MomentumCycles

MomentumCycles commentary for the open of Wednesday, December 29, 1999:

Any other time of year we would have a juicy put trade on our hands, but this extended seasonality is taking its toll on "indicatoritis". For example, the long sustained trend from the October lows has the Modified Option Strategy Spectrum in the neutral zone. Option Sentiment and EquityCP are not screaming buy or sell. 5 Day Declining Volume is dropping back to basing levels from which rallies spring. Green Trend exhaustion Index has crossed into buy mode and the Red TEI is on the fence for buy or sell. There are a few big negatives. One is the End of Day Cumulative Volume which remains in a bear market and quite divergent from the DOW. This is unlikely to improve until January 3rd. Intraday cumulative volume has gone into a Y2K holding pattern. FlowRate and AdvDecl have gone into a year-end trendless mode. The Payroll indicator won't strike until January 3rd as the government only permits 12 monthly checks in one tax year. So this is that one time when the Mutual funds don't get the e-cash until after the first of the month; it is usually prior to the end of the month. VIXpnf implied volatility has been hanging out in the Indeterminate zone clouding the picture for calls or puts. Visually it looks like the NASDAQ and OEX are running out of steam as they form dragon fly and doji candles that are normally construed as trend termination indications. The CODI Nasdaq appears close to a sell. From the BRMOM standpoint it is a sell, but from a price standpoint it is hanging onto an uptrend with the Blue line remaining above the yellow dot indicator. CODI OEX is also flashing the Sell Alert again. Seasonality is the only thing holding this trader back from putting on a put trade. Neutral technicals and Y2K concerns are keeping the cash on the sidelines until next week.

XAU found resistance at the upper 3.5% band of price,as the arrow two days ago on the XAU chart below shows.We still expect an eventual move to the upper 14% band,probably at the time of the next equity index selloff.HL is still not free from tax dumping influences.

Here are the other charts:

CONE CHART. CV CHART. INDU CHART. INDU60 CHART. INDUB CHART. MCOSC CHART. NDX CHART. OEX 30 MINUTE CHART. OEX DAILY CHART. OEX FIBRET CHART. OEX NSYNC CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, December 30, 1999:

The NYSE had a significant drop in the new lows today from 400 on Tuesday to 255 on Wednesday. They are expected to decrease even further on Thursday as the selling of losers appears about over. New Highs remained about the same- around 100. The Trend Exhaustion indices monitor three market zones. The Red TEI monitors the new lows and declining issues and detects pivot lows and basing periods in price. The Green TEI monitors the new highs and advancing issues and detects price peaks and high level consolidations. When the Red TEI peaks and drops it is an indication that in terms of breadth the selling is abating and price may rally. When the Green TEI peaks and drops it means that breadth has peaked and price may drop. In between these two extremes price can trend and cycle within a trading range. As of Wednesday, the Red TEI has peaked and is in a gradual downslope. The Green TEI is basing and poised to turn up if breadth broadens on the NYSE. The reason this is important is because the "Generals" cannot advance very far without the support of the "troops". It looks like the troops are beginning to get marching orders. The McOsc has broken out above its neutral zone, Cumulative Volume trended up, AdvDecl, FlowRate all were indicating a much improved strengthening of the troops. Prices can easily move much much higher by default with broadening breadth and cessation of tax loss selling. You could say that the majority of the troops have been consolidating since the middle of November and are ready to charge again. The low volume this week is clouding the picture and has reduced the price range on the OEX to within the inner green Cones for two days. This has dropped the Projection oscillator back to the neutral line at 50%, and has kept the Moss and Amoss almost dead center neutral after forming ominously contracting triangles. There was a fakeout breakout on those oscillators to the upside and now the AMOSS has dropped below neutral. This may indicate we have some selling ahead even as breadth improves. The last hour on the INDU60 and its Nsync hint of weakness on Thursday. End of Day Cumulative Volume has moved up to the underside of its 200 day moving average just as the RSI for the INDU and EODCV reach for the overbought level at 80%. We are very likely going to get some profit taking in the early part of 2000. When just depends on the amount of cash held in reserve for Y2K fears. This cash could propel all indices higher so it is just suicidal to take a short position right now. Also with the possibility of profit taking next week {in spite of seasonality} we could have some very sharp but short down days. If this sounds like someone is having trouble making up their mind, you've got it right. What we've had lately is an unsynchronized tape and confident trading decisions can't be made under these circumstances. The likely outcome is to be chopped up if you take an OEX position at this time. After this weekend we should get higher range days and a clearer picture.

XAU STOCHASTIC 20 shows a short term overbought index at the upper 3.5% band of price.Longer term,of course,this index has been pounded by disfavor and tax selling.Next year,perhaps,a rise to the upper 14% band is in the cards.HL is 1 5/8.

Here are the other charts:

5 DAY ADVANCING VOLUME CHART. OEX CODI CHART. NDX CODI CHART. EQUITYCP CHART. INDU CHART. INDUB CHART. NDX CHART. OEX 30 MINUTE CHART. OEX DAILY CHART. OEX FIBRET CHART. OEX NSYNC CHART. RISK CHART. SENTIMENT CHART. SUPERT CHART. VIXPF CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Friday, December 31, 1999:

"The strong die hard", as they say. CODI NDX is giving a sell alert on the CODI portion but Price has yet to develop the yellow exit signal. However,the OEX on the Equity and Sentiment charts have given the Exit signal. CODI OEX has flashed another red dot sell alert as the Momentum rolls over and the Market Thrust hits the maximium overbought level. Do we have a sell or not? Red Trend Exhaustion Index says breadth is still coming off the bottom. Green TEI would not be expected to do much until price passes up through the middle zone. So, TEI is still showing that the worst selling appears to be over in the broad market and the indices are showing that the few leaders are weakening. The Russell made a beautiful red dragonfly that is headed downward. McOsc is getting into the overbought area, but it is not a very good top picker. On the positive side the TYX is peaking and the VIX is closer to the buy zone. Of course, VIX can go much higher if some profit taking comes in next week. With only one day left to trade in 1999 and a partial day at that, the advice here would be to sit back and enjoy rather than commit funds. Note we have made a distinction above- buy, exit, and sell.

XAU short term is still overbought,as seen on the XAU STOCHASTIC 20 chart below.Price oscillator is coming off of resistance at the upper 3.5% trading band.Longer term,XAU and its components are quite oversold and appear to be putting in a base for an eventual rally to the upper 14% band,at minumum.

Here are the charts:

5 DAY ADVANCING VOLUME CHART. ADVANCE/DECLINE CHART. EODCV CHART. FLOWRATE CHART. INDU CHART. INDU60 CHART. INDUB CHART. MOSS CHART. OEX 30 MINUTE CHART. OEX DAILY CHART. OEX NSYNC CHART. RISK CHART. RUT CHART. SUPERT CHART. VOLATILITY CHART. XAU OSCILLATOR CHART. XAUS20 CHART.

MomentumCycles commentary for the open of Monday, January 3, 2000:

{The following proprietary system has has an outstanding rate of return since its inception.It will be posted on the front page of OEXTRADER once the link is active,early next week.}

Here are the results of the one year test of our long only CCO system. Trade signals are based on the broader based NASDAQ (symbol CCO on BMI feed) using a trend following system. In practice, a trader would use the QQQ tracking stock or ND futures, or NDX options. It is best to wait until the system comes comes out of a flat position,and where the arrows change from yellow to green before making a long entry. When the blue trendline is above the yellow dots the system is long, and when it is below the yellow dots it is flat(i.e. no positions) for conservative traders {and short for aggressive traders who use appropriate stops and risk management}. As of 12/31/99, the system is still long with "overbought" indications on the RSI and CODI {change of direction indicator}. Momentum has peaked and dropped back to a neutral level as the NASDAQ finds resistance at the 4000 area.

{The following is Monday's commentary.}

It is still premature to draw any conclusions about the future from price and breadth data in the final two weeks of 1999. Y2K funds held in reserve will likely find their way back into the market over the next month. This should counter an expected tax deferred profit taking bout in January for money that entered between the October lows and Thanksgiving. The net result may be a sideways consolidation channel {as depicted on the Volatility chart} in early 1999. It could start off with an attempt to make the first five trading days end with a net gain. Then a decent put trade should be at hand. followed by a month-end rally which would make the month end positively. Statistically and psychologically the "machine operators" want this to happen because the first week, and the month as a whole, are both used as an annual gauge for the coming year. The FOMC will appear again in the first week of February as a party pooper, and continue the consolidation started in January.

An argument for a consolidation is the long extended price run from the October lows to the December highs which occurred without a correction of consequence. The final days of December gave the impression that price momentum was peaking just as new high/new lows, adv/decl, net flow rate were revealing the last minute window dressing. All three of these turned positive as the CV {cumulative volume} continued to rise. The long vacation period dropped the 5day advol and decvol to levels from which renewed upthrusts in price have occurred. However, a McOsc at plus 158 is considered overbought. It is also considered a sign of strength, depending on the color of your glasses. The McOsc is a poor top picker when price continues up in a narrow fashion as the McOsc rolls over, so you can't trade OEX options using it as a primary indicator. The zero crossings and spike lows make better timing tools than overbought levels. Red Trend Exhaustion also shows a continuing improvement off the breadth lows with a decreasing percentage of new lows to declines. Perhaps by February the green TEI will be in a peaking mode with the red TEI in a troughing mode. The 5 day and 20 day historical volatilities are entering top picking levels as the VIXpnf creeps upward in anticipation of a bout of selling. VIX is three points away from going into a deep sell mode or reversing into a beginning of month buying frenzy with a drop back down to the low 20's. Seasonality argues for a call trade in here for four or five days, which means the OEX CODI, change of direction indicator, will reverse downward from the whipsaw zone towards another Sell Alert by the end of the week. The UC payroll indicator says another fresh supply of funds will be available on Monday to help drive prices up into the end of the week along with bonus money. The sentiment chart reflects a consolidation over the previous week, the Equity C/P ratio is not yet at a juicy extreme for puts. MOSS and AMOSS have moved to the oversold side of neutral helping set up the beginning of month trade. Total Equity Put Volume is dropping to such low levels that it is reminiscent of the period going into the early 1999 consolidation. So, basically the feel here is that we will get some more upward movement next week which would be profitable for an at the money call trade. Then the deferred profit taking should overwhelm the new buying and we should have a short but decent put trade.

XAU and its components are overbought short term,but are undergoing longer term accumulation by the slow patient money.See the for XAU charts below.

Here are the charts:

CODI NDX CHART. CONE CHART. INDU CHART. INDU60 CHART. INDUB CHRT. INDU NSYNC CHART. XAU 21 day intraday % CHART. XAU accumulation CHART. XAU OBV CHART. OEX 30 MINUTE CHART. OEX DAILY CHART. OEX DAILY 2 CHART. OEX FIBRET CHART. OEX NSYNC CHART. RISK CHART. SENTIMENT CHART. SUPERT CHART. XAU PRICE OSCILLATOR CHART. XAU STOCHASTIC 20 CHART.

MomentumCycles commentary for the open of Tuesday, January 4, 2000:

What a way to start the new year! Deferred tax loss selling was aided by a further drop in T bonds and consequent rise in yields. Net Flow Rate was exceedingly negative and produced a downtrending cumulative volume. Adv/Decl was in a bear trend right after the opening pop. Corrections are over in a hurry these days, but one has to wonder if the run from October lows can be over in one day. The late day bounce was pretty anemic. In spite of the negative volume and issues, our Red Trend Exhaustion Index continues to drop, which is a positive. The Green TEI rose, which is also a positive. The OEX system is still flat and the NDX system is still long. NYA on the McOsc chart and OEX on the Midas chart both dropped back to Midas support. OEX 30 minute chart shows the simplest of systems using trendline extensions. That was quite an impressive show of force at the trendline originating back on 12/16 and 12/20. The Put Volume indicator had been warning of a short term top. The Equity C/P and Sentiment have had their Stochastic Momentum and 3INDX on a sell for several days now as the OEX system went flat last week, in time to avoid this downdraft today. We still expect some positive seasonality in here. Whether it can overcome the deferred tax gain selling and the Dow trust readjustments remains to be seen.Note that the VIXpnf essentially made a buy signal on Monday.

Examining the series of XAU and FNM charts seen on the links to the left of today's commentary, we can note two important things.XAU shorter term is still overbought,but longer term accumulation measures are showing the slow, patient money is buying index component shares.In contrast,FNM,and thus interest rate related instruments,are short term somewhat oversold,being near the lower band and near where previous FNM price support was seen.However,longer term accumulation measures show confirmation of Monday's FNM price low.This confirms that interest rate related equities have more weakness in their future.

MomentumCycles commentary for the open of Wednesday, January 5, 1999:

It is beginning to look like the first quarter consolidation depicted on the Volatility chart is underway. Last year it began on January 8th. It was predicted here last week that after such a long runup from October lows the market would enter a consolidation period starting with some profit taking. We held out the expectation that beginning of month seasonality might counter some of the selling, however the selling is rather strong and persistant. We also stated recently that the first half of 2000 would be weak and the second stronger, simply because the market correction has to be over before the election and thus interest rates would be raised in the first half rather than the second. In fact we would expect the war on inflation to be declared temporarily over sometime in the third quarter followed by an easing of rates in the third and fourth quarter. Beyond that the End of Day Cumulative Volume never did "buy" into the year end rally frenzy. It remained pretty much in a bear trend and only briefly moved above its 200 day moving average. If you looked at the chart and read the comments then you know the resolution is for the index to follow EODCV which has been dropping. The Sentiment Put Alert was timely following the SMI and 3INDX crossovers as was the Line Dot trend indicator telling conservative types to go flat and aggressive types to short or buy puts last week. This was also accompanied with very low 5 & 20 day historical volatilities on the Volatility chart. The Put Volume indicator and P/C ratio were so low, representing such extreme optimism, that it was only a question of when, not if, a correction was going to occur. Considering the fact that this one is also driven by FOMC concerns we should not expect a quick recovery and tax losses for latecomers are now being generated. Our intraday data supplier had some delivery problems so the intraday charts are absent in this commentray. Suffice it to say that the FlowRate looked like Monday's with lots of net down volume. Also the advances vs declines were strongly into a downtrend mode with declines way above 1500 and advances way below 1200. The question begs asking, "What next"? Well, the Super T oscillator is almost to the correction level where some decent call trades have been born. One more day should do that unless we go on down to the "Crash Mode" level. Risk Monitor says 10766 is a likely DOW target. Super T says 10909. INDU%B says 10976, about where we are now. The Modified Option Strategy Spectrum says the OEX is now extremely oversold and the Adaptive AMOSS is on its way, but only Overbought so far. Note the triangles on those oscillators and note the fakeout above the upper side of the triangle near the apex. That was pointed out in previous posts with an "FO" where we thought the fake out might occur. If you recall last Thursday The futures opened very far above the Wednesday close and took all the shorts to the cleaners. Those kind of moves you just know indicate something sinister is at hand. Now we know what was being prepared for the unwary {non-readers of this site!}.

The same series of FNM and XAU charts shown yesterday are updated today at the sidebar to the left.Again,comments apply to the longer term horizon on both charts.We believe that FNM,and thus 30 year T bonds,show longer term upward pressure on rates,regardless of short term oversold measures.OBV of FNM shows this clearly.XAU was pointed out in several previous sessions as short term overbought at the upper 3.5% band.Today it fell in concert with the general market.Longer term measures of accumulation suggest this index and its components are being accumulated by the slow,patient investors.As such,being long the XAU is probably not a quick trade here.