MomentumCycles

MomentumCycles Commentary for the open of Monday, November 9, 1998:

We pointed out for the Thursday p.m. commentary that the XAU was giving numerous short term nonconfirmations of Thursday's price high.Friday brought a retest of that price high at 83.32,with a selloff to a 79 low and a 79.28 close,off 4.6% on the day,enabling a graceful exit for short term longs and a nice daytrade for shorts.

Thanks to Gitanshu Buch for the following COT interpretations{the previous of which gave ample warning of the rising risk in bond long positions before the recent selloff}.

Note that COT results,being longer term in nature,may run counter to extremely short term cyclical action correlated with patterned money flow at this time of the month.

"Intermarket analysis of COT data updated as of Friday's close shows no new directional bias compared to a fortnight ago. - Gold remains on a SELL signal, with commercials locking in higher-than-average prices and increasing supply into the market. - S and P commercials have not yet increased their profit taking and are presumed to be building up gains or reducing their hedging costs. - Bonds remain on a SELL signal, with reduced expectations of a recession bringing the slope back to the yield curve. - Currency action has quietened down as hedges have been unwound and unprofitable positions squared away. Overall, this "holding pattern" results into a dampening of volatility, which enables trends in motion to remain in motion. This has positive implications (prices go higher) for S and P, and negative implications (prices continue to head lower) for Bonds and Gold. These trends are intermediate term in nature, with validity for periods over 2 weeks. No clues are expected for the equity markets from the currency market in the next 2 weeks."

On to Friday's action,and what we see for next week...

Positive seasonality finally ended on Friday with an attack on DOW 9000. Next week is Pre-Expiration week which has a history of a downward bias until a turn on Friday. The Pulse Rate newsletter from Kasanjian Research has a dynamic cycle energy point on 11/16. It doesn't predict a high or low, however, but would fit in nicely with a downtrend next week. The following cycle dates are 11/24 to 11/27 for a pre-holiday high. There used to be a saying on the street that "it had to go down before it could go up". Maybe we will see that next week. New Highs and New Lows are a sensitive measure of market tops and it must be pointed out here that NYSE new highs peaked on Wednesday and New Lows joined in by bottoming on Wednesday too. Since then we have had a divergence between the index and the NHNL indicator. Also the Super Timer converged with the index on Friday which is another Sell signal. The convergence means the real price is the same as the theoretical price. If the PT drops below the index next week then lower prices are in the forecast as occurred back in the summer. McOscs continue their divergence and made another trendline break on Friday. The last MOSS swing length of 21 days is into the turning length ballpark. RSISTO, CODIs, and AMOSS are armed for sells. Many downgrades on stock simply because of rapid price rises are becoming more frequent by brokerage firms. This is a rather unusual event to have it happen to so many stocks in such a short time. We should see more of them next week. As hard as it is to do, the trading advice for Friday was to enter puts at resistance. This is the last put recommendation on this cycle and hopefully we can exit by Thursday into a retreating market. OEWWH, OEWWI, OEWWJ, and OEWWK give representative examples of prices available on Friday as the indexes jammed into turning point resistance. INDU Sweet Spot has moved far into the upper right quadrant. This is the extremely overvalued region and where corrections start. The upper left quadrant is the fair to undervalued region. The INDU Top Finder is currently picking a top between 9090 and 9162. Application of the TopFinder is a bit subjective because of the manual positioning of the input coordinates. The SuperT Theoretical Price is 9010.53 as of Friday so we could conlude we are in the vicinity of a top. Of course this will change with new data on Monday. Seems as though the expectations of another rate reduction may be ahead of reality. Interest rates are a tool that is best used in crisis and not after the market has rallied back to old highs. It would seem more likely that a rate cut would come when 7400 is challenged as support again. One pattern forecast for Monday is continued upside to complete point 5 of what is called a Wolfe Wave. On hourly charts it has a window of about 560 to 563 using line extensions. The idea is to look for a move above the magenta line and then a drop below it to implement a short.

Here are some charts:

ADHL CHART. ASTROCAST CHART. FRIDAY'S CONE CHART. MONDAY'S CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. S AND P 500 PIVOT CHART. INDU CHART. ANOTHER INDU CHART. NYA CHART. OEX FIB CHART. OEX PIVOT CHART. SPX HOURLY CHART. XAU CHART.

MomentumCycles commentary for the open of Tuesday, November 10, 1998:

XAU continued the selloff from the recent multiple nonconfirmation 83+ price high,with an intraday low of 77.56,but a close at 79.03,at the high of the day.The short term selloff may have come to an end,so neither shorts nor longs are appropriate here,and shorts could have closed out remaining positions from the 83+ high after the 4.5% move in one day,with another chance Monday at even better prices.As we have mentioned,XAU has for some time been a place for trades only on price nonconfirmations well above 70 or well below 70.Looking at the XAU chart below,the equilibrium level seems to have moved higher,as support seems presently to come in above 70.

FNM continued its recent short term weakness from the discussed unchanged day a while back at 71+,with a low at 67.75 and a close at 68.25.

On to Monday's OEX action and the rest of the week...

Remember those days when you first discovered stocks and on payday you would run down to the broker and buy your favorite "skyrocket." Then a week later it was below your purchase price. You did this over and over for a year until you decided that someone was playing a dirty trick on you. Well, the magicians are still at work on new victims. Today we had some breadth and price erosion that we expect at the end of the magic show and also expect in pre-expiration week. Both CODIs are in Sell mode now. MCOSCs are rolling over. Ideally, we would like to ride puts until they hit the zero line or below. NYA breadth was quite negative today. The Red Cone was a good profit taking point for the day traders as that is about all we are served on strong days. Crash days would take it to the grey cone. Here are Monday's and Tuesday's cone charts. SuperT is on a sell. One of the indicators on the ADHL is on a sell. The November puts are day trading items at this point and Decembers are for position trading. Implied volatility did pick up a bit today supporting the notion of a trend change from up to down. Post seasonality and pre-expiration week trend is just beginning.

Here are some charts:

ASTROCAST CHART. DJIA FIB CHART. DJIA CHART. S AND P 500 PIVOT CHART. INDU CHART. ANOTHER INDU CHART. NHNL CHART. OEWWH CHART. OEWWI CHART. OEWWJ CHART. OEWWK CHART. OEX FIB CHART. OEX HOURLY CHART. OEX PIVOT CHART. RSISTO CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Wednesday, November 11, 1998:

XAU shorts had another chance to exit as the index saw 80.54 high,77.75 low,and 78.10 close.No new trades are recommended for XAU due to the closeness to the recent median price.{52 week high 93.56,low 48.67},even though momentum is on the edge of a breakdown.BKX has recently been weak due to traders reconsidering the time schedule for further rate cuts,as also seen in the recent testing of the long term yield trendline in 30 year T bonds.

FNM attempting to rally to the old highs at 71 1/8.A close above that projects mid-70's.

On to Tuesday's OEX trading,and the next few days...

Optimism dies slowly. NYA breadth continues its deterioration and price continues its consolidation, perhaps trend reversal. One day at a time here. Puts had another wild ride with a pop on the close. Seemed like the hedge funds and program traders were all scared off by the government with threats of regulatory controls. Then in the last fifteen minutes we saw what should have happened many times during the day. It was a very strange day with the TICK at -400 to -600 for hours and yet the indexes remained virtually unchanged. Something strange was occurring. McOsc are headed for the sell at the zero line. SuperT continues its sell. ADHL has one RS indicator clearly in sell mode and the new high indicator is about to cross into sell mode. Then if the market heads down we should see the new lows pick up. The S&P Futures, DSP8Z did close below their weekly balance line. Ratio oscillators are tracking in max overbought on the DJIA, OEX, and DSP8Z FIB charts. Cone projection oscillator has crossed over to the sell side. NHNL is headed back towards the zero line in agreement with the other weakening indicators. Modified Option Strategy Spectrum and AMOSS continue to say the market is at a turning point.

ASTROCAST CHART. CODI CHART. S AND P 500 PIVOT CHART. NYA CHART. OEWWH CHART. OEWWI CHART. OEWWK CHART. OEX PIVOT CHART. RSISTO CHART.

To quote from the MomentumCycles commentary for the open of Wednesday, November 11, 1998:

"XAU shorts had another chance to exit as the index saw 80.54 high,77.75 low,and 78.10 close.No new trades are recommended for XAU due to the closeness to the recent median price.{52 week high 93.56,low 48.67},even though momentum is on the edge of a breakdown.BKX has recently been weak due to traders reconsidering the time schedule for further rate cuts,as also seen in the recent testing of the long term yield trendline in 30 year T bonds.

FNM attempting to rally to the old highs at 71 1/8.A close above that projects mid-70's.

On to Tuesday's OEX trading,and the next few days...

Optimism dies slowly. NYA breadth continues its deterioration and price continues its consolidation, perhaps trend reversal. One day at a time here. Puts had another wild ride with a pop on the close. Seemed like the hedge funds and program traders were all scared off by the government with threats of regulatory controls. Then in the last fifteen minutes we saw what should have happened many times during the day. It was a very strange day with the TICK at -400 to -600 for hours and yet the indexes remained virtually unchanged. Something strange was occurring. McOsc are headed for the sell at the zero line. SuperT continues its sell. ADHL has one RS indicator clearly in sell mode and the new high indicator is about to cross into sell mode. Then if the market heads down we should see the new lows pick up. The S&P Futures, DSP8Z did close below their weekly balance line. Ratio oscillators are tracking in max overbought on the DJIA, OEX, and DSP8Z FIB charts. Cone projection oscillator has crossed over to the sell side. NHNL is headed back towards the zero line in agreement with the other weakening indicators. Modified Option Strategy Spectrum and AMOSS continue to say the market is at a turning point."

MomentumCycles commentary for the open of Thursday, November 12, 1998:

BKX continued its discussed weakness from yesterday {off 1.9% or 14.18}on continued uncertainty of Fed action next Tuesday.

XAU showing loss of momentum as mentioned above {7 days versus 35 flat,5 versus 21 dropping}.No trade in XAU recommended currently.

FNM still unable to surpass the old high at 71 1/8,with upside momentum dropping.If 71 1/8 is decisively penetrated,the mid-70's target will be acheived.

In longer term NYSE action,3 day breadth turned down,showing loss of upside momentum that usually accompanies a reading of 53% bulls{excessive short term optimism}.On to Wednesday's action, and the rest of the week...

There has been no change in the view from this section. If anything, the recent momentum change reinforces the view that the rally is mature and in the process of correcting itself. Last week we advised looking for a change in NYA breadth to signal a change in price. Price and breadth can diverge short term but on an intermediate to long term basis they must trend in concert. The ADHL chart now has two of three indicators fully in sell mode. Looking ahead, some very common targets on the INDU chart are the 21, 50 and 200 day simple moving averages. Note that the INDU closed exactly on the +3% band and at the same time the On Balance Volume closed well inside its band. What we have here are the makings of further correction as the INDU drops towards 8635(200 day ave), or 8552(21 day ave), or 8159(50 day ave) and the OBV drops towards its center band. Also you will remember a few weeks back we believed the INDU would be bid above its 200 day average through the beginning of month seasonality period. We now believe the 200 day average is going to be tested from both sides in the coming weeks and months. Another sure thing is that the INDU will drop back inside the +3%,-3% channel. Continuing with the advance, decline breadth we see that the McOsc is about to cross the zero line in a full fledged sell signal. One more day would do it. In less overextended markets the zero line will put up a defense and act as support. Even then it does so by experiencing price penetration and some oscillation before continuing or reversing. Sometimes price will cross the zero line 4 times before resolution. Other times it will slice through in one day with a large point difference in the index. We should eventually expect the McOsc and 10% component to find a low below the zero line at which time we look for another buy signal. Moving on to the Fibonacci charts, INDU, OEX, and DSP8Z, we see that all have generated sell signals on Wednesday by closing below the weekly balance and more importantly below the Daily Triple Switch line just as the Ratio oscillators begin their drop out of the Overbought Zone. The OEX Cone projection oscillator continues to project downward prices and is not oversold yet. The INDU daily, OEX daily, and SPX daily present some fibonacci channel targets. The AMOSS chart is continuing it transition from uptrend mode (trending in extremely overbought) to correction mode (transition to the neutral zones) as the OEX spills out of the wedge. The MOSS chart also confirms the sell/correction mode as the OEX drops out of its average true range channel and as its oscillator representation does a mean reversion. A true oversold condition would be achieved when the cyan and yellow lines change places. At a minimum we would like to see the cyan and yellow lines kiss at the center line. A 50% correction from the October low would put the OEX down near 510 to 520. RSI and Stochastics are rolling over in concert with the other indicators and 8600 looks like a good resting point on that chart.

Here are some charts:

ADHL CHART. ASTROCAST CHART. CODI CHART. S AND P 500 PIVOT CHART. INDU CHART. INDU TARGET CHART. NHNL CHART. NYA CHART. OEWWH CHART. OEWWI CHART. OEWWJ CHART. OEWWK CHART. OEX PIVOT CHART. OEX TARGET CHART. S AND P 500 TARGET CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, November 13, 1998:

We have called the rallies, tops and ideal short exit points quite well on XAU for a while now.We pointed out the multiple non-confirmations of price at the recent top above 83 and advised short covering at the 2 recent daily spikes down near 77 and 76.XAU was up 6.43% today to 81.38,on IRAQ-related military nervousness which also gave strength to the oil futures,and weakness to global markets.

Thursday,the DJIA gave a signal that compares the recent price to the 21 day moving average of intraday volume percent.Further weakness into Friday would not be unexpected due to this signal.

BKX downside momentum slowed Thursday,only down 5.33 or .7% after 2 large daily declines.Any BKX shorts should consider covering here.

Sharp rallies and slow nerve -wracking declines are characteristic of bearish modes. We have been seeing quite a few of these this week where a rally can't hold its gains and is met with negative NYA breadth. It has been easy to get faked out by a TV personage espousing a healthy market with new highs ahead. If you listen carefully though, they are using percentages/probabilities ,historical references and time periods that terminate at the end of the year or into the first half of next year. Before then, we have a war, tax loss selling, get out even selling, interest rate fears to overcome, and last {but not least} an expiration to get through. Yesterday we said the McOsc was within one day of touching the zero line. Today it closed at +19.69 with preliminary data or +15 at w.decisionpoint.com. Alternatives here are bounce, pause, plunge below. Note that it has been making higher lows since the August low and had a divergent higher low which led to this stupendous rally. The uptrendline might cause shorts and put holders a bit of concern. Also the NYA on the McOsc chart is sitting on a dynamic support line. A break of NYA 552 could send it all the way down to NYA 530. Thus there are some arguments for a cycle low in here in time for the pre-expiration "seasonal" trade. And there are valid reasons for much more downside. It is hard to imagine that things will work this time as they have in previous expirations by buying calls on Friday afternoon. What we would like to see is a washout down to the red cones, see Cone chart, and S3 on the OEX pivot chart. That would complete our post seasonality put trade. There might be more left in it after that, but our goal has been to catch a negative trend this week. Odds for an interest rate cut have been reduced and at least one analyst sees 8200 to 8300 DJIA without the cut. SuperT PT sees theoretical INDU at 8672 and the WMSR support at 8735. ADHL continues to spill out of the wedge, but hasn't issued an intermediate system sell yet. The breadth sell would be late ,so a manually placed sell stop was placed at the apex of the wedge. The INDU, OEX, DSP8Z fib charts continue on a sell with Ratio oscillator dropping out of the overbought zone and trending below the green Triple Switch trendline. The OEX Cone projection oscillator has reached the oversold level, but can remain there as long as the OEX remains in a downtrend. It would not be unusual to see a bounce towards the center line and a return to the down trend. In looking at the OEX option charts it is evident that the out of the money puts have a wilder swing during the day, but the in the money/at the monies hold their gains better. NHNL chart shows some consolidation wedges which are usually interpreted as a healthy sign. The problem is, the NHNL percentage indicator is not in a bullish trend, so at this point we would expect the wedge to fail. Finally, the INDU has closed inside its +3% band and its two hundred day average is just above 8600. MOSS chart indicators are making a transition through the neutral zones. Their trend is more important than their actual zone position. The fact is the divergences did occur and are now being worked off. Puts are the order of the day as long as the trends are from overbought zones to oversold zones. AMOSS shows an incomplete consolidation or correction. To return the market to a healty state technically more downside work is needed. CODI is in a sell trend.

Volume that was accumulated by the pros at the lows in August and September has been expended in the sharp rally that is now terminating. The theoretical top for this rally is 8914 using a mean price of the daily (high + low)/2. That has been achieved. It appears then that the decline we are experiencing is a real one and will continue into another volume accumulation period that will support another rally. The "Sweet Spot" has peaked in the max overbought upper right quadrant and is now headed back towards the more fairly valued upper left quadrant. 8500 is first major support at S7. We also have a top in for the OEX. Support is at S8 = 543 S1 = 531 S7 = 519

Here are some charts:

ADHL CHART. S AND P 500 PIVOT CHART. INDU CHART. OEWWH CHART. OEWWI CHART. OEWWJ CHART. OEWWK CHART. RSISTO CHART. XAU CHART. DJIA CHART.

To quote from the MomentumCycles commentary for the open of Friday, November 13, 1998:

"BKX downside momentum slowed Thursday,only down 5.33 or .7% after 2 large daily declines.Any BKX shorts should consider covering here."

MomentumCycles commentary for the open of Monday, November 16, 1998:

We had suggested BKX was oversold due to the number of down days in a row and the tendency of the market to rally due to the pre -ex effect.BKX shorts covered at Friday 's low of 738.09 ,followed by a rally of 17.89 or 2.4% on the day.

The recent chart action suggests that after a messy period of indecision flirting with the upper end of the longer term downtrend in yields,the 30 year T bond should resume its uptrend in price by month end to attempt new price highs by the middle of January.

The XAU is likely cyclically close to the end of this corrective phase and due for a month and one half rally past the previous highs.XAU on balance volume and internal accumulation still are in an uptrend,but momentum of 7 versus 35 days and 5 versus 21 days is still declining{corrective}.We are due soon for the periodic swing up in this index to a high that occurs often at an interval of 5 to 7 months.

On to next week's OEX trading...

Friday ended the swing period for put trading and began the expiration seasonality call trading. November options are daytrading vehicles, Decembers are for position trading. Commentaries for many previous months have dealt with the "buy the Friday" trade for expiration. This is a short term trade that is entered on the long side on Friday of pre-expiration week and held into the early part of expiration week. In years past it was a buy the Friday close. Since it has become popular the buying has come in earlier in the day. Exits are on Monday or Tuesday with profits, or any time if triggered with a stop loss which should be moved up if you are in the lucky camp. A long time reader might have noticed by now that there are technical trades and there are seasonal trades. Both are buffeted around with political and economic noise. Even CNBC gets credit for being a market mover with its guests. Such influences are often short lived.

From the MOSS and AMOSS perspective some of the overboughtness has been worked off and neutral zones provided support on Friday. Even the McOsc zero line provided initial support for a bounce as the bulls brought out the offense. We do have Nature's Pulse Energy point on Monday and a larger one on 11/24 - 11/27. These are more practically used as change in trend dates. The 24 - 27th one is much stronger. The daily trend was down coming into the 13th so the technique would have the trend change to up or....accelerate down. An acceleration is considered a trend change also. We know now that the 13th was up. Statistically the market has moved back to neutrality and centerlines on various oscillators such as CODI and RSI and Stochastics are at 50% retracement levels. The ADHL is painting a pretty weak picture with two components on full fledged sells, only the new lows haven't picked up. If the get out even crowd and tax loss selling crowd wake up then the new lows should pick up and generate a sell on that intermediate term system. The seasonal expiration bias and the holiday bias are competing with a war and an interest rate decision on the 17th. These should clearly mark the 16th as an energy point when looking back at the end of the week. The centroid of market capitalization of November calls and puts zeroed in on the 550 last week. Also the Option Premium Ratio targeted 1129 or lower on Friday.

ASTROCAST CHART. CODI CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. S AND P 500 PIVOT CHART. INDU CHART. Another INDU CHART. NHNL CHART. NYA CHART. OEWKK CHART. OEWLK CHART. OEWWK CHART. OEWXK CHART. OEX FIB CHART. OEX PIVOT CHART. SUPERT CHART. XAU CHART.

Momentumcycles commentary for the open of Tuesday, November 17, 1998:

At new highs for the rally,breadth smoothed by 3 and 5 days,and volume smoothed by 3 and 5 days have been and are dropping, and bullish sentiment is rather high on some surveys.If the FED cuts rates,we could see a relief pop,and if they don't,a selloff.Those who took the "buy the close of pre-ex Friday,sell into the first signs of strength in ex-week"{Monday near the open at the 1.50 trailing profit stop},had the best of both worlds,without waiting for"FED Tuesday".So Monday could have marked the closure of the Pre-E Week trade and if you took it and did not exit after the OEX hit R3 then you were not using a price stop on either the call or the index.

Admittedly it was not a strong recommendation to take the trade. In fact, the updates last week were only acknowledging that the trade has a high success rate {to buy calls on Friday and exit on Monday or Tuesday}. This market continues to surprise everyone. The breadth numbers indicate that many players are sitting out this last fling to old highs. It doesn't have the feel of a market about to break out into a sustained trend into new territory. If this is skepticism, then it is born in the reality of the tape. Look at the NYA and the McOsc charts. Both are on the verge of going negative in a full fledged sell mode. Even the NHNL is still hugging the zero percent line(0.73%). Something should be said about TV commentary on new highs and new lows. Take the net difference and divide by total issues, 3530, to convert it to a percent. That is the number you want to track, not just the net difference. All we need on the ADHL chart is a pick up in the new lows to trip off an official intermediate term sell mode. The OEX Projection oscillator has creeped back up from oversold to the retracement line. The AMOSS is still headed down and the MOSS has had a tiny bounce at neutral. A good oversold market will drop to the lower zones. That is where we would want to play longer term calls from. Expirations by their nature cause multiple strike price range shifts in the index. The next day can easily undo the gains/losses of the previous day. That is why it is said that the expiring month is a day trading vehicle. The index can move so far so fast as to leave you out of the money at expiration. There is one possibility of position trading this week and it might come on Wednesday. This strategy banks on a large move occurring on the close of Friday. If you can leg into an at the money straddle with each side between 2 and 4, then a large run on Friday could deposit some coins in your account. You may also want to consider a put entry on the close of this Friday if we haven't had a correction of any significance before then.

On the XAU daily chart, 73.23 is support. Support was also found intraday. If the support on the intraday chart fails, then look for next support on the daily chart. If the daily fails then a full fledged short term momentum sell is in effect.Monday's trading revealed the high probability of some further short term weakness.

This SWING MACHINE equity index study,thanks to Clyde Lee, shows seven projections each of which is made up of 30 individual swing averages. Before averaging the data was arranged so that swings were ordered by number of bars to second turning point. On a Fib basis prices are now exceeding a 2.0 ratio to the last swing -- dangerous territory. However two of the 5 projections indicate more time/ price advancement can occur. Still plenty of probabilities here to maintain the "wall of worry". From here the worst case scene is a reversal to the 8500 level and the best case somewhere around the 9300 level.

Here are some charts:

ASTROCAST CHART. CODI CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. INDU CHART. ANOTHER INDU CHART. NYA CHART. OEWKK CHART. OEWLK CHART. OEWLL CHART. OEWWH CHART. OEWWJ CHART. OEWXK CHART. OEWXL CHART. OEX FIB CHART. RSISTO CHART. SUPERT CHART. OEX Pivot chart. S and P 500 futures pivot chart.

MomentumCycles commentary for the open of Wednesday, November 18, 1998:

A confusing amount of crosscurrents,with the slight feel from the FED that this may be the last rate reduction for a while here,which helped the bonds a bit.

Momentum of DJIA 7 versus 35 days still dropping as well as 5 versus 21 days,and a closing +441 tick plus an intraday +1151 tick,which normally leads to a pullback within one or two days.

BKX continued its rally from the last Thursday's oversold position;both it and NASDAQ were stronger relatively than the DJIA.The AMEX Internet index just made a new high today-since this appears to be acting as a bellwether,a failure of this index to keep leadership in the rally may signal an important change in direction.

No trade on XAU by further breakdown or 30 year T bond activated here yet.XAU getting nearer to short term oversold.

On to Tuesday's action and the rest of ex week...

Well, well, another R3 day on the OEX and S and P pivots accompanied by a very poor showing on the breadth front and an NYA rally that fizzled faster than it started. Even the new lows increased to 35 from 27 while the new highs only increased from 53 to 60. The McOsc dropped from 14.57 on Monday to 7.49 on Tuesday. It appears that the interest rate reduction was discounted and those who bet on the reduction took profits while those who bet against it covered their shorts. There even was an increase in hourly volatility that hasn't been seen since mid to late October. This could very well mark a change in the intermediate trend although the ADHL still needs a pickup in new lows to trip off a sell. It is looking like 560 is the tug-of-war line for expiration. Perhaps we have already "seen" the unwinding that occurs on Friday afternoon. If that is the case then we could bet on a downside Friday close. This is pure speculation of course. The at the money call and put are pricing in a one strike shift up or down at Friday close. With three days left it isn't very likely that the OEX will go sideways for the next 19.5 hours. Some expert traders avoid this week and let the market makers do their thing. It can leave a very bad taste in your mouth and a funny feeling in your stomach if you bet on the wrong side of an expiration. You will feel a lot better on the weekend if you trade December's and happen to be on the wrong side at Friday close. At least your hope lasts a bit longer. This period up to Thanksgiving has a strong seasonal influence, the market is fighting resistance, but the floor has been raised due to the yield / interest rate comparison. The MOSS and AMOSS are pretty much dead center neutral as is the OEX Projection oscillator so we don't have a really good situation for a recommendation. The feel here though is we have been having a distribution, get out even, tax loss selling, interest rate discounting rally and the sum total of the technicals show deterioration that should resolve itself to the downside shortly. We do have the next Nature's Pulse energy point on 11/24 to 11/27.

CODI CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. INDU CHART. ANOTHER INDU CHART. OEX FIB CHART. OEX VOLUME CHART. RSISTO CHART. SUPERT CHART. XAU CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Thursday, November 19, 1998:

Big change today is in the McOsc reading. It has finally gone negative from 7.49 on Tuesday to -4.70 on Wednesday using preliminary numbers. It had been as low as -24 intraday. The Wednesday Close puts it just below the trendline. Maybe too big a deal is being made out of this since there is a neutral region about zero of +,-40 points. Still, it is a bit of concern since the NYA is making a retest of 566 earlier in the month. CODI's are dipping back down towards the Sell Alert lines. ADHL remains with two of three indicators on sell mode. SuperT is projecting 8856 as near term target. MOSS charts still have the OEX trending in Overbought with 568 to 570 resistance. NYA has resistance at 566 with a negative breadth divergence. Last but not least, the Option Premium Ratio is forecasting a 2.5% drop from Tuesday's low by November 27th.

Here are some charts:

AMOSS CHART. ASTROCAST CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. S AND P 500 PIVOT CHART. INDU CHART. ANOTHER INDU CHART. NHNL CHART. OEWKL CHART. OEWLL CHART. OEWWL CHART. OEWXL CHART. OEX FIB CHART. OEX PIVOT CHART. RSISTO CHART. XAU CHART. XAU DAILY CHART.

] Momentum for the open of Friday, November 20, 1998:

Bulls in INVESTORS BUSINESS DAILY and Investors Intelligence at a dangerous 5 year high of 57%.Put/call not at the prolonged bearish levels of .40 seen last July,but could pop to those levels next week.

Commentary from a week ago suggested that we might enter a put trade during this expiration Friday. If you have traded options very often then you know why option buyers prefer puts. They have the advantage of a volatility expansion on market drops and the payoff is pretty quick so you don't suffer too much due to time decay. The disadvantage is there are not too many times that you can position trade them in bull markets. Another disadvantage is the cash sitting idle waiting for a chance to cream you good and teach you a lesson for shorting America. And another disadvantage is they cost more per unit of protection and days of "insurance". Thus you can improve your odds by entering during a buying frenzy and crazy period. Some things are in favor of a put trade at this time. You undoubtedly have heard arguments for DOW 10,000 and conversely 6,000 {and all places in between}. Time does appear to be running out for this rally if declining volume and breadth mean anything. There is a huge industry that needs transactions to survive on and will move the market to facilitate a level of trading activity to provide for the lifestyle it has become accustomed to. What this means is stocks will drop until volume picks up enough to keep the industry happy. Back to the put trade. First we have to warn you that holidays are statistically a positive period. Institutions, funds, want Mr. and Ms. America to feel good and see gains when they have time to review annual performance to date. What better time for review than on weekends and holidays, or prior to meeting with a tax consultant for fourth quarter decisions. Then again prices might just be made to look more attractive over this holiday period by a few hundred point drop to shake a few more bucks free from those still waiting to get on board. Pushing ahead with eyes wide open we see that the McOsc went negative for one day and then positive for Thursday. A few days back we said that it can take 3 or 4 crossings before the direction is resolved. New highs have improved a tad as this expiration bias pushes the indexes to their summer highs. Thus, the ADHL has had a reprieve on one indicator. CODI's are closing in on the Sell Alert bands and the OEX regression channel on the same chart is providing a resistance point at 570. Thus we are looking at the 570 at the money put, OEWXN, tomorrow. Because of the four weeks to Dec. expiration you might want to drop down in strike price. This goes against some opinion about buying only time value and not premium, but it does have different dynamics and percent profitabilities especially if you are only going to hold it for a few days or week. Buying options this far from expiration does imply something about a holding period. There is definitely no expectations of holding them until expiration. In fact the goals are rather modest, such as a 50% to 100% gain in a much shorter period of time. Maybe even 30% would be acceptable. The OEWXN was trading between 12 and 13 late on Thursday. Should the market rally further on Friday you might be able to better this price or even move up further in strike. Normal expiration pattern is NDX and SPX settlement on the open, sometimes accompanied by a pop which fades into mid-day. Then late in the day, sometimes within the last hour to half hour momentum builds into the close. Most of the time the momentum is upward. This expiration might be the fooler as it has become common to expect such a scenario. Also, there is talk that unwinding has occurred earlier in the week.

AMOSS CHART. ASTROCAST CHART. CONE CHART. DJIA FIB CHART. S AND P 500 FIB CHART. S AND P 500 PIVOT CHART. INDU CHART. ANOTHER INDU CHART. MOSS CHART. NHNL CHART. NYA CHART. OEWLN CHART. OEX FIB CHART. OEX PIVOT CHART. RSISTO CHART. SUPERT CHART. XAU CHART. XAU DAILY CHART.