MomentumCycles

To quote from the MomentumCycles commentary for the open of Tuesday, February 1, 2000:{Wednesday's is below}.

"It never rains but it pours...readers were informed by www e mail that we had isp/mail server problems for Friday's commentary.The weekend commentary was posted as normal,on Sunday p.m. Bob informed me that he is having some trouble with BMI intraday data feed,so temporarily we have to resort to end-of-day charts.Please bear with us.

Well,the expected and discussed bounce{see last sentence of quoted weekend commentary,above} showed Monday,with DJIA theoretical low to high approximately 10660 to 10986{preliminary numbers}.Likely scenario would be to see another try to the downside sometime Tuesday or Wednesday,most likely with early Tuesday seeing some price weakness,due to latent and late sellers.If breadth improves,and strengthens the admittedly crummy longer term market internals,we will see a rally into the end of the week pension reinvestment money flow area{Thursday,Friday,Monday area}.{We must say it might just be a countertrend bounce here.}

The recent 30 year T bond action,including Monday's poor bond price showing,seems to be suggesting that flight to quality bond buying may be temporarily ending,and money may be flowing back into equities.Under current conditions,a weak 30 year T bond means continued money into stocks.Best look at support and resistance suggests a near term retest of 1390 March S and P futures and a try for 1403;succeeding above that 1417,which seems secondary resistance.Brave traders could try a long OEX entry at the likely retracement level{I'm using S and P numbers,but am thinking the OEX as the trading vehicle},with appropriate stop losses,and a partial exit near projected primary resistance,and a complete exit into continued strength towards secondary resistance.

Recent CBOE official equity call/put data for the last 5 days gives 2.2 for the 25th,2.22 for the 26th,2.35 for the 27th,2.243 for the 28th,and 2.24 for the 31st,close to the level of 5 consecutive days at a value of 2 that often mark good bottoms.We had two days with VIX readings above 30,with the high value Monday at 31.7 and an intraday reversal to lower{under 30}values.DJIA RSI 5 hit extremely oversold readings and reversed,suggesting a rally to the midband at least,or 2 to 3% higher.5 day moving average of up volume has stopped falling,and 5 day moving average of down volume appears to have peaked and reversed.5 day arms,the indicator that CODI is massaged and derived from,appears to have reversed.DJIA price oscillator is now rising {and has been in advance of price},as well as the 21 day moving average of adjusted volume.5 day rate of change of price did not confirm Friday/Monday's lows.

Additional suggestions that bonds are soon due for price retracement are due to the present FNM STOCHASTIC 5 reading,which is extremely short term overbought.{No short term bond trade is currently recommended,due to impending FED action-inspired volatility.}

XAU STOCHASTIC 20 has shown similar durations in past basing periods{see chart},and suggests a rally to the upper band is in the works shortly.We are holding a small position in some of the equity components themselves as a long term perpetual call on the sector."

To quote from the www e-mail update from 2:53 PM:

"Momentum Cycles readers who got a good OEX long entry early am are up about 10 OEX points from the discussed and predicted early a.m. lows.Could take 50% off here."

E mail to Bob: "We're up 15 S and P 500 points from the early am lows...looks tired here..take the money and run advice on www?"

E mail reply from Bob: "yes, the 765 calls had a low of 9 5/8 and a high of 14, so I would take some off."

E mail from Don Thompson: "Looks close enough {to your 1390} to me, went to 1391.75 emini, did you mention where primary and secondary resistance is?"

To quote from the next www e mail update: "Those readers who entered at the predicted and discussed early Tuesday a.m. lows {from last night's commentary} have a 10 point OEX profit on the first 50%, which was suggested taken off near 3 p.m. eastern.We now have about 13 points to the good from the 751 OEX a.m. lows.Take off another 20%."

To quote from the last www e mail update: "By the time you got the last e mail,you are up 16+ points from the entry.You should have sold 70% of the position by the close."

MomentumCycles commentary for the open of Wednesday, February 2, 2000:

We thought readers would like to see the complete process that is involved in entering and exiting a long OEX call trade,including our internal OEXTRADER conversations.The predicted Tuesday morning pullback and the gradual exit into various levels of resistance is seen in the above example.We got our morning pullback target almost exactly,as Don Thompson commented in the above e mail.Presently,OEX resistance seems to be about 769.We are still holding 30% of the position.DJI RSI 5 has not yet reached overbought,the 5 day moving average of up volume is still rising,the 5 day arms isn't yet screaming overbought,the DJI price oscillator is still rising,as well as the 21 day moving average of adjusted volume.The 5 day rate of change of price suggests from past rockets off the negative 5 level, that a move to +5 is eventually likely,which is some distance above the prsent reading.So then,why did we take 70% off the position?As mentioned earlier,upcoming short term resistance at 769 seems important.Besides,we have had 2 outstanding days in a row.Some temporary hesitation here would be normal,so much so that we would understand readers who wanted to close out the remaining 30% on Wednesday.

We note that Wednesday is payday for many TIAA-CREF participants,so a chunk of pension money is reinvested by automatic payroll deduction Wednesday,adding to some cash flow into equities.

FNM STOCHASTIC 5 is approaching the short term extremely overbought area seen in previous races to above the upper 3.5% band,so if correlation returns,T bonds are soon due for a rest.No T bond trade is currently recommended,however,due to Fed meeting time manipulation of the market.

XAU 21 day intraday volume percent is not confirming the present lows.We are holding a small equity position in some of the components as a long term perpetual contrarian call on the sector.

To quote from the MomentumCycles commentary for the open of Wednesday, February 2, 2000:

"Presently,OEX resistance seems to be about 769.We are still holding 30% of the position.So then,why did we take 70% off the position?As mentioned earlier,upcoming short term resistance at 769 seems important.Besides,we have had 2 outstanding days in a row.Some temporary hesitation here would be normal,so much so that we would understand readers who wanted to close out the remaining 30% on Wednesday."

MomentumCycles commentary for the open of Thursday, February 3, 2000:

Statistically, Thursday is on the bottom of the probability list for having an up close. The odds are thus against Thursday,02/03 having an up close, but lets play contrarian and consider that the rate rises on Wednesday were fully discounted in January and the seasonality for February has been delayed, and there is a compression of buying to be unleashed. The foregoing is speculation. Now, let's consider that there is little in the way of news to push the market up or down the rest of the month. The INDU and the SPX are still targeted to tag their 50 day moving averages from below. That would put the INDU about 11,200. All things considered, the market held together fairly well. VIX continued its downtrend which is positive. AdvDecl and FlowRate were both positive. CODIoex has a channel breakout, rising RSI, falling CODI, rising Momentum, Rising Mkt Thrust...it is still on a buy trend. Even the equityCP and the Sentiment are in buy mode. PutVol and PCratio have come off of the blistering overbought level. OEXnsync ran into resistance at the midbands, but if it can move above, then 800 is the band target. Likewise, on the OEXfibret. The traders sold on the news, but the selling was not enough to push the OEX below its pivot for Wednesday on the OEX daily fibs chart. Note that the OEX found resistance at the predicted 769+ area multiple times during the day (9:45, 10:00, 11:40, 12:00, 1:45, 2:15, and 3:00 to 3:30) providing an excellent exit on the remaining call positions. Early on Thursday we have support at 760 and resistance at 772 to 776. The 30 minute candle oscillator did flash an exit prior to lunch. Thursday's fib S/R range is narrow, so we will have an exciting time as usual.

XAU has spent some time basing below the lower 3.5% band,so a move up would seem to be in the cards,perhaps even to the upper 3.5% trading band.We are holding a small position in HL and ABX as a long term perpetual call on the sector.

FNM is at the upper 3.5% trading band,with an overbought STOCHASTIC 5,so a pullback would be typical here.T bonds are overbought,but FED adjustments are still distorting short term readings,so no trade is recommended.

MomentumCycles commentary for the open of Friday, February 4, 2000:

We could not have asked for a better day breadthwise. Perhaps you noticed that the McOsc crossed above zero yesterday and continued up on Thursday. This is one of those days when the market environment supported higher prices all day, but a few issues were dragging the index down in price. In the end, seasonality finally won out. It officially ends on Monday, 2/07. Friday should be another good day, followed by more upside on Monday. Thursday ended the day in buy mode on the 30 minute candlestick oscillator on the OEX daily fibs chart. The delayed compressed buying should continue taking the INDU up to and a little over the 50 day moving average at 11218.46, at a minimum. 11253.77 is the 21 day MA, which could also be considered a target. If things really get rolling, then the upper band at 11647 is the target. Many oscillators are still oversold to neutral.

FNM STOCHASTIC 20 may have to join the STOCHASTIC 5 in extreme overbought before the ferocious T bond rally and short covering ends.This appears to be panic buying.

XAU still seems in position to be basing for a good rally.Examine the XAU STOCHASTIC 20 chart for previous prolonged periods below the 20 level,and then see what happened.

MomentumCycles commentary for the open of Monday, February 7, 2000:

Positive seasonality officially ends on Monday. Having watched this for quite a few years, I know there is often one last gasp upwards on the afternoon of the end of the seasonality to facilitate the switch from aggressive growth back to money markets. The Doji star on the CODIndx shows a major point of indecision, and is commonly accepted as a reversal indication, if not just a consolidation. Technically, the price markdown continues as the INDU remains below its 50 day moving average and the SPX more importantly closed on its moving average. VIXpnf hit the Sell Alert level, but is still in an overall downtrend from the first of the month, as you would expect in a seasonally positive period. EquityCP and Sentiment are a bit shy of calling for aggressive put buying. Another day or two of optimism could put them at that level. 3INDX has turned, but the DoTrend and SMI haven't joined in yet. Other indicators like MOSS and AMOSS are neutral to overbought. Ideally, we would get one more upward push, perhaps intraday on Monday taking the OEX daily fibs to 780 to 785 levels for a put entry. Bonds have had quite a rally, and with the treasury refundings next week we should see some retracement, facilitating a correction in stock indices.

The short term buy signal on the XAU a while back appeared to be wrong,but we stuck with our guns and were at least partialy vindicated Friday.We had earlier recommended HL at 2$ as a long term call on the sector,with a short term trader's recommendation to take profits at 3$ to 3 3/8$.Low for this move was 1.25$,and Friday's close brought 1.75$.We later recommended a small position in ABX on the recent XAU buy arrow,at about 16-17$,and Friday saw 18.375$.Notice how the XAU intraday volume % chart on the sidebar reliably predicts rallies in the XAU from at least the lower 3.5% band to the upper 3.5% band every time the 21 day intraday volume % hits a reading of approximately -25% and price hits the lower band.This is followed by LOWER prices accompanied by a less negative reading on the intraday volume % chart.This downside non-confirmation is then followed by a move to the upper 3.5% band,and often above it,as we see now.Presently,STOCHASTIC 5 is approaching short term overbought,so a pullback sometime soon is likely,at least back to the upper 3.5% band.STOCHASTIC 20,however,is not overbought yet.Remember,that unlike most other analysts,we were short term bearish on the XAU at 92 {see the huge plethora of down arrows on the XAU charts on the sidebar at XAU 92 !},and only recently received a short term buy,albeit a bit early.We still are holding the small position in both equities as a perpetual call on the sector.Longer term rate of change analysis on the sector seems to suggest a pullback in the underlying metals fairly soon,but then a good rally into the May area.

FNM/T bond correlation suggested that the gap down in yields Thursday was temporary "give up" behavior by bond shorts.The recent strange action in long term bonds is partially due to hedge funds caught on the wrong side of the bond trade in the same way that was seen on at least 2 occasions in the last 2 years.The last time was serious enough to force a bailout of illiquid derivative positions by Greenspan and his banking cronies.We gave 2 days notice this time that the T bond/FNM correlation suggested a short term overbought position in T bonds.No trade was recommended,however, due to FED manipulation during the recent meeting.It is just as well...bonds were so wild intraday last week that several multi-billion dollar funds were caught on the wrong side while {repeatedly} trying to reduce positions.

MomentumCycles commentary for the open of Tuesday, February 8, 2000:

The saying goes something like this, "Amateurs control the first hour, professionals control the last hour". If that is true, then what message did the market send today? It appears that the public was bearish and the professionals bought the dip to lower OEX daily fib support at 768.54 and rallied it to close above Tuesday's pivot. The Candlestick oscillator turned up in that hour. Granted, the OEX Projection Oscillator is tracking in Overbought and it can track there if the daily uptrend continues. Trading was abated in the morning due to problems at the CBOE. At first it was thought to be flood related, and later that reason was rejected. Whatever the case, it put a damper on AM trading since the CBOE is responsible for over half the volume on NYSE- optionable stocks. Also, this is pre-expiration week and there are treasury auctions that additionally put a damper on equities while pros wait to see the impact of rate changes. VIXpnf has moved into the indeterminate zone. MOSS has dropped back a bit. CODIoex is still on a BUY from the last signal. There is a possibility that the OEX could break out of this ABC flat within the Cyan channel which has been corrective of the rise off the October lows. This would be in concert with the INDU bouncing off the 200 day MA and the -3.5% band. Note that the INDU rate of change is about to turn positive on a Daily basis. Its OBV has been gradually climbing throughout this correction. OEXnsync is neutral, but in an uptrend. If the OEX can close decisively above the 774.77 band, then 804.44 is the intermediate term target. OEXfibret is also targeting 801.87 and its daily rate of change has turned positive. OEX30minute suggests an inverted head and shoulders that also projects to 800+. TYX yields did pull back inside their channel, and are now in the position to create a head and shoulders top. That will take awhile to work out, as it is about 3/4 of the way through the pattern. That would be a definite positive for stocks. In the meantime the NDX and NASDAQ continue their uptrend. EquityCP and Sentiment still appear to have a bit more on the upside before a good put trade is at hand.

We came very close to hitting the upper 14% trading band on the XAU Monday.We had predicted that a rally to 72 was in the cards {upper band} and Monday saw that,and then a reversal.We expected a tag and pullback,but were surprised to see it all in one day.Notice the down short term sell arrows on all the XAU charts on the side bar to the left,from the 72 intraday tag.We still feel a longer term rally is in the cards,with May as the likely target area for profit taking using longer term rate of change analysis.We are prepared for another short term decline,perhaps even to the lower band,for the components ABX and HL.We will hold the small equity positions as a longer term call on the sector.

Remember how we characterised Thursday's T bond trading as "panic short covering"? FNM/T bond correlation {see sidebar} predicted a short term overbought situation Wednesday of last week, 2 days ahead of the key reversal.T bonds fell again Monday,in accordance with the weekend analysis. We will be looking for the next tag of the outside bands on the FNM charts for a chance at another short term bond trade,now that the FED meeting inspired manipulation is over.