MomentumCycles

MomentumCycles commentary for the open of Wednesday, February 9, 2000:

Tuesday was anything but a good day for breadth on the NYSE. Adv/Decl was almost unchanged. All the price gains in the NYA and OEX came within the first half hour, and the remainder of the day volume was distributed to the late comers and short coverers. In the meantime, the PCratio and PutVolumes have warned of another top. EquityCP and Sentiment have peaked and turned, and if the SMI crosses, then it would look like a sell is at hand. Channel line resistance is present also, with a trip back to 750 in order if it can't make it to 800. The moneyflow is still into the NASDAQ as evidenced in the CODINDX chart. It would be an understatement to say it is now thorougly overbought. Now that Cisco's earnings are out perhaps there will be some profit taking. One newsletter writer forecasts the NASDAQ to surpase the Dow INDU in the next 6 years. At the rate it is going, it might not take that long, especially if the INDU takes a dive. If Berkshire Hathaway stock is representative of value plays in the big caps, then the S and P may just be headed down to the 1998 highs. End of Day Cumulative Volume is still working lower under the 200 day moving average. It would seem the INDU is destined to work below its 200 day, as the markdown in prices continues under the 50 day MA. It is never too late to sell, and given that seasonality has run out for February, rallies should be sold as the McOsc is working its way back towards zero. The OEX30 is forming very sloppy handles on the pattern off of the 735 low, and it appears that the rallies are met with flat distributive tops followed by sharp drops. Bond fund manager B Gross believes T bonds will hold in the 6.25% level, and the Fed may have to raise the discount rate dramatically as the months pass. The yellow arrow on the Momentum Cycle chart suggests that a sell may be in the near future.

The short term sell arrow generated on the XAU chart from the near tag of the upper 14% trading band brought more retracement Tuesday. We thought this might happen,but still feel even with another possible decline to the lower band,sentiment is still so longer term bearish that another good rally will be seen this spring.We are holding a small position in HL and ABX as a long term call on the sector.

No short term trade is currently recommended in T bonds until FNM gives a clear downside non-confirmation.

MomentumCycles commentary for the open of Thursday, February 10, 2000:

Price Markdown continues with the INDU falling below the 200 day moving average taking the End of Day Cumulative Volume further into the long term shift from big board stocks to NASDAQ stocks. The Hourly INDU tested the Jan 31 low as its RSI dropped to levels from which decent buys have occurred, but don't believe it until you see the bars taking out previous highs and lows. Adv/Decl weakness from Tuesday spilled over into Wednesday, driving the FlowRate deeply negative. That produced a lower Red Cone day and took the Projection Oscillator back to neutral. It also took the Modified Options Strategy Spectrum back to neutral. McOsc dipped below zero. Bond yields rose a bit to entice buyers into the 30 year auction on Thursday. Afterwards, we can expect bonds to rally and stocks to rally. This is nothing new;it happens every 30 year auction... short bonds and stocks prior to the auction, cover during and after the auction. That sets up the perfect buy for the end of pre-expiration week.

XAU components ABX reached 18 7/16;HL reached 1 11/16.Resistance was seen again near the upper band,as seen on the XAU charts on the sidebar to the left.Near term resistance is 72;above that would be a great morale boost to XAU bulls.We are patiently holding a small position in the components HL from 2,and ABX from 16-17.

MomentumCycles commentary for the open of Friday, February 11, 2000:

Day of week seasonals say Thursday has the lowest probability of having an up close. Friday has second highest probability of an up close and Monday has the highest. OEX daily fibs made a higher intraday low and closed above the pivot at 767.65 with a narrow range for support and resistance for Friday. This facilitates an upside breakout. The last hour was bought on Thursday from an oversold condition for the ideal "buy the Friday of Pre Exp" week trade. TRIN spent all day below the Buy line indicating a continuation buy into Friday. EquityCP ratio has turned up again like it does at low pivots. Wednesday had a momentum low in volume Flow Rate and the cliche is "momentum precedes price". Numerous oscillators had pivoted at the neutral line, i.e. Momentum Cycles, Cone,and MOSS. CODIoex generated another buy signal and VIXpnf was stalled out at the upper side of the indeterminate zone. It has been turned down there since the first of the month. As the market enters the expiration bias of net positive for the next week, VIX would be expected to drop into next week. An average up close on Friday for the OEX would take it to 775 green cone. A strong upside close would take it to 780 red cone.

Another short term non-confirmation sell arrow on the XAU charts Thursday,but notice that 21 day intraday volume percent is rising,and OBV has not made a new low.We are holding small positions in HL and ABX.

MomentumCycles commentary for the open of Monday, February 14, 2000:

"If the OEX doesn't make it to 800, then 750 is the target", so stated MomentumCycles a week ago. Who would have believed it? Yet, all the signs were there for a downward pre-expiration week. You know, we always repeat that pre-ex week trend statement every month and several times during pre-X week. We also say that buying the Friday close(PM period) of pre-X week and selling on the first profitable open during X week is one of the most successful trades. The Stock Trader's Almanac odds for February being an up month are the lowest for the year.

Cone Projection oscillator and EquityCP 3INDX, SMI, AdvDecl, Flow Rate, End of Day Cumulative Volume, INDU all have been warning of the markdown in prices. Back when the INDU closed under the 50 day moving average we warned of the ongoing distribution and markdown in stock prices. Now it has closed three consecutive days under the 200 day MA. The INDU is in a bear market. VIXpnf came close to the Buy alert level as the OEX tagged the Crash Down Grey CONE. CODI OEX is flashing Buy Alerts, but it is prudent to wait until the RSI hits bottom and turns up. CODIndx has been flashing sell alerts since early this week. Unfortunately, the INDU on balance volume and the EODCV don't indicate the hemorrhaging is over. The INDU has been defined as the "old" technology and the NASDAQ the "new" technology. That makes it all the more humorous, knowing that Microsoft is now in the DOW and Linux is becoming a serious competitor. Of course, MSFT has ownership in some of the LINUX related companies. Remember, the NASDAQ will surpass the INDU in the next half decade or sooner. Declines reached that 2000+ magic level where climaxes occur on the upside and downside. Following the MomentumCycles trend determination of 1200/1500 would have kept you out or short all this week. NYA broke an uptrendline on Thursday as it fell through the 50% retracement level on the McOsc chart. McOscillator has dropped through zero bringing in more selling this week, and it won't stop dropping until the breadth improves. Technically, the buy is when the McOsc crosses above the ten percent component of the McOsc. Even MOSS and AMOSS dropped into oversold.

As long as the specialists have to absorb stock into inventory, prices will drop fast. Three sellers for every one buyer ensure this. Remember, specialists buy at flea market prices and sell at antique prices. Prices have to drop until the pass through is one for one. This is called price facilitation. The big question, is will we have an expiration seesaw next week, reversing this week's trend? The answer is...not very likely, as there are so many market shaking reports and meetings, that traders might as well bail out and take a vacation to sunny parts of the globe.

No, we haven't gone astro and don't intend to make frequent posts on this subject. In updating the FibonacciTrader software we ran into the Quick Harmonic Trader and quickly made a few charts. The Mars chart is rather interesting in that Friday's downward action points directly at the Mars N and Mars Y intersection. Mars Y line is for bearish action and Mars N is for bullishness. Also note that the October '98 low occurred at the intersection of Mars conjunct Moon True North Node. Support in the bull trend was found at the big planets. The second chart of Harmonic Mirrors which are also for bearish action are right in sync with the first two months of 2000. What the two charts may mean is that once the OEX passes through or breaks away from the Sun Earth green line the uptrend may continue. Starting next week the Mars N line(bullish) will have more influence on the OEX. Laugh all you want...I will be the last one to try to convince anyone of the efficacy of this technique, for the time being. The Range Trader is the resident astrologer on Oextrader, and we will defer such analysis to him. An occasional chart may be posted if something of interest comes up.

XAU is still finding short term resistance at or above the upper 3.5% band of price {see down arrows on charts on sidebar}.The chart formation looks similar to the action of last September,with 21 day intraday volume percent still rising.The longer term bands are turning up {finally} for the first time since the predicted precipitous decline from XAU 92{see those clusters of sells!},which is a longer term positive.The announcement that Barrick is reducing its hedging program due to the company perception of future rising prices is helpful.Barrick's Peter Munk has a good record for timing intermediate changes in trend in long term gold prices.

We are holding small positions in HL and ABX as long term calls on the sector.

FNM oscillators are suggesting that long term T bonds are due for a rally very soon as we are near the lower band of price and momentum measures are higher than the previous set of price lows {see charts on sidebar}.However,the TYX chart places interest rates in "no man's land",that is to say,neither extremely overbought or oversold.Stand aside from short term T bond trades for now.

MomentumCycles commentary for the open of Tuesday, February 15, 2000:

It's beginning to look like we have a trading low in place. Volume momentum hit a low last Wednesday, and tested it again on Friday. That is indicated on the Flow Rate chart, as well as the 5 day advancing and declining volume chart. Price hit a low on Friday. Monday looked quite constructive and orderly. AdvDecl was touch and go, and had a positive curvature in the afternoon. Monday also saw the fewest declining issues in 4 days. The feel here is there is potential for a significant upside thrust to the 200 day, or even the 50 day INDU moving average. CODIoex is making Buy noises again with the Momentum, Mkt Thrust and CODI signals. Initial thrusts off a pivot lows are sometimes rather powerful as everyone rushes to buy before prices advance too far, and then they end up chasing them up because second chances don't avail themselves when a new swing is started. Technically, what we have today is an inside day, and that is reflected by oversold to neutral oscillators and trend channels. Option sentiment {in the form of Put Volume} is neutral. PC ratios are neutral also. The Cone Projection Oscillator has turned up after the OEX has made a 2/3 rds retracement of the upswing from the January lows. There are numerous ways to make price projections, but let's stick with the probability cones for the moment and look forward to Friday. Let's assume a low is in place, and that we will have an upside expiration. Using current implied volatility and an average movement in price, then the Green cones at 770 to 772.5 are the first choice. If we get some strong up days before that then the Red Cones at 782 to 792 provide the target zone. 790 is the magenta and green channel lines' intersection. The upper projection band is at 787. We have four days left until OEX settlement. Using the Yellow line 4 day projection we also have 787 by Friday close. This is, of course, Ouija board stuff and the OEX could just as easily go to 715. But if you look to the left across the OEX Cone chart you see that the current Cone Pivot has provided an excellent launching pad for 20 point rallies to the 797 level.

Continuing on with the "guess the Friday OEX close" game we have the OEX weekly fib chart to look at. Maximum upside is 800, and the resistance zone below that is 780 to 784.93. The OEX did close above the Slatyer Crossover line in buy mode on Monday close. Previous week's resistance zone is 787.82 to 793.68. So, I think I will stick with 790 as the most optimistic expectation by Friday close.

XAU found predicted resistance at the upper 3.5% band of price.We are holding small positions in HL and ABX as long term calls on the sector.Another decline to test the recent lows is possible,but will probably bring another downside non-confirmation.

FNM didn't rally yet,but 30 year T bonds did.Downside momentum appears to be slowing for interest rate related vehicles.