MomentumCycles

MomentumCycles commentary for the open of Monday, November 22, 1999:

Another expiration has come and gone. This one was rather uneventful as expirations go. Last week it was suggested that much of the unwinding occurred a week early. This week lacked the final hour lottery-like payoff. Perhaps it was because the deteriorating breadth once again overwhelmed the overbought price oscillators. Our Trend Exhaustion Index changed character again with the down TEI turning up and the Up TEI going sideways in an UP market. A few weeks back we said we wanted to see a lower low TEI followed by a lower high to consumate the fall 1999 low. On the issue front the McOsc is about to drop back into the neutral zone. It is common for price to continue up and begin to consolidate as the McOsc trends towards zero. A fall through zero would bring in accelerating selling, or in bull markets a resumption of buying. There are other topping-like divergences. At a new high in the NASDAQ and the S and P in this move,the IBD Option premium Ratio was .77,far below the over 1.00 readings seen at lower prices. The 5 day Advancing Volume and NHNL are two more. The SuperT composite breadth oscillator has a beautiful divergence; beautiful to bears,that is. OEX CODI issued another Sell Alert on Friday with the magenta and red dots. There really is no need to belabor the point much further. Let's keep this commentary short and point out that options Sentiment as measured by the modified Hines ratio is screaming, "too much optimism". A close below BRDot of 745.73 on Monday would turn the three day momentum down. But it is easy to misinterpret sentiment in a strong trend just as it is easy to misinterpret a price oscillator in strong trends. In this case we have a 3INDX and stochastic momentum that are showing potential for a nearby price turn. The Hines ratio is showing much heavier volume and open interest on the call side of options. The next step would be for the HRBBS to drop while price is peaking. This, along with the above diverging breadth, should mark a price top. The big question is whether price goes sideways or down from here sufficiently to make money in buying options. Holiday seasonality argues that we won't see a precipitous drop but another indecisive period where bulls and bears have a tug-o-tape across the McOsc zero line.

Using the rate of change cyclical indicator that we often use to pinpoint lows and highs {often to the day},the last important buy point was October 27,discussed here during the 3rd week of September.The NASDAQ subsequently rose 15%,after the low point date.We like to see confirmation with our other indicators to have high confidence in the rate of change "hit dates".{That point should be stressed strongly!}Tentatively,we get a sell November 26,a buy December 1,a sell December 17,a buy December 22,and a sell December 30.Remember,projecting this far in advance is inherently risky,and the major low points and high points are much easier than the minor turns.We will point out,however, that we nailed the mid-May high and late October low weeks in advance with this technique,to the day.

XAU has declined,as predicted,from the upper trading band to the lower,in concert with our short term sell signal.Momentum on 2 oscillators is dropping,both Momentum of price 7 versus 35 days,and price force.The sector is again unloved,and may require more basing before the next rally attempt.

We are holding HL as a perpetual call on the sector.

Here are the other charts:

ADVANCE/DECLINE CHART. CODI NDX CHART. CYCLE CHART. DSP9Z CHART. DUS9Z CHART. DUSPZ CHART. EQUITYCP CHART. FLOWRATE CHART. INDU CHART. INDU60 CHART. INDUB CHART. MOSS CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX MIDAS CHART. OEX NSYNC CHART. RISK CHART. VIXPF CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Tuesday, November 23, 1999:

Deteriorating breadth sure looks like a juicy short is shaping up for Thanksgiving. We just need to have the price come down on the turkey. After all, did you ever see a turkey that wanted to be eaten by a bear? Market is getting to the "Road Runner treading air off the edge of the cliff" syndrome. Everything is in place, negative issues, negative volume, McOsc about to cross zero, divergences abound, Cone Projection oscillator peaking out, Moss in extremely OB and turning down, Sentiment turning down as price makes a fake out move on Monday. 3 day smoothed cumulative breadth and volume both have turned down.If there were ever a time to be diligently looking for a short entry, this is it. Major caveat, is we trade price and not breadth even though we monitor breadth, volatility,and sentiment as well. So,by using the BRDot support level for Tuesday, a close below 749.27 would flip the cyan line and yellow dot indicator into sell mode. I would be inclined to sample the put side on price action below that level on Tuesday.

End of day total Cumulative Volume is rolling over and as you would expect, so is the Mcosc of Volume and the RSI of EODCV is rolling over. Price may be able to hold up a bit longer, but if these breadth trends persist, the upside points are limited in time and magnitude.

XAU and its component HL,as seen by the 2 XAU charts seen below,are working back into oversold territory after finding short term resistance at the upper 3.5% band of price,where we predicted a short term sell arrow would occur.The sector is also a victim of lack of money flow due to tax selling.We are holding HL as a perpetual call on the sector;there may well be an outsized payoff for patient long term holders.

Here are the other charts:

ADVANCE/DECLINE CHART. CODI CHART. FLOWRATE CHART. INDU CHART. NHNL CHART. RISK CHART. SUPERT CHART. TEI CHART. XAU OSCILLATOR CHART. XAUS20 CHART.

MomentumCycles commentary for the open of Wednesday, November 24, 1999:

Deteriorating issue and volume breadth finally got the attention of price. The down Trend Exhaustion index is turning up as new lows exceed new highs and down volume exceeds up volume, and down issues exceed up issues. This produces the SuperT divergence. If it were not for the statistically positive bias for the end of month and Thanksgiving holidays, it would be easy to conclude that we have crash potential here from such an overbought market. OEX did close below the cyan line and yellow dot indicators on the Equity and Sentiment charts,but the CYAN did not close below the yellow dot so we do not have a sell yet on this indicator. The Cyan line gives the resistance value for tomorrow; 750.34 is where puts might be entered unless the Turkey momentum carries stock prices higher. SMI and 3INDX are on sells also. End of Day Cumulative volume has dropped back to the highs of summer 1998 and the Relative Strength of EODCV is dropping faster than RSI of INDU. McOsc of volume on the EODCV chart is also crossing the zero line to the negative side. Momentum Cycle chart is in sell mode. Cone Chart is in sell mode with a downside channel break and Projection Oscillator pointing downward. That means if trends continue we have much further to go on the downside, and I would not be a dip buyer in here. The preference is still to trade the put side as rallies fail. Or, if you are a stock buyer,to wait until the RISK Monitor has dropped back to lower risk levels. The INDU has run into resistance at the 11000 level and could easily drop back to 10800 or 10600 or 10500 before it finds good support.

XAU momentum switched to up on two of our short term momentum oscillators. See the two XAU charts shown below. We had recommended acquiring HL at 2. That price was revisited recently. Present price is 2 3/16.

Here are the other charts:

5 DAY ADVANCING VOLUME CHART. CODI CHART. MCOSC CHART. XAUMVM0735 CHART. OEX MIDAS CHART. XAU OSCILLATOR CHART.