MomentumCycles

MomentumCycles commentary for the open of Monday, November 15, 1999:

Long time readers of MomentumCycles know we make heavy use of the Cone support and resistance levels. The advice all week has been to buy puts on rallies at the upper cones and to exit at support, or use a time stop for an exit 30 to 45 minutes before the close. You also know we favor a "Buy the Friday of Pre-Expiration week", and thus a caution about being short Friday was posted at the very top of the commentary for Friday's open. Friday provided opportunity for two great trades. The opening rally on the Midpoint chart provided a nearby put entry such as the OEZWE Nov 725 Put. The selloff took the OEX down to the red cone at 715 where you could have exited and gone long with an at the money such as OEZKC if you wanted in on the "Buy the Friday Close" trade. This facilitated two great trades that don't come along very often. OEX CODI dropped into the extreme Sell Alert zone by the close. End of day cumulative volume has now hit the 200 day moving average. INDU 60 minute NSync has hit the maximum overbought level implying a consolidation/correction is in the near future. Chances are the INDU will challenge the 10861.79 level on Monday, and go into a holding pattern until the FOMC meeting is over and a resolution to interest rate uncertainty is at hand.

Shorting the 30 year T bonds on the weekend commentary and covering on Wednesday into price weakness was perfect timing in view of the subsequent bond rally. Clues for this were given in the FNM oscillator chart;the change in this oscillator often precedes short term T bond reversals.

XAU oscillator and stochastic 20 show an index trying to reach above resistance at the upper band near 71.Momentum is stalled on one oscillator;however,STOCHASTIC 20 did cross above the 20 level-perhaps more basing is still needed. HL, the component that we are holding as a long term call on the sector, closed at 2.25.

Like many NASDAQ stocks {except the limited universe of high cap favorites currently forcing the indices up} QWST is confronting resistance near where the summer breakdown occurred.Many of the non-favored issues are making multiple tries to overcome tax selling and overhead supply.QWST resistance appears to be above 39,so a strong close above this level on increased volume would bring an AOL style run up to next resistance quickly;perhaps to 45.

Here are the charts:

ADVANCE/DECLINE CHART. CODI NDX CHART. FRIDAY'S CONE CHART. MONDAY'S CONE CHART. CYCLE CHART. EQUITYCP CHART. FLOWRATE CHART. FNM S20 CHART. INDU CHART. INDUB CHART. INDU FIBRET CHART. MCOSC CHART. MOSS CHART. NASDAQ CHART. NHNL CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX NSYNC CHART. OEXWM CHART. RISK CHART. SENTIMENT CHART. SUPERT CHART. VIXPF CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Tuesday, November 16, 1999:

There was very little price range to trade with on Monday. Tuesday will undoubtedly be the extreme opposite of Monday. The INDU 60 minute chart illustrates the resistance problem facing the DOW 30. Not only is the INDU near previous highs, its NSync indicator is peaking out. NSync is a composite of 8 indicators. The fact that it is topping out is not sufficient to say that the INDU itself is topping out, as evidenced by a similar situation on the left side of the chart. As we all know oscillators will sometimes lie. CODI is telling us puts are the way to trade at the top of failing rallies, whereas many of the indicators are either neutral or overbought and nothing is indicating oversold. So we will take a little time to present something different that may turn out to be of some use. Gann made a big deal about price making 50% retracements. On short term time frames which occur intraday the truth of this is quite evident. Let us look at price via the GOsc on the TBond and Midpoint charts. At some point we hope to have a system designed around this indicator. You may have heard from various sources to avoid trading early in the day. The GOsc illustrates that range is being established in the hour or so. Beyond that the traders have a bead on potential retracements such as 0.33, 0.5, or 0.667. They also have a notion of range expansions from the previous day. Monday had an extremely narrow range, and we know narrow range days beget large range days. Expiration week is notorious for multiple strike price range shifts. Wouldn't it be a surprise to find out that much of the unwinding occurred last Friday? After all, it sure felt like an expiration Friday. If that is the case then we should not expect too much the remainder of the week. Perhaps only a slight net positive drift upward due to seasonality. Surely the market has discounted anything but a 0.5% increase. Short sellers are trading against the year-end seasonality, so any put trades should be kept to intraday time frames (if Novembers are the tool).Perhaps by the half hour or hour or if the trend permits,and then to use time and dollar profit targets. Personally I have never had much luck trading the next month out because the greeks and premiums have already felt the influence of people moving from November to December; premiums get hit hard the week following expiration.

EquityCP and Sentiment have both moved back up to the Buy Puts Alert area. This is further evidence that we want to trade the put side.

Last summer we started monitoring the End of Day Cumulative Volume, and it looked pretty grim as September and October unfolded. Lately the RSI of EODCV has been stronger than the RSI of the INDU suggesting prices would rise in spite of the negative aftertaste of those two months. The EODCV has also made a decisive move above the 200 day moving average and the theory says it leads the index price. The Risk Monitor also had been pointing out the low risk buying time as those two months came to an end. We all should know by now that this cycle happens every year. From August to October is a period where mutual funds dump losers and those issues with diminished prospects. That slow erosion ends in the selling climaxes of Sept. and Oct. and makes two distinct footprints on the charts, one low higher than the other. We should also jot down on the calendar that October 30th marks the end of this liquidation and the beginning of distributions and reinvestment.That is one reason why we suggested at the end of September that an important low would be seen October 27,which marked the start of the upside NASDAQ explosion. The roots of the year-end rally are thus born as November gets underway. Conference season is at a pinnacle in the fourth quarter. Lately you have heard about many upgrades and excellent earnings. The fourth quarter is also favorable for declining bond yields and skyrocketing tech stocks. Corrections do happen even in November and December, but they are not as severe as in Sept. and Oct.

The two XAU charts seen below use different momentum methods to try to anticipate short term trand changes.They are giving a mixed picture here.We are still long HL from near 2$;it closed at 2.25$.

Here are the charts:

ADVANCE/DECLINE CHART. MONDAY'S CONE CHART. TUESDAY'S CONE CHART. CYCLE CHART. FLOWRATE CHART. INDU CHART. MCOSC CHART. MIDPOINT CHART. MOSS CHART. XAU MVM0735 CHART. NHNL CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX MIDAS CHART. OEX NSYNC CHART. SUPERT CHART. TBONDMP CHART. VIXPF CHART. VOLATILITY CHART. XAU OSCILLATOR CHART.

MomentumCycles commentary for the open of Wednesday, November 17, 1999:

Tonight's commentary describes the Gann Oscillator I've been playing with lately. The other charts are available for review below. The GOscOEX and the GOscTB can be referred to for illustration of the trading concepts. Perhaps this example using today's day session of T bonds will help understand the Gann Oscillator.I will use this;however,I have also seen and experienced a lot of price action in equities and their related indices. The GOsc represents what I perceive as a convenient means to measure movement on an intraday basis regardless of the issue. As we all know, markets cycle, breakout, and trend. That is pretty general, sounds simplistic, and has been said a zillion times. Two important day trader concerns are the day's range and retracement targets, and also an easy way to monitor them for trading purposes. One of Gann's quotes is that price tends to make 50% retracements. He also said price tends to target the established swing High and Low within a few percent. He also suggested what have now become "Gann numbers", and he also suggested dividing the price range up into percentages for support/resistance. He was most likely referring to days and weeks and not minutes and hours, but who knows for sure? I can't say, as I honestly haven't read more than a few paraphrased paragraphs of his work. The fractal nature of markets applies on all time frames. Many of the standard canned indicators in today's software use the previous day {or several past days} data for calculating the next day's support/resistance pivots {such as the classical pivots}. That muddies the picture, IMHO. Other ways use statistics. Both are illustrated on the StatP2 chart. It is possible to know within a fraction of a point where probable price resistance/support will be found. See the www.tradehard.com site for help on that. Others use channels based on averages of highs, lows, close, etc. What has been missing in my opinion has been a technique closer to the action, modified by the current action, and one that adapts instantly to new range changes. When it comes to making a dollar today, I would prefer not to look at something like Average True Range. I want to know today if range has been established; I want to know if it has stabilized. I want to know what its personality is today, and not what it was 21 days ago. Then I want to know what the midpoint of that range is and what the retracement targets are, and I don't want to keep moving a manual retracement tool on the screen. Since the market has movement, the midpoint and the retracement targets change until the range has stabilized. You may have heard before that the first hour of trading is "Amateur hour." The GOsc chart shows that a range is established early in the day by the spread between the High and Low. Events later in the day can disrupt the range established early in the day, such as today's FOMC discontinuity. In a precursory look at T Bonds it appears they follow the 50% retracement rule better than equity indices. T MP is the dynamic midpoint on the GOsc chart. It is also the zero line in the detrended price as represented by the GOsc. Basically, the MidPoint oscillator {renamed the GOsc} illustrates that the midpoint provides buy/sell signals and support/resistance with profits taken at the H or L, and nearby % or gann fraction. If price breaks out of the established range, then the 0.382 extensions are popular as in the low in bonds today, seen as Yesterday's low minus 0.382 of yesterday's range. Price tends to bounce between the floor and ceiling until it gets enough energy to reach a new level. Then it parks there while ownership of the instrument changes. Sort of like quantum mechanics.

As you might expect, various indicators are now more overbought than the day before. You might take a look at the INDU 60 minute chart again and note the one/two punch on the NSync index. Tuesday gave us a one, two, three punch. When the INDU makes a large range day, it is usually followed by several days of consolidation or even a reversal. Will it be a knockout? Stay tuned. With interest rates backing up, i.e., bonds dropping, this rally is limited. Wednesday's Cone projection oscillator is now firmly overbought.

The XAU momentum oscillators show a continued mixed picture.One shows continued movement up from oversold;another shows momentum flagging,with a short term sell arrow at the upper 3.5% band.{See the 3 XAU charts below.}Don Wolanchuk,a respected market timer,reportedly sees gold at 800+ eventually,but a move to test 250 first as possible.Anyhow,as a perpetual call on the sector,we are holding HL.Close was 2 3/16.{Wolanchuk also is reputed to see a bull market in commodities forming.Copper eventually at 1.60,lumber at 520,and oil possibly targeting 33.45 then 41.No time targets on these available}.

Here are the charts:

ADVANCE/DECLINE CHART. TUESDAY'S CONE CHART. CYCLE CHART. EODCV CHART. EQUITYCP CHART. FLOWRATE CHART. INDU CHART. MCOSC CHART. MOSS CHART. XAU MVM0735 CHART. NHNL CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX MIDAS CHART. OEX NSYNC CHART. RISK CHART. SENTIMENT CHART. VIXPF CHART. VOLATILITY CHART. XAU OSCILLATOR CHART. XAU STOCHASTIC 20 CHART. SUPERT. CODIOEX. CODINDX. STATP2.

MomentumCycles commentary for the open of Thursday, November 18, 1999:

The market appears to be yielding to some of the overbought pressures in both equities and bonds. Sentiment index has made a pivot, indicating reduction in speculative fever and a signal to trade the put side on rallies. Cone Projection oscillator is rolling over as are many of the price and breadth based indicators. Traders should be cautious about buying dips before the profit taking has run its course. There are a lot of investors in the denial stage and playing the momentum game. If you are playing it, just don't be the last one out the door or the one making the last high on the charts.

XAU yielded to the short term sell given on one of the oscillator charts posted yesterday.We are still holding HL.

Here are the charts:

ADVANCE/DECLINE CHART. CODI CHART. THURSDAY'S CONE CHART. CYCLE CHART. DSP9Z CHART. DUS9Z CHART. EODCV CHART. EQUITYCP CHART. FLOWRATE CHART. INDU CHART. INDU60 CHART. INDUB CHART. MCOSC CHART. MOSS CHART. NHNL CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX MIDAS CHART. OEX NSYNC CHART. RISK CHART. SUPERT CHART. VIXPF CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Friday, November 19, 1999:

"In by Thanksgiving, Out by Easter". This has been said here on more than one occasion. Santa is arriving early to avoid Y2K air traffic control problems... listen for cnbsee to quote me on this tomorrow or the next few days. In fact, he is flying higher and faster than the turkeys on Broad and Wall. Look to the stars and hold out your hands to catch the falling darlings when the Thanksgiving feast is over. As you can see the rush is on to see who will pay the most for stock. Remember, the public buys at antique prices and sells at flea market prices. Momentum goes both ways, folks. NASDAQ stocks can {and many will be} clipped by 50% by Easter 2000. And oh, did you hear the good news? The US is going back on the gold standard, sort of, by minting dollar gold coins with a Native American on one side and an eagle on the other. I missed hearing whether it is just gold-leaf plated or .9999 gold. Its about time we got the Indian head coins back in circulation. I always loved Indian head pennies. Does anyone really think these coins will remain in circulation? Come on, they will be hoarded and then exchanged for paper money as fast as they are minted. Not to worry about missing a chance to get in on the moonshot. The market won't keep going up relentlessly as there is no escaping the gravitaional pull of profit taking. Greed is not dead. The carnival barkers have attention now and are going to keep it as long as the appetite is unsatiated for stock with or without value. We do have a big problem here with the perception of price strength and breadth weakness. Perhaps it is exagerated by expiration bias. Have you noticed the number of upgrades, mergers, special announcements this week? The marketeers are back at it again to get the big push up before the skyrocket goes into a Y2K holding pattern orbit. The breadth problem was illustrated today in that HWP and INTC contributed to 80% of the Dow's gains. Gotta look below the surface, folks. To make it worse the New lows have been expanding as the broad indexes climb in price. Tax loss selling is not over. { Had to slip that one in there.}

On to a few technicals. 5ADVOL is reaching a peaking level while NHNL is diverging downward; a bad sign. OEX CODI is maxed out in the Sell Alert zone, as are BR_Mom, TrinThrust, and OEX RSI. SuperT is forming one of those correction-predicting divergences. Trend Exhaustion appears to be securely locked in trend, but note how jiggly the Red TEI is getting the last few weeks. Last year the Thanksgiving Rally ended on Nov 30th after which we had a few weeks of consolidation and then Santa's spirits reignited the rally on 12/15, figuring all tax loss selling was history.It will probably play out pretty much the same this year. The gift giving continues as mom and pop can't give their brokers money fast enough. Faster than Stuart can say, "Research it!", the key is struck and Ameritrade has handed his boss some e stock. Really now. Who does any research on stock these days? Anything that comes up on the fundamental screens is a fat zero on the momentum screens and people want to make money fast. I do, that's why OEX is my favorite tool and not some ValueLine bluechip. What I fear most about this party is the door will be closed or only partly open for the e traders who want to exit. I am hearing more and more comments from disgruntled traders who can't get a trade off when pandemonium is the song of the hour. You get really confident in your e-trading system,and then just when you want to sell that stock you bought at 10 which is now 100 and ...everyone else decides to sell too. Say a prayer when you hit the sell button that the order will get filled at the other end of cyberspace, because that is just where your order may go. RISK Monitor says we might have some DOW resistance at 11049.79 + a little for tomorrow. Or, on the outside chance of a blow-off explosion, next week we have 11588.44 + a little. Sentiment and EquityCP are telling us this is a strong trend and now we have all three components nearing a peak. All we need is for price to look down the screen and see what it is hovering above.

XAU is the neglected sister,at least until some sort of nervousness returns.

Here are the other charts:

ADVANCE/DECLINE CHART. CYCLE CHART. DSP9Z CHART. FLOWRATE CHART. GOSCTB CHART. INDU CHART. INDU60 CHART. INDUB CHART. MCOSC CHART.