MomentumCycles

Momentum Cycles Update after the close on Tuesday, December 2:

After early December reinvestment money flow ends, there is seasonally sometimes a weaker period that occurs before the Santa Claus rally and New Year's rally period begins.Selling that occurs in this weaker in between period often finishes about the middle of the month, associated with the remaining tax selling of losers for the year.In the next several days we will attempt to calculate the likely reversal dates for December's money flow patterns.

Breadth:

Tuesday saw consolidation of Monday's unusually large gains, see VPband chart. NYA breadth deteriorated somewhat, but not enough to end the recent advance. The last hour flow rate was not encouraging and could have just been related to daytraders giving up rather than signalling a change in trend. The McOsc of issue and volume is overbought and there are a few more days remaining in this momentum cycle where they can get more overbought. CODI is in the indeterminate region.

Volatility: AMOSS Zone Timer made another penetration into the sell zone on Monday and dipped out on Tuesday creating a sell pivot. This is not too unusual since the 20 and 90 day components(not shown) are in the overbought zone. The MVIs also made sell pivots on Tuesday. These may be a little premature due to the extreme move on Monday and three days remaining in the positive momentum cycle.

RSI, SMI:

These read like a broken record. XAU is making a stand at the 70 level. Yields frozen in the first snowfall. Stocks are still on the menu. Wednesday is "hump" day for the week.

Of Special Interest:

Got a 98 up rating on CMR{Canmine Resources,Toronto} on Tuesday. The bullish divergence continues between price and volume related indicators. Here are the support and resistance targets for today's OEX trading.

Here are today's pivot prices.

Momentum Cycles Update after the close on Wednesday December 3, 1997:

Breadth:

Wednesday's breadth was about the same as Tuesday's resulting in little change in price and the issue and volume oscillators. NYA declines increased to more than 1200 which put pressure on prices. Flow rate was quite sufficient to create a downtrend in prices prior to 2PM and reversed to an uptrend for the last hour and forty-five minutes. The last fifteen minutes saw a decline that rapidly triggered stop losses eroding virtually all the gains for the previous two hours. Overhead resistance brings out the sellers as it stands its ground.The breakdown from the 8259 high earlier in August gained momentum after falling below 8050, so resistance in that area would be expected.After the DOW dropped over 1000 points, the smart money was buying{remember6900 print?}, and after rising 1000 DOW points, the smart money may be taking some profits. CODI is in the indeterminate zone.

Volatility:

The MVIs and AMOSS are signalling further weakness ahead. OEX P/C ratio is neutral.

RSI & SMI:

SPX RSI is forming a wedge pattern with the vertex in overbought territory. This comes at a time when price is pushing on resistance set by highs earlier in the year. In order for the SPX to remain above the overbought line it would have to breakout above resistance and continue to trend. There are two days left in this momentum cycle increasing the odds that the SPX will be pulling back shortly. XAU appears to be putting in a double bottom similar to the one in November 1992. T bond yields are hanging tight at current levels.

Of Special Interest:

Finally we have something of very special interest tonight. The volume on Canmine Resources soared to 136,400 shares today which is over six times its daily average. It closed back above 1.5c. The price/volume divergence over the last weeks may finally end with price pushing higher. Congratulations to those who have been reading this section and had below market bids in to capture some stock below 1.5c. It may be appropriate here to review some salient features on this issue.First of all, this is a bet on geology.We reviewed the existing maps of the Thompson nickel belt,the second largest nickel deposit in the world.For many years, people were looking for the extension of that belt, which hosts so many rich producing deposits.Canmine spent almost 1 million on surface , electronic and aeriel surveys in the north of the existing deposits, where no one had thought to look before.This area, called BINCO, is completely claimed by Canmine.If ,as preliminary geology suggests, the North of the belt has ANY nickel at all,this could be the extension of an already world class deposit.This is totally unfactored into the present price of the company.Let's call it a bonus lottery ticket with a lot better odds.Canmine is today in the process of drilling the Eastern portion of what is already a commercially viable nickel deposit at MASQUA.ANY nickel results of note on this Eastern side of the present deposit could add as much as 3$ a share to asset value,since the geology to the East of the already measured deposit has a similar electronic signature.

Now, let's examine the identity of recent buyers and sellers.It may be that most of the selling has been coming from one group who may have had problems related to the BRE-EX scam in Indonesia.Tax selling may be the other reason for the recent selling.There appeared to be a pattern of institutional buying today.MOST OF THE TRADING HOUSES IN CANADA APPEAR CURRENTLY TO BE NET OR CLOSE TO NET BUYERS IN THIS ISSUE,WITH WHAT APPEARS TO BE ONE EXCEPTION.It is possible that once that selling is exhausted,with any favorable drill results,the story may be too compelling to be ignored.Remember,Werner Lake alone{the cobalt deposit} leads us to project 77cents a share{scope only estimates} in 1999.That's a multiple of 2 when the share price is 1.50$.Admittedly this is a gamble,as any individual stock selection is, after all.We have been looking for technical confirmation of the fundamentals and internals by a violation of the downtrend line.We also watch the tape.

Here are the OEX pivots and the DOW pivots.

Momentum Cycles Update After the Close on Thursday, December 4, 1997:

Breadth:

McOsc issue and volume oscillators are diverging from price. Friday is the last day for this momentum cycle. Equity indices are due for a pullback. NYA has dropped back below long term resistance and below a seven day uptrendline. Flow rate was of liquidation quality on Thursday. See charts for additional commentary. CODI is in the indeterminate region. Its readings should be tempered by the Zone Timer scores below.The resistance of 8060 or so mentioned yesterday is bringing out supply.

Volatility:

Modified Volatility Indices have failed and are signaling weakness ahead. The Zone Timer and Zone Scores are registering sell signals. These are similar signals, although the Zone Timer is more sensitive and keyed to option strategies.

RSI, SMI:

XAU took a panic hit today on news that Argentina had been trading gold bullion for US T bonds! Note that is past tense, HAD been. Who do you think got the better end of the deal? He who has the gold rules. { Or he who controls the printing presses rules!} Fantasizing here, Gold could double, but could T bonds double? Now that is real leverage. This comes at a time when T bond yields made a spike low and closed up for the day. Kind of feels like something terminal, but one day at a time here. SPX RSI and SMI look like it is time to cash in and go do some Christmas shopping. Come to think of it, if retailers make half their annual profits between Thanksgiving and Christmas, where do they park all that cash short term? Might be a clue to short term interest rates.

Of Special Interest:

CMR- Turning up that downtrend line is causing a battle royal between value buyers and tax sellers at the 1.55 price where supply meets demand on heavy volume.The trend has not yet broken, so some players are buying the low end of the channel and selling the top, until it stops working.There are bids of significance at 1.40, from what we can see on the offer side. Now comes the hard part for Canmine Resources. News of significant new reserves, improving technicals, three and a half more weeks for tax selling, still wise to try for acquisitions with below market bids until Santa arrives. In fact the best prices on Canadian moose pasture occurs when the above ground thermometer registers its seasonal low.BINCO drilling to begin this December.

This simple moving average crossover suggested weakness coming up near term related to the AMOSS and Z Timer scores above.

Momentum Cycles Update for Monday December 8, 1997:

We are overbought by many measures, including days of rally, normal end of monthly reinvestment money, stochastics,and the probable turn day areas of December8-10.Price has not yet turned.Looking at our MOSS and MVI charts, long equity positions are certainly risky at this point, as we are in the sell zones.CODI has not yet hit the sell alert region.Seasonally , in December,there is often some pullback after monthly money flow ends into midmonth, prior to a rally that often begins December 23 into the New Year.Bonds are still receiving money from overseas turmoil seeking a relatively stable dollar and what appears to be an endless bull market in T-Bonds.We pointed out much of last week that 6% was a hard nut to crack, especially considering the near 12 year high in bullish bond sentiment.

Breadth:

NYA issue breadth was good on Friday, but not great. Any time the declines are over 1200 something serious is occurring. Advancing and declining volume Friday was more in line with a DOW up nearly a hundred points at one point during the day. Flow rate was better than what is expected on a typical Friday. Putting this in context of an intermediate term view with the McOsc of issue and volume we see that a divergence has been developing between the price index and the underlying issue and volume. Generally the volume oscillator will peak first, followed by the issue oscillator, and finally the price index gives way. The divergence can go on for days and weeks, even months. The point is some concern should be given to long eqiuty positions. It is hard to stand by and not participate in a market that feeds on itself. One that does ends up with no legs. CODI is in dead center in the indeterminate region after a period of oscillation while price trends higher. It just takes patience for CODI to get to the extremes. The fewer,but more certain and profitable trades taken off of the extremes make up for the shorter term whipsaws in the indeterminate region. Click here to see the daily and weekly trends expressed on the rainbow charts.

Volatility:

The MVI adaptive is coiling into a tight wedge foretelling of a coming explosion. If we are to believe the Modified Option Strategy Spectrum and the %b and the RSI, then we would expect some downside action. Here is where oscillators trip up many traders. Trends on price should be the first thing to look at; secondarily look at overbought and oversold oscillators. Ideally they will be in agreement at turning points. When price trends, oscillators based on a fixed period will give miscues. We have introduced some Fibonacci indicators with price targets and a Ratio Oscillator to help separate our analysis from the standard fair. The SPX and INDU are not surprisingly indicating an oversold condition. The XAU and T bond yields are viewed as hitting bottoms. These Fib charts have daily bars with weekly look-ahead Fib Zones. Below each price plot is the Ratio Oscillator. The next update will go into their use and construction.

RSI and SMI:

T Bond yields are finally making the RSI chart come alive. XAU is making another attempt at moving off of oversold. The SPX RSI & SMI are in overbought, but as of Friday have not signaled a short term sell signal. It could happen any day now.

Of Special Interest:

Canmine Resources is beginning to behave like a big cap stock in the artificial intelligence engine. The extra volume it is getting along with the inching upwards in price is turning many of the indicator panel's buttons(not shown) to green from red and red/yellow.

Momentum Cycles Update For December 9, 1997:

We warned last week that 6% on the bonds was accompanied by extreme bullish sentiment, a close to 12 year high.Traders who lightened up at 6% or shorted near that level did well the past 4 trading sessions.Only a substantial close below 6% accompanied by increased bearishness will project the 120.8 that some see as a target.Right now 6% seems pretty strong resistance.Bonds are probably oversold somewhat on a daily basis.

Breadth:

McOsc issue and volume have stalled out and the vol oscillator is rolling over. Momentum preceeds price. Price stalled at a triple top dating back to earlier this year. NYA breadth was not conducive to price advance today. A/D intraday line is losing momentum. Flow rate showed weakness in large caps related to increasing bond yields. CODI bounced off the center of the indeterminate region and is about to cross the red signal line.

Volatility:

MOSS Zone Score is in dangerous territory. MVI is poised for an explosive move. RSI and %b say Monday's weakness has more to go.

RSI, SMI:

T Bond RSI made a gonzo move today and there were perceptible moves in the Yield SMI. XAU is still suffering yearend problems and relative strength problems. Once the short gold stocks/buy blue chips subsides, the XAU RSI should improve. SPX RSI/SMI is showing geriatric wrinkles.

Fib Zones:

Tonights view of the Fib Zones on the SPX, INDU, XAU have a daily stop loss line added named the Triple Switch. A daily close beyond this line changes the daily trend. T bond yields TYX closed above the weekly balance. This should provide support on Tuesday.

Of Special Interest:

Canmine Resources had extremely low volume on Monday. Everyone wants to buy it on the cheap and sellers have decided to hang on for higher prices.There were a lot of bids at 1.55, and not too many sell offers at 1.58. This means the price should work higher. http://www.canmine.com has complete information on this company.My gut feel from the geology is that hole 2 will be similar to the good results of hole 1 {maskwa drill site}, and that the similar eletronic signature of the new portion will prove to add as much as 3 $ /share to asset value.Binco , of course, is the lottery ticket.If it is indeed the extension of the Thompson field,share owners will own part of an "elephant" in mining terms.