MomentumCycles

MomentumCycles commentary for the open of Monday, October 25, 1999:

Breadth Down Trend Exhaustion is still stronger than the uptrend Exhaustion. OEX Projection Oscillator is running in overbought and the MOSS and AMOSS are now near {and in} the Overbought zones. OEX is near channel and trendline resistance on the Cone Chart. We do enter the positive seasonality next week and it seems like we entered it on Friday. As you know, buy programs hit as early as five days before the UC payroll indicator strikes(which is Friday of next week). Then we get a few days of back and fill, and then another push up. The 5 day advancing volume crossed above the 5 day declining volume. That chart also illustrates the trendline resistance. CODI is firmly in the Sell Alert zone, as is the Momentum Oscillator. This is one of those times where the oscillators may be deceptive as price continues in an uptrend. NYA on the McOsc chart ran into resistance also as the McOsc just crossed over the zero line. If the NYA and the OEX migrate above those down trend lines, then we might just have an explosive situation on our hands. Because of the nature of the game the odds are the chart busters will succeed in moving the indexes above those trendlines next week. Experience says we will see some consolidation early next week, {see the position of RSI 5 period of the DJIA } and then late in the week the upward push will resume. Generally puts are not a successful venture in the last week of the month. VIX point and figure is getting down there near the sell alert level. If the current trends continue than the indicators will be the position of maximum overbought in the first week of November, and we would be set up for one heck of a sell mode.

Option premium ratio service is targeting SPX 1281 or less at October 29th and 1275 or less at November 5th close. This goes against the positive money flow seasonality this time of month.

Let us contrast the recent action of XAU with its mirror inversion {the DJIA}.At the recent XAU/HL top of 92 and 3 3/8 respectively,STOCHASTIC 20 of the XAU was near 100.DJIA was flirting with successive lows,on basing STOCHASTIC readings.Now XAU STOCHASTIC 20 is at 15,with momentum still falling.Price of the index is 72.34.Typically XAU/HL rallies will see basing below the 20 level,and then a pattern of closes at the highs of the day on rising volume.We are holding HL as an XAU component from 2.125-2.HL closed at 2.4375.This position is treated as a perpetual call on the entire sector.Another short covering rally in the metals sector is still possible.

This editorial gives some interesting discussion of the current short and long positions of hedgers.We do not endorse all the views of the writer,of course.

Here are the charts:

ADVANCE/DECLINE CHART. CODINDX CHART. CYCLE CHART. EODCV CHART. EQUITYCP CHART. INDU CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. PUTVOL CHART. RISK CHART. RSI5 CHART. SENTIMNENT CHART. SUPERT CHART. VIX CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Tuesday, October 26, 1999:

This XAU CHART shows the current STOCHASTIC 20 position of the XAU index,of which we are holding long the component HL from near 2$.Close was $2 1/2.Characteristic of XAU STOCHASTIC position is basing under 20,a reversal above 20 on increasing volume,and a change from dropping to rising momentum.STOCHASTIC 20 current reading is 15.A trip to the lower trading band of the XAU is possible,but we are already oversold,and basing for the next rally.

Day one of consolidation. Monday ended in a weak fashion with PREM dropping and TICK in negative territory. Profit taking and seasonal tax loss selling continues as evidenced by the Trend Exhaustion Index. What we are looking for here is a drop in the Red TEI and then a lower high, and then another drop to lower before the seasonal breadth weakness is finished. The Green (up) TEI may not rise immediately as there is a "neutral" zone between the oversold and overbought zones and the Y2K irrational fear will keep the Green TEI under pressure. Rising TYX rates is enough to keep the pressure on. This week is filled with enough economic reports to make any market sick and waiting for the doctor. For a printable economic calendar go to http://www.dismal.com/toolbox/msnbc/calendar.stm.

EquityCP and Sentiment in terms of option volume and OI is not helping this week either. Basically price is extended in time and profits need to be taken to feed the machine that lives on them in the short term. Longer term the RISK Monitor is working on the two point autumn low. End of Day Cumulative Volume is a fearsome sight as it relentlessly trends downward with brief bear morket rallies. INDU and EODCV RSI could only rally to the 50 and 40% levels on this last gasp rally. There are those who are waiting for a capitulation selloff before committing serious money. They may get it yet later in November after the beginning of month seasonal money flow pays up for stocks. Cliche is "in by Thanksgiving, out by Easter". Maybe it will be different this year. Earnings are coming in as expected, but this is also expected to be a peak in the growth rate. We all know how growth rates are factored into stock valuations. It will be interesting to see how the Y2000 forecasts look at year end. EOM seasonality says we should expect a tradeable low this week with profit taking next week. A number of indicators are riding in Sell Alert Mode already, such as OEX CODI and Cone Projection Oscillator. Tuesday has the feel of a fakeout move to 689 OEX and then a drop to 677 or lower. The intraday FlowRate chart is scaled in millions of shares per minute. The volume flow rate trend repeats everyday with heavy volume in the AM, 1 million shares/minute in mid-day, then a rise in volume late in the day. Some Pros only trade the first and last hours because of the momentum given to price with the added volume.

It's a strange market when pokemon-related stocks outperform the S and P 500 by +50%.Look at what's at new highs,and what's not.

Here are the charts:

5 DAY ADVANCING VOLUME CHART. AMOSS CHART. CODI NDX CHART. CV DAILY CHART. CYCLE CHART. EODCV2 CHART. INDU CHART. MCOSC CHART. MONEYFLOW CHART. NYA CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. PROBS CHART. PUTVOL CHART. SPXMA CHART. SUPERT CHART. VIX CHART. VIXPF CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Wednesday, October 27, 1999:

Day two of consolidation, and the Red Down TEI is beginning to stall out at the 0.18 level, and the Up Green TEI is making noises about turning up. Could this be the whisper that seasonality is going to kick in the next few days? If so, then it's time for a hit and run call trade. This flies in the face of all the negative advice and "sell everything" commentary read on the web. It flies in the face of overbought oscillators that the naive think mean sell, but (as has been said here before) this is the time when overbought can become more overbought and an oscillation can become trend, at least temporarily. So, we are looking for CODI to track in the Sell Alert until next week and the OEX Cone Projection Oscillator to track in Overbought until next week. Officially the seasonality does not begin until Friday 10/29, but as in previous months the front running jacks prices up,with the result that the retirement funds pay up for new purchases. What we have seen the last few days is short term profit-taking and inventory buildup for the distribution phase next week. There should be a pretty good put trade following this ramp up period and thereafter going into pre-Thanksgiving days. As this is being written, there is continued pressure on Globex, which is technically justifiable given current data. So much the better for a long entry on Wednesday, Thursday, or Friday. Coming off the last pivot low we have only had two days of consolidation;it may take one {or one and a half} more, so the timing on the call purchase may not be until Thursday. What we are doing here is factoring in the new money flow that jerks the charts around. Holding time may only be a few days. It might even be better to stand aside and wait until next week for the put trade as this so-called seasonality may be met with additional selling into strength, and the indexes may go nowhere. We also have the much talked about changes in the DOW components next week that will do who knows what to prices. INDU dropped back to the yellow line support on the SuperT chart as the composite breadth oscillator pulled back into the correction zone. This is actually good in preparation for a run up next week and continuation of the next leg up from the pivot low. Keep in mind this is playing on the odds of seasonality and is subject to all the economic reports and FOMC, etc. There are some money managers, though, who buy when cash comes in the till and ignore market timing altogether. As long as they perceive value then they buy. The wild cards here are the DOW 5 and 10 trusts that must now liquidate the stocks leaving the DOW, and buy those that are entering. Perhaps they will sell first and then buy;we guess they would have to. Since the transactions occur at month changeovers, this Friday and Monday could form quite a discontinuity in the indices with heavy volume in selected stocks.

A few months back we posted an NSync long term chart of the DJIndustrials. Now that we have a bit more data we see that both the weekly and the daily NSync have hit the Buy Alert level green line. The monthly has definitely turned down and the formation looks a lot like that of the same period in 1998 with a double bottom on the daily and weekly beginning to rally. Seasonal cycles continue to play out.

Looking at the XAU chart below,we see STOCHASTIC 20 now near zero.Quite a trip from 100.It is difficult to avoid bullish media noise at STOCHASTIC 20 near 100 {XAU 92/HL 3 3/8},just as it is difficult to avoid bearish media noise at STOCHASTIC 20 near zero {present XAU 67.71/HL 2 7/16}.Momentum is still falling.Price will typically base;advance above the 20 level-then momentum will turn up.We can buy other metals issues on the break above 20,or add to HL.Price may be higher on the breakout than presently,or we may get to the lower 14% band.We still hold HL as a core sector hold.

Here are the charts:

5 DAY ADVANCING VOLUME CHART. ADVANCE/DECLINE CHART. CODI NDX CHART. CYCLE CHART. EODCV CHART. EODCV2 CHART. EQUITYCP CHART. INDU CHART. MCOSC CHART. MOSS CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. PUTVOL CHART. RISK CHART. SENTIMENT CHART. SPXMA CHART. VIX CHART. VIXPF CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, October 28, 1999:

Now you know what it means for seasonality to kick in. The time target stated in Wednesday's commentary was one to one and a half days, and to repeat, it flies in the face of most visible technical evidence and sentiment. Guess the movers and shakers decided on one day to get money managers and individuals thinking about buying equities{ before they spend their money on something like a fixed income piece of paper}. Nothing aids success like success, and nothing sells stocks more than a rising stock.Its called the herd instinct and it is the fear of missing the boat. You,as more sophisticated market readers than the general public,will want to leave the herd before it goes over the cliff or enters the slaughterhouse. There is still formidable overhead resistance to get through. It always helps to have brokerage house upgrades to boost key stocks in key sectors. Its part of the promotion game that also occurs a few days before expirations. Now it will be a game of "squeeze the shorts" and this will chase price upwards for the next 4 or 5 trading days.The pros have been building inventory to distribute to mom and pop retirement funds. If you saw the BKX multi- year chart with cumulative volume on CNBsee today, then that chart must have rung a bell if you have been following the MomentumCycles Risk Monitor.The commentary was similar in regards to pattern and risk on the intermediate to long term basis. Such fun. The near-the-money(now in-the-money) November 680 call OEYKP had a low of 13 3/4 and high of 19 1/4. VIX pnf cooperated with a nice drop. TYX yields cooperated with a bullseye drop to the support lines at 6.3. You also now know why overbought oscillators are death to newbies {and even some oldies} when those traders are not anticipating a trend due to something not measured in the data stream such as seasonal money flow. A calendar indicator or mental note is needed for this. This is a risky time with CODI OEX in the whipsaw zone. We expect CODI to drop back down to the Sell Alert zone over the next few trading days. In anticipating and picking an entry point for buying calls, it is best to do it on OEX weakness, i.e. such as at the green cones for today. The dips are bought going into positive seasonality. We came into today expecting more consolidation, {read call buying opportunity} and it was provided at the lower green cone as it so often happens. Probability cones are posted each night for the next day.

A High Tech conference in San Diego, CA, runs between 11/06 and 11/10. 2500 security analysts and portfolio managers meet privately with 300 company managements to talk about the plans for 2000 and beyond. This meeting often starts or intensifies a major tech rally that continues into January. Another significant event as October leaves us is the release of mutual fund distribution money that finds its way back into stocks through reinvestment programs. If we get further weakness in mid-November while fear of the 11/16 FOMC meeting adds to an already volatile expiration week, it could play into the hands of the intermediate to long term investors.

XAU/HL STOCHASTIC 20 is in the cellar near zero where rallies are born.Momentum of price of 7 versus 35 days is still dropping.Price is in between the 50 day MA and the lower 14% band.We are patiently long HL...we predicted and discussed the decline from the XAU 92 top at STOCHASTIC 20 at 100 to today's current oversold reading.Can HL drop to our buy point of slightly over 2$? Sure..its possible.Readers were advised that short term profit taking at 3$ and change was O.K.However,we wanted to keep a perpetual call on the sector.The short position in the underlying commodity is still there,but the leasing game and risk free short is no longer a sure thing.That's the difference.

Here are the charts:

ADVANCE/DECLINE CHART. CODI NDX CHART. THURSDAY'S CONE CHART. CYCLE CHART. EODCV CHART. INDU CHART. MCOSC CHART. MOSS CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. PUTVOL CHART. SPXMA CHART. SUPERT CHART. TEI CHART. VIXPF CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, October 29, 1999:

Yes, the UC payroll indicator struck and yes seasonality kicked in to the degree that it could be felt. Nothing more really needs to be said as money speaks for itself. Sometimes it ignores everything the media feeds it and the only worry is not being committed to an investment or a trade.

The fear of missing the bus puts panic in the hearts of money managers. Of course we are only good for as long as the trend is good and are always looking for the exit. Life exists when trend exists. Since seasonality lasts into the first three to five days of the next month, its a bit premature to put a hand on the door knob. TEI gave us clues a few days back that a call entry was at hand. The NOV 680 call which was out of the money at time of Wednesday's update went into the money on Wednesday and continued up on Thursday;in fact it gapped up on Thursday on the open. It was suggested that seasonality would do some chart busting this week upon challenging overhead down trend lines. That happened. When the market isn't making news, the bubble vision makes news. Everything that's been focussed on prior to this earnings period has been negative, compounded by the tax loss selling and profit taking period. The signs have been here for months that this year is not much different from previous Sept/Oct periods and the the year end rally has its roots in the lows of October. So, instead of a repeat crash of Oct 29,1929, the market serves a crash up on the anniversary {better make that the anniversary eve as tomorrow is yet to make history}. Thursday's Cone laid out the crash up target. Friday's Cone lays out the probability zones along with an overbought Projection oscillator. OEXtprz and OEXtprz 30 minutes show the OEX has met its probable time and price swing target zones. CODI has tripped back down to the Sell Alert Line, but as we all know it will do this during positive seasonality. This weekend starts the major investment conference season of the year with the 8,000 strong audience attending in San Francisco, followed by the 2000 at the high tech conference in San Diego on 11/06. The stocks recommended by certain influential newsletter writers soared today in advance. Mutual fund reinvestments are cut loose on the unloved and loved stocks that have been under pressure for a year or more. Thursday ended with a strong TICK and PREM with low VIX and low TYX. If you are infected with contraryitis and try to short every time the market pauses, it would be best to take some time off and enjoy the fall weather. Buy and holders must be beginning to feel vindicated, but wait, as there are more than a few who still want to get out even. As this is being written, the S and P futures are struggling to hold their gains on globex. It looks so tenuous that the weight of little moonshine could send it sharply lower.

XAU is basing at cellar STOCHASTIC 20 readings;momentum is still dropping.Price is oversold.We are holding HL;close was 2 9/16.

ADVANCE/DECLINE CHART. CODI NDX CHART. CYCLE CHART. EODCV CHART. EQUITYCP CHART. FLOWRATE CHART. INDU CHART. MCOSC CHART. MOSS CHART. NHNL CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. RISK CHART. SUPERT CHART. VIXPF CHART. VOLATILITY CHART. XAU CHART.