MomentumCycles

MomentumCycles commentary for the open of Monday, February 22, 1999:

This S AND P 500 CHART shows the trading range that the large caps have been mired in for months.Many traders have been whipsawed by attempting to trade or define a longer term trend.Thus, very short term trades have been recommended, and worked well for us--sort of a "hit and run" style.As discussed below,indicators are mixed.For instance ,using the method of CONSECUTIVE put/call readings,the last 5 equity call/put ratios were 2.0114,2.1893,1.981,1.4905,and 1.756.In October 1998,7 consecutive basing ratios were accompanied by a 5 day rate of change at -17.5 %,CODI well in the buy zone,STO and RSI at extreme oversold,price below the lower 3.% band,and extreme bearish Investment Advisory sentiment.

The present series of basing ratios are accompanied by a 5 day rate of change at 0%{neutral},price at the middle band of the DJIA {21 day moving average},RSI and STO not oversold,and Investment Advisory sentiment just coming off the highest bullish consensus in years.

And so, at first glance there does not appear to have been much of a change from the neutral stance MomentumCycles has presented here the last few weeks. MOSS is dead center neutral on a price basis. ADHL and JBOC OEX are still in the sell mode. Breadth measures such as McOsc have only come up to the lower side of the neutral zone, as they have for the last month on each short rally. SuperT is a graphic way of saying that overall breadth measures have not supported this horizontal price movement for the last month and price should break if the overall breadth does not improve. At least, that is what history teaches us. If a rally is for real, then it would be reflected in the EquityCP and Sentiment with rising values until a short term top is reached. As these charts ideally pounce on a reversal,presently they have come close to the Buy Calls levels that occurred in the fall of '98 and bounced for a day. Until a breakout occurs on the MOSS chart, the trend will be sideways.

XAU longer term seems to be making STOCHASTIC and OBV nonconfirmations of each succesive low.The last short term sell arrow at 68,cover under 63 turned out well.

Here are the charts we examine nightly:

CODI CHART. CONE CHART. CYCLE CHART. INDU CHART. INDU FIBRET CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEXPF CHART. RSISTO CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

To quote from MomentumCycles commentary for the open of Friday,February 19,1999:

"One problem with cycle analysis is that verification of a cycle hit only comes so many bars after the the hit. Cycle 1382 has been saying that 2/18 or 2/19 would be a trend change date. Breadth did make trend change, and price appears to have also. However, only history will show if this change has much significance after it develops further. EquityCP and Sentiment are in the vicinity of an outright call recommendation. This is as we would expect, as these measurements tend to precede the price indicators. ADHL and JBOC remain in sell mode for the intermediate term systems. The market can rally some and still retain the Sell mode. Moontide also gave some encouragement for an upside expiration. The Thursday positioning set the NDX and SPX up for the Friday morning settlement. After that, we still expect the mid-day slump and then the late PM rally for the OEX. That is where you might want to buy an in the money call if everything else is in go mode. Most of our short term price indicators remain in neutral with the breadth indicators stuck in oversold. There is potential here for some rally."

MomentumCycles commentary for the open of Tuesday,february 23,1999:

Well,if you bought those calls Friday,Monday with 212 DJIA points up in one day...you should have taken good money home today.

But whoa, was that for real? How much faith can you put in a short covering rally to continue into the following days?Perhaps traders were front running Alan Greenspan's testimony this week?Or a full 2 weeks of increasing retail public short selling,encouraged by late -to -react talking heads,and thus the pros smelled the blood in the water?With those basing ratios we quoted this weekend,being short Monday was suicidally high risk.

Anyhow,given that some options ceased trading on Friday we would expect the EquityCP and Sentiment charts to have some changes, but nothing like we saw on Monday. In fact, the EquityCP ended at one of the most optimistic levels since the lows in the fall of '98. The Sentiment is close behind and near the Buy Puts level. CODI is moving on down to the Sell Alert. OEX jammed up to the lower Standard Error Bands, a logical reversal point. OEX pivot and fib resistance was broken, and it triggered buying that jammed the INDU up close to its 3.5% band{in fact,the theoretical tagged it !}. The risk of longs here is high on a short term basis. MCOSC came right up to the zero line where we figured additional shorts would re-enter the market. Both AMOSS and MOSS pushed into Overbought zones. Moontide was quite constructive all day in support of the rally, meaning it had issues and volume behind it.

Note that this level of Projection Oscillator overboughtness has been followed by some retracement in a day or so{ in our past experience}.

XAU Stochastic 5 and 20 in the oversold area,readying for trying another rally crossing of the 20 level in concert with a try towards the declining tops pattern on the XAU charts below.As mentioned before,buying in this general area has come in many times before in past years.Multi year lows occurred at 48-54,and recently past monthly rally efforts have started from 61-63.

Thanks to Clyde Lee we have the OEX swing analysis for Tuesday. His take on it is the OEX has a few hours of pullback.

Here are the charts we look at nightly:

ADHL CHART. CYCLE CHART. DSP9H CHART. NYA CHART. OEYCE CHART. SUPERT CHART. VOLATILITY CHART. XAU 30 MINUTE CHART. XAU DAILY CHART Cone chart. Wednesday's pivot chart

MomentumCycles commentary for the open of Wednesday, February 24, 1999:

30 year T Bonds had better start to rally soon,or the 2 year decline in yields is over,and 5.5% {which is the intersection of the declining yields trendline} will become support instead of resistance,as seen on this TYX CHART.

For equity indices, we all know what this week is, don't we? Been here, done that, more than once. Short covering is what the action on Monday was attributed to, but we know better. We had a significant cycle date on 2/18 and 2/19. Also the Payroll cycle strikes this week. When money is burning holes in accounts, it jumps in a bit early. One to three days before the end of the month is when the Momentum Cycles UC Payroll indicator has the highest odds of striking.In past years,the 19th or 20th trading day of the month {Friday,February 26 area}has been an advantageous point to take advantage of incoming pension monies,but we've found it often wise to attempt to front run the cycle slightly. Breadth has firmed up prior to this period, and price is jammed up against resistance lines. Odds are very high we will see 1300+ on the S and P very shortly. In spite of the big run on Monday, you might want to take Travis' advice to buy the dips in this period. Once the bull starts running, he doesn't give many opportunities to catch him, so dips are shallow. We are overbought on nearly all accounts, so this upcoming run has shaky legs. In fact, the worst thing that could happen is if the run is on narrower breadth and the EquityCP and Sentiment move into the outright buy puts area. You want to be ready to exit the calls and jump on the puts. Seasonality {that is,past patterns of pension money flow} says up into next week and then take the "rational exuberance" temperature again.

XAU jammed against previous support near 61.64,with price momentum of 7 versus 35 still declining.At this price point many times previously,XAU has started to make multiple closes at the highs of the day on increasing volume into overbought territory.As of today however,price is still eroding, with no crossover of STOCHASTIC 20 above the 20 level to kick off a rally.

ADHL CHART. AMOSS CHART. CODI CHART. CONE CHART. CYCLE CHART. DSP9H CHART. INDU CHART. MCOSC CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEXPF CHART. RSISTO CHART. SUPERT CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Thursday, February 25, 1999:

We had suggested recently when FNM was trading at 74 and change near the recent retest of the old yearly highs {75 and change},that on balance volume was not confirming the retest,and that it would likely fail.Conversely,we noted that while XAU was edging down into 63-61 {much retested support}, that on balance volume was showing longer term patient accumulation of the components by longer term investors.Today FNM lost 5% on interest rate fears to 69,and XAU is still holding at 62.56 support.

The new circuit breakers are providing wider equity index range days and keeping the VIX at historically elevated levels. One hundred plus point swings in the DOW are now the norm, so we should not get too excited about them and draw unnecessary conclusions. If anyone needs a reason for market behavior today, there are plenty of things to point fingers at... resistance levels,the recent tag of the upper 3.5% trading band, Greenspeak, T bonds threatening to break the 2 year 5.5% trendline discussed yesterday, and equally or more important...the three day settlement rule for booksquaring for February. The UC payroll indicator could strike tonight with the electronic deposits providing pension plan influence on bonds and equities Thursday and Friday. The official MomentumCycles seasonality is one to three trading days before the end of the month. The early birds that jump in on Monday, 5 days ahead, often get whipsawed as they did today. Our plan, as it is each month, is to find the low in here for an official OEX call trade into the first of March. EquityCP and Sentiment are rather neutral looking and the AMOSS has dropped back into the neutral zone. Since VIX is running at such high levels, an out- of -the money call could be selected instead of an- in -the money. The MARCH OEX 625 Call is shown as an example of the price swing possible on a day like Wednesday. Even the OEX Projection oscillator on the Cone chart dropped into oversold. It is still very possible we could get the usual upside action the remainder of this week and next.

Here are the charts we look at nightly:

ADHL CHART. AMOSS CHART. CODI CHART. CYCLE CHART. DJIA FIB CHART. MCOSC CHART. NDX CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEXPF CHART. RSISTO CHART. SENTIMENT CHART. SPX CHART. SUPERT CHART.

MomentumCycles commentary for the open of Friday, February 26, 1999:

We had previously suggested that once 5.5% was passed,what was previously the top of the descending 2 year T bond yield trendline would become support,with a concomittent decline in 30 year T bond prices.Notice that today,5.5% did indeed provide the floor beneath which yields could not fall.The longer a trendline is in force,the more powerful the reaction can be once it is violated.Now, when the revisit is made below the new yield channel,sellers will probably return later in force.Spring often has a way of jacking up interest rates,especially when housing and housing related items are strong.

We had noted early in the week that the equity put/call reading on Monday,February 22,was one of the most lopsidedly bearish topping readings we'd seen in a while{call/put 3.2836}.Readings since then have been 2.75,2.2237,and 1.92453.And naturally,since the 3.2836 reading ,we've come down from the upper 3.5% band of the DJIA to the 21 moving average...admittedly still not oversold at the lower band.But that reading today {1.92453}was the first basing ratio in a while,and the basic plan for these three days has been to look for a long OEX call entry into the favorable seasonality period. We may have seen it on Thursday when VIX peaked over 30 and Moontide turned up. The strategy in the past has been to enter with at -the -money options, so the 615 call is used as the example, as well as the 625 call for comparison. INDU found support at the 50 day average and bounced.The UC payroll indicator kicked in late today. Friday should be a better day.Additionally,when we look at the 10 day rate of change history of the NASDAQ as an indicator,the 19th trading day of February {February 26,this Friday}comes in as a recurrent low.

In case Friday is not the cycle low of this last-week -of -the-month decline,let's consider the Thursday S and P 500 lows as risk for a stop loss on the long call position{that is,1225.010 on the S and P 500,which was Thursday's low point}.A successful retest of this level Friday,or a continuation of Thursday's rally will keep us long the OEX options acquired Thursday.That Thursday low point,however,if violated to the downside,would likely bring further selling.

FNM hasn't been able to best 76 and change where we called the target high earlier this year,or 74 on the retracement rally.Low today 67.375,close 68.625.

XAU holding up well at 61.39,but still lacking successive higher volume closes at the high of the day and a STOCHASTIC 20 crossover of 20 to the upside to give the all clear for price improvement.

Here are the charts we examine nightly:

ADHL CHART. AMOSS CHART. CODI CHART. CONE CHART. CYCLE CHART. DSP9H CHART. EQUITYCP CHART. INDU FIBRET CHART. MCOSC CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEXPF CHART. SENTIMENT CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Monday, March 1, 1999:

Note-there is a possibility that this section will have no commentary or a greatly reduced commentary between March 4 and March 14,due to travel and inability to get satellite feed.More on this later.The other sections will continue to post their commentaries.

Indicators for the OEX are neutral to oversold, and the ADHL system remains short. The end of month seasonality long trade is having difficulty holding its gains. The high VIX readings are providing daytrading opportunities if you are so inclined. This time around, bonds have thrown a monkey wrench into the plans. Late Thursday and Friday, things looked a bit more encouraging for the call trade.Friday did not violate the Thursday S and P low,which we had suggested as a stop loss for the call trade entered near Thursday's low{or for late buyers,who could have bought the revisit near the lows Friday}.Remember that Friday had a price "hit" associated with the normal low seen on the 19th trading day of the month prior to pension fund reinvestment,and also coincides with a low in the time series analysis we do on the historical NASDAQ 10 day rate of change of price.There were 2 consecutive basing days on the equity put/call ratio.If the call trade is able to hold last week's lows at the start of the week,we will look for an exit into the normal seasonal strength seen during the first week of the month.

XAU has been unable to hold support{seen on the XAU chart below}at the white trendline,and is fighting to return to it from the underside.The colored descending trendlines,when violated to the upside in concert with a STOCHASTIC 20 move above 20,provide energy for a rally.As of now, momentum of price of 7 versus 35 days is still declining,and STO 20 is still below the 20 level.

Here are the charts we examine nightly:

AMOSS CHART. CODI CHART. CONE CHART. CYCLE CHART. DSP9H CHART. EQUITYCP CHART. INDU CHART. INDU FIBRET CHART. MCOSC CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEXPF CHART. OEYCC CHART. OEYCE CHART. RSISTO CHART. SENTIMENT CHART. SUPERT CHART. TRADE CHART. XAU CHART.