MomentumCycles

Momentum Cycles update prior to the open on Wednesday November 26, 1997:

Bonds haven't decided whether to make a run for new highs in this channel, or whether resistance was only temporary at 6%.A strong close below 6% could project 120.5 on the bonds.So far, 6% has brought profit taking.Keep an eye on those silver and gold charts- seasonally between November and January,lows and rallies can occur in this group.We would love to see a violation of those long downchannels- not here yet though.{See our rsi analysis below}.The day before Thanksgiving often brings equity index short covering- squaring up positions before traders leave on holiday.No short or long trade is recommended here today- we like to trade the absolute CODI extremes for short term index option trades when premium is most in your favor.The next bus will be here soon enough!

Breadth:

NYA issue breadth was marginally better today with a few more advances than declines resulting in a flat intraday advance/decline line. McOsc is on deadcenter neutral and the volume oscillator rolled over somewhat as price consolidated. CODI made a buy pivot in the indeterminate region. Money flow factors will hit the banks and mutual funds strongly tomorrow and have an influence over the next week. Regardless of the technicals, this trader has found it prudent not to be holding puts in the last three trading days of any month.

Volatility:

AMOSS is not to be outdone by CODI, so the Zone Timer joined in with a buy pivot just above the sell region. The implications are that the buy will be short lived in time and not major in price differential. Modified Volatility Indices are painting a topping picture.

RSI, SMI:

These charts on the XAU, T-bond yields and SPX are almost identical to yesterday's. Nothing new to report here. To summarize, XAU is attempting to bottom in the neighborhood of 72. Yields are basing and stocks have lost some upward momentum.

Of Special Interest: Canmine Resources ticked down a little today, but the breadth indicators are still in good shape.

Momentum Cycles update prior to the open on Friday, November 28:

Squaring up positions Wednesday and pre-holiday short covering was the order of the day, as discussed yesterday.This week can move erratically due to lessened participation ,even on post holiday Friday.

Breadth:

Pretty quiet day with lower total volume than recent days. Declines pushed on the 1200 level keeping prices in check. Flow rate was not sufficient to sustain much of a price trend. Issue and breadth oscillators are at one of those terrifying inflection points. Can they go higher, will they go lower? The long holiday has taken trend out of their chart until next week. CODI is vacationing in the center of the Indeterminate region as is sometimes done when price is rolling over.

Volatility:

AMOSS is pretty much in neutral until after the festivities tomorrow. A vegetarian would claim that eating meat brings out the aggression in people. Well, we will just have to wait and see if that translates to aggressive trading. A few things are certain. The MVI adaptive is near its center support line and its bands are rolling over. MVI regular is struggling to stay above its centerline. The AMOSS Zone timer has surfaced above the sell zone, but will dip into it again next week if the market manages to survive the holidays and rally a few days. If not it could continue on up in sell mode as the 5,20,90 components head downwards. As of the close on 11/26 they all look neutral.

RSI, SMI:

XAU broke the 72 level on the weekly Fibonacci Zone chart posted on Monday. Tax loss selling can go on until the last trading day of the year. Gold stocks are prime candidates among those selected for selling. They are also candidates for a sharp bounce just on technical reasons after the first of the year. T-bond yields appear to be beginning of a basing period rather than an immediate reversal. Stocks in general are losing upside momentum.

Of Special Interest:

CMR Below market orders picked up some CMR below 1.5 today when some big volume sell orders broke support. The fact that it did not fall further than 1.35 for a few shares and most were traded at 1.45, meant ready buyers were there to absorb the selling. Low bids are the way to buy Canadian mining stocks during tax loss selling. Let the price come to you and be patient. Remember we analyzed this issue primarily based on its extreme undervaluation and potential for a possibly large strike at one of its various locations under development. They will also have pretty good earnings by 1999 based on scope-only estimates. The candlestick for today's trading in CMR is close to being a hammer which is a bottoming candle. Will be very interesting to see what happens next week with this stock. Sometimes when a big player wants to pick up a big position, he will hammer the stops with 8,000 and 10000 share blocks when the average trade is 1000 or less. Then he stands ready to absorb the below market orders. This is typical of smaller Canadian stocks. Metals issues of all sorts are out of fashion presently.

Momentum Cycles update prior to the open on Monday December 1, 1997:

The conventional wisdom is that gold is worthless and that a fall much below 300$ an ounce means nothing more than the present price at 300$ the ounce. Analysts everywhere are jumping all over each other to discredit metals. The Merrill Lynch analyst recently said that $250 was a target because it is closer to the average cost of production. I believe he mislead the public with misinformation. The average cost of production in hardrock underground mines is closer to $350 and the heap leach cost of production is closer to the $250. He equated the price differential of spot price vs production cost of gold to that of other metals and concluded therefore gold was overvalued. He in essence was equating gold to base metals which is an unusual concept. If the price of gold stays down too long, many mines will close and be difficult to reopen without extensive renovation. Metals stocks of all sorts, even those whose base metal prices are RISING are being sold indiscriminately.It's deflation , they say, and not to worry.Bankers flying out of windows in Japan-just benefit capital flight to the good old U.S.A., no problem.They'll never sell those T-bonds, after all, the dollar is strong and bonds are in an endless bull market.Weakness in secondaries- just temporary-those telephone stocks are so boring after all-money will move back to where the action is soon enough.We note that that there are RSI nonconfirmations of the recent XAU action.If it is a 1929 style deflation, its interesting that from 1930-1935 Homestake rose 643%, the top gainer on the NYSE during those 5 years.If one ever had the urge to make a very small contrarian bet,this is sure something like"buy low time".Can it go lower? Sure.Will gold go to 0$ the ounce?Don't think so.May have to wait a bit though for a payoff.Remember oil at 35$ the barrel? At 14$ the barrel?Were you with the crowd or against it?Lots of XAU charts below.

Breadth:

Last week presented inconclusive insight into the immediate market direction. Thin volume and very low participation by the option pits left market direction up to the general public. Professional traders as a group, tend to avoid trading during long holiday periods. Thus, our flow rate chart showed the public had a net positive effect on share flow and price. The McOsc is on the high side of neutral(63) and can go higher next week if the typical beginning of month momentum cycle holds true again. The NYA chart has been advancing for only 3 days where a typical rally length is 6 to 9. So that would take us up through the next week. This would also make all the oscillators more overbought. CODI is in the indeterminate zone, although closer to the buy area than the sell area.

Volatility:

There was no change in the volatility indicators this holiday shortened week. MVIs and AMOSS (not shown)have both come off of overbought levels and are residing in and near neutral zones. This is supportive of continued rally next week.

RSI, SMI:

These charts are slow to change. XAU is testing the 70 to 72 levels after a major brokerage firm turned gold into lead last week in the minds of the public. You have to keep in mind that news disseminated to the public is manipulative in nature. XAU has hit a five year low to the day. The hourly RSI(9 to 14 period) has generated a buy signal and the XAU has broken a three day down trend line. Note how the XAU rallied out of the 92 low from a double bottom, maybe it will form another double bottom in December with a higher low. Most technicians would expect a test of this support area, if it holds, a nice bounce should ensue. If it fails, then the Merrill Lynch guy will be right and gold will fall to 250/ounce. London PM fix does not show signs of bottoming yet. Stocks often lead the underlying commodity, so a trader needs to look at the stock performance before the metal performance. T Bond yields are pressuring the 6.0 level and stock momentum has slowed due to the overbought nature of many indicators and due to the absence of many players last week. SPX 14 day RSI is at an intersection point that shows the pattern of rally failures that have occured since the August top. With December seasonality normally bullish, we may be about to see a breakout from this pattern.

Of Special Interest:

Canmine Resources continues to confound the artificial intelligence engine. Wednesday it issued a 100 up rating and on Friday it issued a 99 up rating because of all the divergences between new lows in price that are not confirmed by volume related indicators. It looks like the new support is 1.35c and new resistance is 1.5c. The Rainbow momentum indicators have been updated for the end of the month. The monthly DOW rainbow has gone back on a buy with the shorter term oscillator. The weekly rainbow has been on a buy for two weeks, actually only one week since it takes a week of data to change direction. The daily rainbow has been on a buy for nearly two weeks and has run into stiff resistance at a downtrend line. The rainbow momentum pattern is typical of year end strengthening after the initial third quarter weakness that is manifested every year.Remember we called the exact cycle low October 28-29 and rally afterwards ahead of time using our CODI indicator.

Momentum Cycles update after the close on Monday December 1, 1997:

Our prediction that monthly money flow would continue the pre-thanksgiving rally worked out correctly on Monday,as expected.CODI was near the buy area on Friday, so that bias also had to be given the benefit of the doubt.We exceeded the upper 3.5% band today.When that happens,it has very often been that higher highs lie ahead, although sometimes there is retracement before the higher highs are achieved.

Breadth:

NYA advances and declines looked great today and produced a nice move up in the issue and volume McOsc. Up volume exceeded down volume by 2.3 to one and the flow rate was of trend inducing magnitude. It has been stated here before that a sustained flow rate over 1 million shares per minute is necessary for price to trend significantly. Not only that- the net flow rate must be positive or negative for a sustained period. Today was one of those clasic trend days where the proper flow rate conditions produced a triple digit gain in the DOW. CODI is in the indeterminate zone, but near the buy area.

Volatility:

The increase in price and decrease in volatility has pushed the Modified Volatility Index back to a higher risk level. It can remain here in trend conditions for a few days, but a pullback should be expected imminently. Volatility tends to drop as price trends higher until a top is reached and then an intraday increase in volatility gives a clue of reversal. We did not have that clue today lending support to the belief in higher prices ahead, not forgeting that Monday advances often yield to Tuesday consolidations. OEX Put/Call ratio is still neutral at 1.28. 1.5 is a sell alert.

RSI, SMI:

Gold stocks in the XAU are making a stand at the 70 level. Note the narrowing of the step channel over the last few days. This narrowing is prelude to an explosive move. XAU RSI gained more strength today giving the feel that the move will be to the upside. The long termXAU showing the 1992/1997 lows is attached again for perspective.

Of Special Interest:

Once again Canmine Resources has been given a 99 up rating by the artificial intelligence engine. Another reversal candlestick signal was given on Monday. The AI ratings are programed to signal up moves prior to receiving price phase confirmation.