MomentumCycles

MomentumCycles commentary for the open of Tuesday, March 2, 1999:

Once the 5.5% level was violated,we said that yield level on the 30 year T bond would become short term support, instead of resistance at the 2 year descending trendline.See what has happened to the T bond since the violation on this TYX chart.

The TRIN and RSI models kicked in with call recommendations for the OEX, which are added to the Momentum recommendation on Friday.Note that DJIA 5 period RSI is in the extreme oversold region,and 5 day rate of change is now -3%,yet DJIA theoretical undercut last week's low by less than 9 points Monday. The OEX Projection oscillator on the Cone chart is oversold with what appears to be a 4 day candle bottoming formation.5 consecutive down days in the S and P 500 gives higher probabilities for a snapback. Buy stops at 619.62 should send prices higher into the candle four days back. Breadth measures are still oversold. EquityCP and Sentiment indicators are not expressing either optimism or pessimism, as might be expected in a price neutral market,although one of the last 3 equity call/put readings was a basing ratio in the last series{1.92453,2.0872,2.09}. ADHL, our intermediate term system, remains on a sell until the new high, new low, advance, and decline numbers improve dramatically. It is very possible that we could get a rally short term and still have the ADHL remain in sell mode. That means more selling after the positive seasonality ends on Friday.

Here are the charts we examine nightly:

AMOSS CHART. CODI CHART. CYCLE CHART. DSP9H CHART. INDU CHART. MCOSC CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEYCC CHART. RSISTO CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Wednesday, March 3, 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.

In spite of the discouraging round trip in the indexes today, the new highs increased and new lows decreased significantly. One day does not make a trend, however, and the ADHL system remains on a sell. The overall picture has not changed much from Monday, except for the fact that most of the indicators are more oversold. It would not take much to push the McOsc up through zero and trip off a buying panic that scares put holders out of their shorts (not a prediction). We did see the Sentimentchart change reflecting an increase in optimism, but not large enough to outright buy puts. The short term mechanical models were temporarily stopped out using either the trendline stop or 1.5 dollar stop as used in the past. The models are still armed to go long during this period on trendline breaks to the upside. Note that the Dynamic CODI is above its Buy Alert Level. With various forecasting techniques calling for a crash this month, we might see a pick up in put buying that drives the market higher by expiration. One major event we have to look out for here is the drop of the INDU below the 21 and 50 day averages and the crossing of the 21 day below the 50 day. This would precipitate the spring washout that buyers are apparently waiting for, just as it stimulated buying on the crossovers to the upside.

Here are the charts we examine nightly:

AMOSS CHART. CONE CHART. CYCLE CHART. DSP9H CHART. INDU FIBRET CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEYCC CHART. Equity call/put CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, March 4, 1999:

There will be no commentary,or a greatly reduced commentary for the period after this weekend's update until about March 16th or 17th.A vacation is well overdue.The other sections will continue to post,of course.You may wish to check back here daily in case something is posted.

We had said {prior to the crossover!}that once 5.5% was passed on the 30 year T bond, people would use that interest rate level to sell the bonds rather than to buy them. At this point, bonds are quite oversold.We almost tagged 5.7% today! Thursday may bring a little more interest rate fear due to the rumors that unemployment may fall to 4.2%, but by Friday, no matter what the number of the report comes in at, we'll be well overdue in the consecutive number of days trending for a snapback rally. Since we're oversold on price short term, on Thursday, people who shorted the bonds at the crossover of 5.5%,or retest of that level, should take short term profits by covering their short position.

It is unusual when the seasonal OEX long trade doesn't leave traders smiling.In fact,in 1929,buying the end of the month and selling the start of the month broke even for traders;quite a feat in a year the averages were down 90% !

So what is wrong with this stock market? Total volume is about the same, total issues about the same,yet price keeps drifting lower, McOsc has lost its bounce. This has to be a defining moment in market history. INDU closed below the 50 day average. Another day or two like this one, and the 21 day average would close below the 50 day. It is hard to miss the curvature of the INDU on- balance volume, i.e., downward. Bonds sold off and the stock bear appears to be more alive than ever. There are two days left to the positive seasonality and then we can get really bearish.

Here are the charts we examine nightly:

ADHL CHART. AMOSS CHART. BREADTH CHART. CODI CHART. CONE CHART. CYCLE CHART. EQUITYCP CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEYCC CHART. SENTIMENT CHART. SUPERTIMER CHART. XAU CHART.

To quote from the MomentumCycles commentary for the open of Thursday, March 4, 1999:

"There will be no commentary,or a greatly reduced commentary for the period after this weekend's update until about March 16th or 17th.A vacation is well overdue.The other sections will continue to post,of course.You may wish to check back here daily in case something is posted.

We had said {prior to the crossover!}that once 5.5% was passed on the 30 year T bond, people would use that interest rate level to sell the bonds rather than to buy them. At this point, bonds are quite oversold.We almost tagged 5.7% today! Thursday may bring a little more interest rate fear due to the rumors that unemployment may fall to 4.2%, but by Friday, no matter what the number of the report comes in at, we'll be well overdue in the consecutive number of days trending for a snapback rally. Since we're oversold on price short term, on Thursday, people who shorted the bonds at the crossover of 5.5%,or retest of that level, should take short term profits by covering their short position."

MomentumCycles commentary for the open of Friday, March 5, 1999:

Boy,was that a perfect exit! 30 year T Bond yields spiked near the open Thursday,enabling shorts to exit at the maximum low price of the day{high in yields},which was followed by a price rally to near the close of the day{low in yields}.High in yields near the open was 57.19,low of the day 56.73,and the close was 56.84.Traders who had previously shorted 30 year T bonds near the significant 2 year long trendline crossover at 5.5%,or even on the predicted retest,exited perfectly Thursday, as advised, prior to whatever Friday's report will bring,bullish or bearish as it may be. Sometimes the wise thing is to take good short term profits the day before a report,as the news may already be discounted in the previous day's price action.Note that FannieMae{FNM},which reacts badly to yield spikes,has been acting poorly since the advised sell a while back near the secondary yearly high at 74 and change.Thursday brought us a downside non-confirmation in price for FNM at the lows near 66.75.This implies FNM is due for some sort of short term rally,implying bonds are oversold short term also.As of Thursday,we are officially out of the short term 30 year T bond short.No new bond trades are presently recommended.We're happy with the move from 5.5% or so to Thursday's spike to 5.719%,and the commensurate profit on the short.

Looks like we are getting the OEX seasonality release compressed from five days to two days. Friday has a good chance of a repeat Thursday performance, at least until the afternoon. The alternative is a delayed seasonality that extends into the next week. Breadth finally pushed the McOsc above zero. That might just bring in some follow through buying. Also, the INDU appears to have had a reprieve at the 50 day average, and the close above 9400 gives additional reassurance for public consumption of equities. INDU 9600 looks like an easy target this cycle,as that level is the upper 3.5% band of price,where rallies have been drawn up to recently. The March 615 calls are finally making decent money, assuming readers take some profits on the trendline breaks. Various indicators, such as AMOSS and Cone Projection oscillator, are now on the neutral line. Moontide (lower plot) indicates higher prices are ahead at least for one day. EquityCP and Sentiment also have returned to the neutral camp. This environmental backdrop is conducive to higher prices as long as the T-bond /stock yield differential does not widen dramatically. We also have the quarterly earnings reports about to hit the street, and the whisper is that they are going to be better than expected.

Here are the charts we examine nightly:Note that XAU {see below}has made a very marginal STOCHASTIC 20 crossover,which is often the start of a short term rally.

ADHL CHART. CODI CHART. CYCLE CHART. INDU FIBRET CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. RSISTO CHART. SUPERT CHART. XAU CHART.

To quote from the MomentumCycles commentary for the open of Thursday, March 4, 1999:

"There will be no commentary,or a greatly reduced commentary for the period after this weekend's update until about March 16th or 17th.A vacation is well overdue.The other sections will continue to post,of course.You may wish to check back here daily in case something is posted.

We had said {prior to the crossover!}that once 5.5% was passed on the 30 year T bond, people would use that interest rate level to sell the bonds rather than to buy them. At this point, bonds are quite oversold.We almost tagged 5.7% today! Thursday may bring a little more interest rate fear due to the rumors that unemployment may fall to 4.2%, but by Friday, no matter what the number of the report comes in at, we'll be well overdue in the consecutive number of days trending for a snapback rally. Since we're oversold on price short term, on Thursday, people who shorted the bonds at the crossover of 5.5%,or retest of that level, should take short term profits by covering their short position."

To quote from MomentumCycles commentary for the open of Friday, March 5, 1999:

"Boy,was that a perfect exit! 30 year T Bond yields spiked near the open Thursday,enabling shorts to exit at the maximum low price of the day{high in yields},which was followed by a price rally to near the close of the day{low in yields}.High in yields near the open was 57.19,low of the day 56.73,and the close was 56.84.Traders who had previously shorted 30 year T bonds near the significant 2 year long trendline crossover at 5.5%,or even on the predicted retest,exited perfectly Thursday, as advised, prior to whatever Friday's report will bring,bullish or bearish as it may be. Sometimes the wise thing is to take good short term profits the day before a report,as the news may already be discounted in the previous day's price action.Note that FannieMae{FNM},which reacts badly to yield spikes,has been acting poorly since the advised sell a while back near the secondary yearly high at 74 and change.Thursday brought us a downside non-confirmation in price for FNM at the lows near 66.75.This implies FNM is due for some sort of short term rally,implying bonds are oversold short term also.As of Thursday,we are officially out of the short term 30 year T bond short.No new bond trades are presently recommended.We're happy with the move from 5.5% or so to Thursday's spike to 5.719%,and the commensurate profit on the short.

Looks like we are getting the OEX seasonality release compressed from five days to two days. Friday has a good chance of a repeat Thursday performance, at least until the afternoon. The alternative is a delayed seasonality that extends into the next week. Breadth finally pushed the McOsc above zero. That might just bring in some follow through buying. Also, the INDU appears to have had a reprieve at the 50 day average, and the close above 9400 gives additional reassurance for public consumption of equities. INDU 9600 looks like an easy target this cycle,as that level is the upper 3.5% band of price,where rallies have been drawn up to recently. The March 615 calls are finally making decent money, assuming readers take some profits on the trendline breaks. Various indicators, such as AMOSS and Cone Projection oscillator, are now on the neutral line. Moontide (lower plot) indicates higher prices are ahead at least for one day. EquityCP and Sentiment also have returned to the neutral camp. This environmental backdrop is conducive to higher prices as long as the T-bond/stock yield differential does not widen dramatically. We also have the quarterly earnings reports about to hit the street, and the whisper is that they are going to be better than expected."

MomentumCycles commentary for the open of Monday, March 8, 1999:

Our predicted cycle low of Feb. 26 was only 14 DJI theoretical points off the actual low. Examining the linked chart in the previous sentence, we can see that traders who bought on the predicted low date of Feb. 26 and liquidated into Friday, March 5, the official end of pension seasonality, would have made up to 5% unleveraged,depending on their entrance. This month- end long trade (buying before the end of the month and selling in the first week) has a long term record which often works quite well in bear markets as well as bull markets.We had pointed out that in 1929,this strategy would have broken even,quite a feat in a year the averages lost 90%!

It's absolutely amazing how very long trend lines can make price or yield levels extremely significant. We had pointed out that the 30 year T bond yields had a series of descending tops that intersected at 5.5%. The longer a trend line is in force, the more powerful the short term move is once that trend line is violated. Once 5.5% was violated and the retest was unsuccessful, traders were instructed that that level would become support for yields, rather than resistance. We had instructed traders who went short the 30 year T bond at the crossover of 5.5% to cover their short position on Thursday. Near the open on Thursday, the day prior to a significant report, 30 year T bond yields spiked to 5.719% near the open. As it turned out, downside nonconfirmations in FANNIE MAE (FNM) on Thursday predicted Friday's favorable reaction to the report for both the bond and stock markets. Traders who unfortunately neglected to cover their short position on Thursday, as they had been instructed, saw a retest of the significant 5.5% area. Again, this held as support for yields. So, while traders were celebrating the bond market rally, 5.5% still looms as an extremely significant number. We did get the predicted short term bounce in FNM on Friday, which was discussed on Thursday's commentary, but until yields drop back below 5.5% with some force, one leg of the bull market "chair" has been removed, making for a wobbly structure. Presently, no short term bond trades are advised.

Friday marked the official end of the MomentumCycles beginning of month seasonality. It was late in coming this month because of various government meetings and economic reports. The seasonality was thus compressed into a shorter time frame. It may extend into next week, however, the mechanical trade calls for the OEX Call exit to be on the fifth trading day regardless of other factors. The OEYCC had a faltering entry sequence, but ended with a bang. ADHL almost went into Buy mode, but the SPX performance relative to the DOW was not quite enough to place a green arrow on the chart. Various indicators are now in or near the overbought zones, but that can be the beginning of a breakout or a reversal. EquityCP is nearing the Buy Put level, but would be more convincing at a slightly higher level. MOSS and CODI are at the overbought levels. Have a good week. This trader will be taking some time off and will return during expiration week.It's nice to leave on a high note for readers.Some commentary may be available in the interim if scheduling permits.Check back nightly!

Here are the charts we examine nightly:

CONE CHART. CYCLE CHART. INDU CHART. MCOSC CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX PIVOT CHART. OEYDC CHART. RSISTO CHART. SENTIMENT CHART. SUPERT CHART. XAU CHART.

To quote from MomentumCycles commentary for the open of Friday, March 5, 1999:

"Note that XAU has made a very marginal STOCHASTIC 20 crossover,which is often the start of a short term rally."

Thursday's XAU chartdisplays a green up {buy}arrow.Friday's XAU chart displays a green up {buy} arrow.

"Boy,was that a perfect exit! 30 year T Bond yields spiked near the open Thursday,enabling shorts to exit at the maximum low price of the day{high in yields},which was followed by a price rally to near the close of the day{low in yields}.High in yields near the open was 57.19,low of the day 56.73,and the close was 56.84.Traders who had previously shorted 30 year T bonds near the significant 2 year long trendline crossover at 5.5%,or even on the predicted retest,exited perfectly Thursday, as advised, prior to whatever Friday's report will bring,bullish or bearish as it may be. Sometimes the wise thing is to take good short term profits the day before a report,as the news may already be discounted in the previous day's price action.Note that FannieMae{FNM},which reacts badly to yield spikes,has been acting poorly since the advised sell a while back near the secondary yearly high at 74 and change.Thursday brought us a downside non-confirmation in price for FNM at the lows near 66.75.This implies FNM is due for some sort of short term rally,implying bonds are oversold short term also.As of Thursday,we are officially out of the short term 30 year T bond short.No new bond trades are presently recommended.We're happy with the move from 5.5% or so to Thursday's spike to 5.719%,and the commensurate profit on the short."