MomentumCycles

Momentum Cycles Update for the open of Thursday, March 26, 1998:

We did not yet have 2 successive daily higher closes above the Friday-Monday double top in DJIA,SPX or OEX, to sound the all clear signal to the next leg up.Wednesday brought a spike high to the 9000 DJIA theoretical intraday{tyranny of round numbers} , and a reversal lower,although NASDAQ versus DJIA relative strength was positive due to Microsoft.We did not achieve the ideal oversold postion yet that makes a long OEX call trade preferably situated.

Trend:

OEX regression channel oscillator is rolling over. The intersection of the grey channel and the blue channel appears to be a decision point of sorts as direction is having difficulty being established. A change of trend is expected here. It could be a slower upramp, or reversal, or acceleration. TYX trend is inching upwards.

Breadth:

NYA breadth saw somewhat of a deterioration on Wednesday after a long ramp up in the NYA. McOsc issues is closer to dropping through zero. Thursdays have high odds for such a move. CODI made a sell pivot in the sell alert region. ADHL is still supporting a continued uptrend although one of the signal components has been armed for a sell.

Volatility:

VIX is working its way higher on a sell trend. It is anticipatory in nature by a day or two. MVI moved higher on a sell trend. Z Timer followed its polynomial projection lower today in a sell trend. Projection is lower for Thursday, but it is just showing an extension of the current Z Timer Trend. Tomorrow will have new data that could change the projection.

RSI, SMI:

SPX RSI is finally beginning to turn down.

Fibonacci Zones:

Again the NDX is the star performer by breaking out above its weekly fib resistance. The DJIA, OEX, SPX were contained by upper weekly fib resistance. XAU also found resistance in the weekly fib resistance zone. TYX looks like it is coming off its lows again.

Momentum Cycles Cones:

Projection oscillator is working its way lower projecting lower prices ahead. The OEX open and close were pretty much on Thursday's Keyline.

Stocks of Interest:

CMR at 1.46 is working the lower side of the middle trading band. Listed are 50 bid at 1.46, 35 asked at 1.49.Necessary is a close back above the middle band on increasing volume, and a turn up in the volume accumulation % and phase curve. ASTN's president spoke to us today, and said he expects to be able to make an announcement next week regarding a positive development that will ensure the company's future, unrelated to the Philadelphia VWAP system.He also explained, as we had seen here, that there is some overhead supply at 4$, which, when tested again today,brought some selling in back to 3 and 5/8. Pivots:

After upper resistance held and gave way to selling we got the decline back to the keylines and the hourly trendlines with final closes right on the keyline for Thursday. The NYA pivot point and figure chart gives an example of how the pivots act as support and resistance intraday. The use of the moving average as a trend indicator facilitated the decision making for selling.
DJI NDX OEX SPX

Momentum Cycles Update for the open of Friday, March 27, 1998:

Above the 532 level,the OEX will have no specific level the shorts can target.Below 521, several previous days of support will be violated.Shorter term RSI and STO are not greatly oversold,however, in this leg no good oversold readings have been seen, except fleetingly intraday.

U.S dollar and currencies in a battle.Will the buck take out 101.2 basis June and make a long run for the roses,or break down under 98 from nascent strength in XAU,CRB and oil?Either way it looks to be an important trend altering move.U.S dollar range narrowing greatly, winding up for a volatility breakout.Previous commentaries gave the trade setup for longs and shorts on this one.

Money flow into pensions starts soon.See our comment on the bottom of the page.

Trend:

OEX regression channel is at a moment of truth as the Projection oscillator closed between 40% and 50%. Many times in strong rallies like we have been having, the index will turn up again at this Projection level. Looking at the CUMIV chart we see that the cumulative issues and volume broke down on Wednesday and recovered somewhat on Thursday. They are trying to reassert the uptrend.

Breadth:

The ADHL chart is beginning to look ominous. If the new NYSE new highs for Thursday are truly only 136 as reported by Decision Point Timing, then they have fallen precipitously from over 300 last week. Only the New Lows have to rise before this mechanical system generates an official sell. Of course the index could start falling before new lows pick up. There are numerous other ways this system can generate a sell or buy besides just the levels of the indicators. McOsc of issues has dropped below zero without much fanfare. It is still in the Neutral zone, but it needs to be watched closely in the days ahead. CODI is still in the Sell Alert Region.

Volatility:

MVI has generated a Buy signal with its downward pivot at the upper band. Z Timer has also generated a weak buy with its upward pivot on the oversold boundary of the neutral zone. The polynomial projection is not taken seriously by me at the pivot points.

RSI, SMI:

XAU and TYX are the standouts here.

Fibonacci Zones:

Upper weekly fib resistance is containing the DJIA, SPX, OEX. NDX and XAU have broken out to the upside. TYX is working upwards. TYX longer term shows the upward channel forming.

Stocks of Interest:

CMR rebasing ,but on low volume.VA% shows a volume and price pickup must come soon, or a retest of the lows may be in the works.Strangely enough, drill results have been very exciting.ASTN oscillating between 3 and 5/8 and 3.75.ASTN's president says some sort of major news is due next week.

Pivots:

Thursday was a very indeterminate day. It was more of a consolidation for the broad market than the narrower and more overextended DJIA. Closes were pretty much on the Keylines with a slightly upward bias. Friday is the third trading day before the end of the month. Payroll buying begins on Friday due to the three day settlement period. End of quarter window dressing and the end of Japanese fiscal year could make a decent call trade for a few days to a week.
DJI NDX OEX SPX

Momentum Cycles Cones:

Projection oscillator is at a probable reversing level. Thursday had an inside doji candle representing a very indecisive situation. However, the regression channel is still sloping upward.

Momentum Cycles Update for the open of Monday, March 30, 1998:

OEX trading between 521, which is the last important low,and 532.62, which is the all time high.Sell stops clustered below 521 ,buy stops above 532.62.Below 521 will cause further selling, above 532.62, and another short covering run to the upside is likely..Put/call on Friday intraday somewhat bearish at 33 puts to 100 calls.

Our call for XAU strength to continue short term once 80 was penetrated was correct, as Friday brought 83.22 as the close,and 84.20 intraday.

Fear of Japanese selling after Tuesday,the Fed meeting,OPEC, and recent commodity strength is contending with portfolio adjustment,and pension fund reinvestment,causing whipsaws intraday.

5 day cumulative breadth and volume dropping.When these measures turn up,new upside strength will be confirmed.

U.S dollar and currencies have not yet resolved the stalemate in place since January.New highs in the dollar{101.47 basis JUNE is the area buy stops are clustered above}will support further highs in bonds and equities, and a close below the 99-98 area leaves a large gap down to the 96 area.Weakness in the dollar index makes foreign holdings of our paper less attractive.U.S. dollar options on futures can be played on either breakout.

Trend:

OEX is working the long term channel line from 1/95 as the projection oscillator drops to the oversold level. Keep in mind that "oversold" can be the beginning of a downtrend as with other saturating oscillators. This entire first quarter trend to extended valuations is based on continued strong money flow and goosing by popular analysts in the media. IRA, new Roth IRA,and new Japanese tax laws giving increased accessibility by the Japanese citizen to the US markets is taking valuation levels to Asian proportions. Trend is supported by breadth, and changes in breadth should lead to changes in trend. The ADHL chart shows a marked deterioration in new high strength and a marked increase in new low strength. This mechanical system is a breath away from generating an intermediate term sell signal. It could happen as soon as one day from now. Or, if the trigger thresholds are played with, it has already happened on Friday. The advances were too strong relative to the declines and the DJIA was not weak enough to keep the ADRS below the magenta line for a full fledged sell signal. This is the obvious sell signal. There are other sell signals that can happen based on new highs and lows, which will be discussed next week if they occur.

Breadth:

McOsc issues dropped to the lower side of the Neutral region. NYA breadth was negative, but the spread was not a disaster by any means. Advances were still over the magic 1200 level. The NYA index appeared to be trying for a trading low on Friday with the higher low made intraday. New retirement money generally has a positive effect for a few days to a week in here. But if volume continues heavy and price goes nowhere as it has for the last three days, you are then seeing a red flag waving. CODI is making a sell pivot as the OEX low penetrated the first trendline(yellow) but closed above it. If the low begins dropping below the low of previous days, i.e. 1 or 2 or 3 or 4 days back then stops will be triggered and accelerate the downward movement. SVMA is a moving average of on- balance volume for the NYA and is breaking down as the price phase for the DJIA and NYA roll over, not a positive situation short term. Here is the cumulative issue and volume chart.

Volatility:

Something needs to be said about volatility as an indicator for price direction. Historical volatility is a measure of what has happened. Implied volatility as derived from OEX options and represented by the VIX index is a measure of what is expected to happen. A change in implied volatility can be a clue to a change in direction. The direction change may have happened that day on surprising news, or it may be several days in the future. In the latter case the VIX then represents a fear factor which is sometimes realized, but is discounted in advance. Therefore the MVI and the Z Timer may make buy or sell pivots concurrent with or a few days in advance of an event such as Fed meetings, PPI and other economic reports. It may also give a clue to major trend changes that last weeks to months. The MVI buy signal on Thursday close only lasted a brief moment Friday morning. It has risen higher setting up for a larger buy signal, but is still saying there is fear, and is discounting numerous economic meetings and reports next week. Z Timer tested the oversold side of its lower neutral region on Friday. It could pivot upward in a short term buy or it could move lower to sideways with further selling or consolidation. Thus, we have to be careful about premature conclusions from volatility indicators and look to the above breadth and price trend measures for confirmation.

RSI, SMI:

XAU, TYX are looking stronger than the SPX in both relative strength and stochastic momentum.

Fibonacci Zones:

Ratio oscillators have rolled over on the DJIA, NDX, OEX, and SPX, but not on the XAU and TYX as the weekly fib resistance was tested and failed in some cases and held in others.

Stocks of Interest:

ASTN is seeing resistance at the previous yearly high of 4, closing at 3 and 21/32 on light volume.ASTN is retesting 3 and 1/2.Phase and VA% are rolling over, however, ASTN's president says that major news will be announced this coming week unrelated to the Philadelphia VWAP system "that will ensure the future of the company". CMR attempting to clean up sellers in the under 1.50 area, with 50 bid at 1.48, 100 asked at 1.50 in pre-opening trading for Monday.Phase and VA%,however, are rolling over also.1.35 has held several times as support.This issue needs to close back above 1.50-1.55, then above 1.64,before 2.00-2.50 can be achieved.Most sells recently have been small lots.The large institutional buyer last seen here that took price from 1.00 to 1.70,may return here on large volume to move price through the 1.64 level.Base metals are no longer making new lows.Copper, which we have commented about before, made a series of lower lows in price until February 23, on increasingly higher stochastic readings.A rally until March 11, was followed by a predicted {here} pullback.78-79 or so seems to be holding as a higher low.Much below this, mine closings become feasible,and above 80 or so,presently selling comes in by producers.

Pivots:

Thursday closed with a recovery mode in progress and Friday opened with a strong premium of the snp futures to the cash. That produced an early morning pop that was sold into as gains for the month were banked. Hourly trend lines(cyan) were crossed to the downside and closes were below the hourly and the Keylines. There is the possibility of wider ranging prices on Monday because of the wider range in support and resistance levels.
DJI NDX OEX SPX

Momentum Cycles Cones:

Projection oscillator has dropped below 40% and the OEX has dropped below the regression channel constructed using data from the recent low to the recent high. A new channel may be birthing if in fact Wednesday is the high for this swing.A caution here is that the projection oscillator is now bordering on a reversal level and end of/ beginning of month and quarter will have choppy effects on index trends as portfolio adjustments are made. It could of course trend sideways with a downtrending index within the new channel. We will just have to wait and see. Breadth has been deteriorating as mentioned above and the old cliche of "In by Thanksgiving, out by Easter" is sounding again.

Momentum Cycles Update for the open of Tuesday, March 31, 1998:

Economists from High Frequency Economics are urging the Fed to raise rates to cool off a "red hot" economy.These Fed watchers include former Fed governors.Bonds tagged 5.988 today before settling off the lows.Further strength in the economy this spring without the Fed raising on Tuesday would make pressure for a rate rise later this year.

Crude down {after the huge spike up last week} on disbelief that full realization of the upper end of the quota numbers will be achieved,leading to slight weakness in CRB to 229.72.

DJIA retag of 21 day moving average.So far in this leg, this has been support.

5 day breadth and cumulative volume still dropping.These slower lagging measures of trend, when they do turn up, often signal further legs to a rally.

Trend:

OEX is resting right on top of the regression channel originating in January 1995. Its projection oscillator has reached the oversold levels where the odds have increased for continued up movement.

Breadth:

NYA breadth was decidedly negative today and pushed the McOsc below the neutral region. Positive seasonality is keeping it from falling out of bed. CODI moved up reflecting the minor sell mode present.

Volatility:

Z Timer made a small pivot upward today on the edge of the oversold neutral line. This is a small hint of some positive up movement in the OEX. MVI is also working on a new buy signal here by loss of upward movement and closing under its upper band.

RSI, SMI:

See charts.

Fibonacci Zones:

The week is starting off with indexes in a neutral/mixed state. Daily stop losses are being challenged as is the weekly balance line(horizontal red dashes).
DJI NDX OEX SPX TYX XAU

Momentum Cycles Cones:

OEX index ranged within the average day parameters of the green cones and also within the downward sloping regression channel.

Stocks of Interest:

ASTN had a +13% move today after consolidating the previous move above 3.5.Yearly highs are 4 and 3/16;today's close was 4 and1/8.Above the old highs,next resistance levels are 5,7,10. CMR chart is not quite as dynamic at the moment.Patient buyers are buying small blocks of 1000,and 2000 shares, then trying to clean up supply in the 1.45-150 area.Above 1.50 important resistance is 1.64, then 1.75-2.00, then 2.50.Copper up another 5 points today to 79.60 on drawdowns in warehouse stocks and firm new home sales, where copper plumbing is an essential.Concerning Werner Lake,which is Canmine's cobalt high grade supply, the rumor in the trade going round today is that Warren Buffet is buying cobalt on the open market as a value buy, much as he did silver at 4$.High grade cobalt is in short supply presently, as there are few sources for the 30% or so grade.Canmine, when the autoclave is put in production, will be able to supply this material.

Momentum Cycles Update for the open of Wednesday, April 1, 1998:

DJI found intraday sellers at 8900 again.OEX made intraday new highs, but ended off the highs.We need 2 successive daily higher closes above 532.62 to confirm a strong and lasting new leg up, accompanied by rising 5 day cumulative breadth and volume, which have not yet turned up.RSI on a shorter term basis oversold.OEX 521 still key support.DJIA again found support near the 21 day moving average, which ,if violated, would bring a test of the lower 3.5% band and a probable larger oversold rally to the upper 3.5% band from there.Bonds not breaking 6% is helpful.

Copper up another 25 points on warehouse drawdowns and lingering reaction to the strong housing report.

CRB down .36% on the 1.25 million BPD OPEC decision,since oil bulls were looking for more.The recent spike low under 13$ was an important bottom.

Commodities are entering a bullish seasonal period.CRB has bounced off the 225 area , and has short term resistance at 230.We are likely seeing another palladium leg up from the 250$ area, as Russian deliveries are still uncertain, and the selling that occurred on the recent Russian budget news did not occur on any new supply, just the hope of new supply.

OEX Trend:

Blue regression channel still rules and the projection oscillator is turning up. No ADHL chart until Sunday, but from the raw data a sell was not generated, obviously.

Breadth:

NYA had good issue and volume breadth. McOsc turned up into the neutral region. Cumulative issue and volume supported the advance today. CODI still not encouraging but is in the indeterminate region near the halfway mark where reversals occur.

Volatility:

MVI and Z Timer are making buy pivots.

Fibonacci Zones:

See individual charts.
SPX TYX XAU

Pivots:

Not available until Sunday

Momentum Cycles Cones:

Interesting action in the regression channels and projection oscillator turning up.

RSI, SMI:

See charts.

Stocks of Interest:

ASTN saw support at 3.75 and selling into the new 52 week intraday high above 4. CMR is retesting 1.35.A close below 1.35, and rebasing in the area below 1.35 near the lows will be necessary.If the large institutional buyer returns to clean up what appears to be a drying up of asks in the 1.40-1.64 area, we will get 1.75-2 in short order.