} MCOSC OEX pivot chart DSP8Z pivot chart

MomentumCycles Commentary for the open of Thursday, October 15, 1998:

Two days remain until OEX expiration. The last three days have seen the Classical pivot line zero in on the 490 strike. This may or may not have relevance, but for the moment let's watch the 490 put and call options for fun and see how things play out on Friday. What we are presented with is the energy point as determined by the dynamic time price cycles and the Astrocast chart. A few other cycle services point to the 16th and 19th as days of more than normal significance. Other charts give us the following technical picture. First the ADHL, which is our intermediate to long term tool, shows the new highs are in sell mode, the new lows are breathing a sigh of relief, the DJIA RSI has recovered some. So the ADHL is not in immediate danger of generating a sell unless the bottom drops out immediately and the RSI follows. The RSI Stochastic chart is overbought. The Cone projection oscillator is overbought. The Super T has been rising and is now looking at 7500 in seven days, which again is no disaster, but lower than current levels. NHNL is still running below zero percent which means the new high new low relationship is in bear mode. INDU chart with on balance volume shows price in a sideways channel and the OBV in a slight down channel, thus the weight of evidence here is prices should continue to work their way lower unless the breadth components become more positive. It is hard to conceive of this happening in October because of the historical bias. One cliche says in by Thanksgiving, out by Easter which from an annual perspective puts us in a time frame where there should be a decent tradeable low put in. In the more immediate time frame the weak breadth numbers suggest looking for a put entry point at the upper side of the current sideways channel. That might occur on Friday at the OEX expiration unless there is some front running of the cycle turning point mentioned above and participants decide to exit on Thursday and Friday. Astrocast suggests slowing of upside momentum over the next two days. CODI is in the Sell Alert zone trending sideways whereas CODI2 is trending up in buy mode. The actual point of transition from Buy to Sell should be identified by a turndown of CODI 2 even with CODI 1 in the Sell zone.

Here are some charts:

CODI CHART. DJIA FIB CHART. S AND P 500 FUTURES FIB CHART. OEX FIB CHART. S AND P 500 FUTURES PIVOT CHART. INDU CHART. MCOSC CHART. NYA CHART. XAU CHART. XAU DAILY CHART.

MomentumCycles for the open of Friday, October 16, 1998:

CODI, RSISTO, panic short covering prior to expiration,and a push above the breakdown point of 8000-8150 has moved us to extreme overbought.The FED plans these interventions well,announcing the rate decrease right at the previous breakdown point,where the shorts were most vulnerable.If this is a new bull leg from the October 8th low,the retracements seen in post-ex week will be acccompanied by only marginally negative breadth after mid-week,which is typically where weakness accelerates.A return to overwhelmingly poor breadth will signal the return of fear.

No trades on XAU or 30 year T bonds are currently recommended.

So where do we stand after Thursday's action? The expectations were for an upward bias into the end of the week, but because of the convergence of the dynamic price time cycles we preferred to let them play out while standing on the sidelines. {The pre-ex/early ex week trade on OEX calls closed out Monday/Tuesday was almost a sure thing due to its highly reliable cyclic nature, and that trade we were glad to play.} E week has enough whipsaws as it is even though the bias is up. VIX has been running quite high making trades rather risky, of course they always are. But on top of the the E week bias we have had deteriorating breadth numbers. So the plan was to wait until the end of the week and hopefully price would be at the upper side of the channel(s) it has been working. At that point the plan was to put on a put trade to capitalize on the Astrocast projection for a down direction into the end of the month. Nothing has really changed after Thursday, except the valuation comparison between interest rates and yields which has become marginally more favorable for stocks. The net effect is the downside won't be as extreme and would seem to make 7400 a rather firm floor. PT has been working higher and is now at 7800, up from a low of 7200. Seven days haven't passed since that PT low yet, but a more likely scenario would be a cycle mode between the yellow and magenta lines on the SuperT chart. Yesterday it looked like the OEX was zeroing in on 490 strike and we looked at the 490 put and call. Today's close was 514.18 so we have a "companion" set of the 515 put and call. The 515 call OEWJC was a lottery ticket type of action from .06 to 4.00 which also corresponded to a "crash up" grey cone type day, see Thursday's Cone chart. Here is Friday's cone chart. These cones really do play the probabilities for support and resistance. Of course we are not recommending October options here, just using them as an illustration of the expiration week dynamics. Thursday looked like Expiration came a day early and exceeded our expectations for an entry price on the puts(no entry yet). The 50 day simple average on the INDU chart provided initial resistance early in the day and then the interest rate drops gave it enough power to blast up through for a close above it. Conventional analysis would say it should provide support, however the On Balance Bolume is still lagging the index. CODI 2 is now in the Sell Alert zone along with CODI 1. NHNL is closer to the zero line, but still negative. McOsc 10% is back up to the zero line where there was a good put trade previously and the regular McOsc is overbought. Overbought can become more overbought when cycle mode turns into trend mode...just a possibility. OEX projection oscillator has been trending in overbought also. The NYA has some resistance at 522.99 where an OEX put might be timed for entry, or even at NYA 530. Look for breadth deterioration somewhere between 523 and 530 on the NYA. If we get it then go for an OEX November put a strike out of the money. This may be jumping the gun a bit, but is the continuation of the plan laid out a week ago. Breadth deterioration means advances trending down below 1200 and declines trending above 1200, preferably 1500. At this point is a big question how investors/traders will view the rate decrease. More than one advisor has said, "Don't fight the Fed, and don't fight interest rate trends". The problem with that as of late is that interest rates have been declining and stocks have been down to flat.

Here are some charts:

SUPERT CHART. XAU DAILY CHART. NHNL CHART. ADHL CHART. ASTROCAST CHART. OEXJR CHART. OEXVR CHART. OEWVC CHART. INDU CHART. DJIA FIB CHART. OEX FIB CHART. OEX PIVOT CHART. S AND P 500 FUTURES PIVOT CHART OEX 5 minute chart

MomentumCycles Commentary for the Open of Monday, October 19, 1998:

One of the indicators that we look at is the 5 day rate of change.Reversals often appear at the negative 5-6% or positive 5-6% level.The reading of late August of negative 14% was very unusual.Early September's reversal at +6%,and late September/early October's -5% reversal level were typical.Friday's reading was +6%,overbought short term.Also overbought is MACD,closing tick +404 after a high closing tick Thursday,2 over 1000 upticks Friday,and the distance above the upper 3.5% trading band,which often brings at least a tag intraday of the upper trading band,now some hundreds of DJIA points below.Whether this is the setup for a serious reversal,as ASTROCAST implies,or a pause before a rally resumption is unclear as yet,but we are positioned for either.Multiple price "hits" occur at 8400, 8700,and 9000,if the rally continues in spite of the extreme overbought short term position.At those levels, at least temporary hesitation/resistance would likely occur,with a close much above the level targeting the next.

XAU needs a return of fear to catch fire again.We stood aside after the two previous "catch the breakout trades",with the secondary target of 86 reached and profits taken there.

30 year T bonds still have a bullish bias,with oscillation around 5% normal after major moves to short term support and resistance within one week.We are standing aside here also.

Watch FNM.It closed at 64,close to primary resistance above 65,and not far below the 52 week high above 68.A close above the old highs imply larger legs to the larger big cap rally,and failure here the opposite.

Larger cycles imply a possible price low below the 7400 level is out there within the next 2-4 months,due to the developing credit crunch.The FED action between meetings is symptomatic of an overly late reaction to global instability.

Now on to Friday's trading...

Friday continued the setup we were anticipating for the next put trade. The actual breadth trigger(s) for initiating a short have not occurred yet as the breadth numbers have been improving. Even the NHNL has come up to the zero line after a long spell in negative territory. McOsc has continued to trend up and the 10% component is extended above zero. Neither has turned down or diverged from the index yet. The NYA penetrated the Yellow resistance line on the McOsc chart at 522.94 and closed sligtly below it at 522.24. The Friday commentary advised looking for a peak at 522.99 to 530 to initiate a put trade and there was a caution we might be jumping the gun here. E weeks have motivational dynamics that are reversed the following week so the plan was to enter a put trade at the end of the week in anitcipation of the AstroCast downturn in the following weeks. CODI 1 has made a sell pivot and CODI 2 has pivoted sideways. One more day of flat or reduced breadth would trigger the forementioned trade for conservative types. Speculators would have taken an initial position in the final hour during the OEX push per commentary starting a week ago. With options it is advantageous to enter put trades in periods of strength just prior to reversal. Sometimes it takes multiple entries over a few days to get positioned. With futures it is best to have an order placed so that the market takes you in when it is moving in your desired direction. You definitely don't want to play contrarian with futures, it is suicidal. The November 520 put, OEWWD is the at the money put followed for this trade although a further out of the money put will give a larger percentage gain providing a significant down move develops. If the indexes move up a little further on Monday on weak breadth followthrough, then pick a higher strike accordingly so that you stay within a strike or two of the index. IBM's earnings reported next Tuesday, estimated at 1.53 and whispered at 1.75 might throw a monkey wrench into the put trade temporarily. Just depends how much they are already discounted. Various other indicators are trending in overbought such as the 5 day RSI and Stochastics and the OEX Projection oscillator on the Cone chart. Last week was an example of how buying both the at the money put and call can work out providing you get a multistrike range shift in the index (when doesn't it occur over three days). The OEX mid week was at 490 and the 490 put and call OEXVR, OEXJR were both near 4. At the close on Friday the call was 31 and the put zero. The math is simple, an entry of $800 and an exit of $3100. This trade does not always work, but when it does it makes up for previous failed trades. So if you are religious about putting on the at the money straddle about mid week every month, the annual return can be more than pocket change.

Here are some charts:

XAU DAILY CHART. SUPERT CHART. XAU CHART. OEWKD CHART. INDU CHART. ANOTHER INDU CHART. DJIA FIB CHART. ADHL CHART. OEX FIB CHART. OEXPIVOT CHART. S AND P 500 FUTURES FIB CHART. S AND P 500 FUTURES PIVOT CHART.

MomentumCycles Commentary for the open of Tuesday, October 20, 1998:

We had advised standing aside from XAU until a return of fear.Exits from long positions taken previously on the price breakouts were suggested at 87.5 ,86,83,and 82.5,enabling several opportunities to liquidate .Index closed Monday at 73.26.XAU and to a lesser extent, 30 year T BONDS,are presently a reverse mirror of NASDAQ action.NASDAQ stronger than DJIA reveals increasing confidence,and vice versa. A return to XAU strength will cause OEX program selling.For now,lets stand aside on XAU. Notice for the past year how XAU has oscillated around 70. Prices far below 70 have led to rallies above 70, and prices far above 70 have led to declines below 70. Presently, the close at 73.26 places us too close to the apparent equilibrium level to make an intelligent trade.

Concerning FNM, 65.75, then 68 5/16 is resistance as seen in multiple price hits in the past year.First support is 56 ,then 45-49.A close above the old high at 68 5/16 has bullish implications for the present rally in large caps and FNM in particular. FNM has been a kind of bellweather for the rallies and declines in the present market. It has good institutional support on rallies and is also easily dumped by institutions during periods of fear. So a close above the old high on increasing volume projects higher prices for the rally in general. Failure to exceed the old highs (similar to action seen on Monday) implies a retesting of the lower end of the trading range.At only 4 points below the 52 week high, we'll wait to see how it acts here.

DJIA 8450 is a 50% retracement. The breakdown in the OEX came about 522. Overhead resistance between 8400 and 8700 is significant. The 200 day moving average is 8530. All of these are important in that they would normally provide a barrier to further rally. However, a close much above these important numbers tips the pendulum ,much as in a seesaw.

On to Monday's trading...

It is rather interesting that AstroCast is dropping like a rock just as the indexes are jamming into resistance and the On Balance Volume on the INDU chart is reaching the upper band. If AstroCast does not work out this month it is going to join other misleading indicators and will disappear from this commentary. Both CODI's are on short term Sell Alert now. ADHL remains on its intermediate to long term Buy mode. NHNL is stuck at the Zero line as McOsc and 10%McOsc extend into extremely overbought and are on the verge of generating a trendline crossover sell signal. Most of today's index gains were made on the open and the remainder of the day was total distribution and sell it to the "bag holders". Note how flat the OEX was just above 520 on the OEXWM chart. SuperT is confirming the INDU rise but is still tracking below the index. Should it cross above and lead, then higher prices would be forecast. So far it is still hanging out for lower prices from current levels. NYA is working on the top between 522 and 530 where we wanted to enter the 520 November OEX puts. The OEWWD is underwater a few points, which might be made back on "Turn Around Tuesday". We cautioned on the weekend update about jumping the gun on a short or put position and that breadth had to deteriorate more before such a trade would be less risky for more conservative options traders. It was also suggested that multiple entries might have to be made to catch this trade as it could be slow into the top and then a rather dramatic drop. Entry on Friday when the NYA was peaking was 19 and today the second entry was available between 16 and 17 on the OEWWD. Because November expiration is ways off, the 1.5 stop usually used here is being given more room. Now that all of TV land is looking upward and breathing a sigh of relief that the 1987 anniversary has passed without a hiccup thanks to the Federal medicine, the INDU can get back in sync with its astrological forecast. There is no question that intervention delayed, perhaps saved, the market from a serious drop. The slowing economy should revive the "sell the rally mentality."

Here are some charts:

CONE CHART. DJIA FIB CHART. S AND P 500 FUTURES FIB CHART. OEX FIB CHART. OEX PIVOT CHART. S AND P 500 FUTURES PIVOT CHART. INDU CHART. OEWKD CHART. RSISTO CHART. SUPERT CHART. XAU CHART. XAU DAILY CHART.

MomentumCycles for the open of Wednesday, October 21, 1998:

5 day DJIA rate of change +6%,5 day RSI in screaming overbought,another day of high uptick readings,including a +1386 at 9.50 a.m.,a +1000 at 11.15 a.m.,and NASDAQ relative strength versus DJIA weaker for the first time in many sessions.We are approaching the normal midweek pullback point which often occurs in the Wednesday/Thursday time frame.

XAU will be probably traded on the long side on a breakout past the old highs,or on a fall much below the 70 equilibrium point-presently we are too close to 70 to either short or go long XAU.

30 year T Bonds still cycling back and forth as predicted around the 5% area-price high seen at the 49.55 point in yields,low 50.94,close 5.034.No trade recommended here until extreme overbought or oversold is reached,or a breakout above the 52 week highs is acheived,or a definite violation of the downtrend in yields is seen.

This period of short term price whipsawing and indecision in XAU and 30 year T Bond action is normal after the previous tradeable{trending} action we recently saw in both indexes.

Six to nine days of positive NYSE breadth is one indication of a short term extended market and subject to a tradeable pullback. Just maybe we saw the beginnings of it this afternoon. The sharp short drop occurred too late in the day to affect the breadth numbers very much so end of day traders might wrongly conclude all is well. Resistance as measured by various techniques such as moving averages, price levels proved to be formidable at least for Tuesday and comes at a time Astrocast is projecting a decline into the end of the month. Thus we have been targeting a rollover in the NYA between 520 and 530 to buy OEX puts and made one entry on Friday close around 19 in the OEWWD and again at 16.5 on Monday. The advice has been to move up in strike on a rally so today the OEWWF 530 was the closest put just out of the money when the OEX hit the red line on Tuesday's Cone chart. Here is Wednesday's CONE chart. We thought it might take three entries to get positioned and now have an average of (19+16.5+15.5)/3 = 17. No more entries will be made on this trade. We will look for an exit near the end of the week or early next week. The NYA is being used because it carries more weight in numbers. On an end of day basis we still don't have the breadth deterioration we would like to see and maybe will have to see the index take a spill first to feel comfortable. McOsc and 10% McOsc just don't keep going up like they have. Both CODI's are on Sell Alerts. ADHL will be late to catch a move in either direction because it is an intermediate to long term indicator.

Here are some charts:

DJIA FIB CHART. S AND P 500 FUTURES FIB CHART. OEX FIB CHART. S AND P 500 FUTURES PIVOT CHART. OEX PIVOT CHART. NHNL CHART. OEXWM CHART. RSISTO CHART. SUPERT CHART. XAU CHART. XAU DAILY CHART.

MomentumCycles Commentary for the open of Thursday, October 22, 1998:

Bonds are trying for equilibrium near 5% or slightly above after the tradeable huge move up and down in price recently.A breakout above the old highs in price is tradeable on the long side,and a violation of the longer term downtrend in yields is tradeable on the short side.For now, for short term trades{not core positions}, stand aside.Many short term bond gunslingers are parking money in short term T bills until a clear breakout occurs.

Fear has been recently receding,witness the oscillation up and down near 70 in XAU.Stand aside for now on XAU.

On to OEX action of Wednesday and Thursday...

A couple of repetitive patterns have been occuring this week. Have you noticed how Globex is much quieter at night and is not extended in the morning as it was in previous weeks. It is as though the manipulative forces that were applying an opening bias are standing aside. Perhaps one night Globex will tank so that the opening bias is to the downside now that upside momentum is waning. The other obvious event is how intraday rallies are not holding and a late day selloff occurs. It is common knowledge that the pros play the opening and the close, especially the last hour when volume is thinner and there is more power in fewer bucks. The 200 day average is holding as resistance, oscillators are are overbought, McOsc 10% has generated a sell signal, etc. We continue to hold the three positions in the OEWWD and OEWWF and are looking for a selloff to start on Thursday and to continue into early next week, possibly a low on 10/28.

The Fibonacci charts show the indexes finding multiday resistance at the weekly fibo resistance band as the Ratio Oscillators make a sell crossover. They need to drop out of the overbought zone to put a sell in effect. The NYA found resistance again at 531.26 where puts were advised and this location is on the lower side of the regression channel on the NYA chart. We should see a reversal here. Tuesday is now standing out as a pivot point of strength one, i.e. a lower bar on either side. This has to be triggering some flags on technical screens. ADHL remains on the intermediate term buy, yet the NHNL is rolling over at the zero line where we expected a sell to occur.

Here are some charts.

ADHL CHART. ASTROCAST CHART. CODI CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. OEX FIB CHART. S AND P 500 PIVOT CHART. OEX PIVOT CHART. INDU CHART. ANOTHER INDU CHART. NYA CHART. OEXWM CHART. SUPERT CHART. XAU CHART. XAU DAILY CHART.

MomentumCycles Commentary for the open of Friday, October 23, 1998:

7 in a row for the DJIA -first time since June of 97 without a negative day in this string.10 day moving average of up volume versus down volume at extremes.STO 20 at overbought levels similar to December 97,February 98,and July 98.2 of the three cited occasions brought a tradeable selloff.

XAU below the lower 3.5% trading band with STO 20 oversold at 21,awaiting the return of fear to rally.We are standing aside since the exit from near the top of the previous rally,well above 80.XAU close 70.92.

Bonds down in price on the continuing flow into equities,with short term bond traders parking in 13 week T bills as discussed previously,which were conversely UP 1.03% in price to 38.60{down in yields}.No trade in 30 year T bonds yet recommended.

Technical indicators are being jerked around during the day and "painted" in the final hours. This is what distribution looks like. Sarcastically speaking it resembles being taken to lunch and being left with the tab. Buying into resistance at the 200 day average is like buying at the top during the summer only at lower levels. The perception is deceptive as the real reasons for prices being lower are not readily visible to the novice investor/trader. Lower prices do not a bargain make. So much for sour grapes. Truth of the matter is the OEWWF is back to its entry point and time is running out as the broader index NYA is behaving like the Little Train That Could at the top of the hill. The lower level topping process continues and the short term sell signals are in effect. Intermediate to longer term ADHL is still on a buy. Its signals are late so a money management stop on the index should be used rather than waiting for the new high and new low indicators to generate sells. Thursday's Cone chart shows we had an average range day in the OEX since the range is confined to the green cones. Narrow ranges precede wide ranges. Here is Friday's CONE chart. The OEX projection oscillator is laboring under an overbought trend. Both CODIs are hinting at a sell mode developing while the OEX is making like it is in a trend mode within the regression channel. It needs to drop out of that channel again on decent negative breadth to get some downside of significance. Astrocast chart has some critical times of day added for potential trend changes. The AstroCast and the DJIA are stretching like a rubber band, the further the stretch the more energy in the snapback. Weekly fib resistance is holding as the Ratio oscillators continue their movement in overbought. Bottom line is speculators are sitting with an average of 17 in the OEWWD and OEWWF with a slight loss providing their entries were made per NYA levels (522 to 530) and the Conservative types never got the breadth deterioration this week with declines over 1200 (1500 better) and advances below 1100.

Here are some charts:

DJIA FIB CHART. S AND P 500 FIB CHART. OEX FIB CHART. S AND P 500 PIVOT CHART. OEX PIVOT CHART. INDU CHART. ANOTHER INDU CHART. MCOSC CHART. NHNL CHART. RSISTO CHART. SUPERT CHART. XAU CHART.