MomentumCycles

To quote from the Momentum Cycles Update for the open of Monday, March 2, 1998:

"Watch the CRB.Just when commodities have officially been pronounced moribund,a double bottom may be in the making{52 week low 221.56, Friday close 227.65}.Watch the dollar.Just when it has been annointed as the new gold standard, is it possible that the german mark is showing signs of life?We will be watching these as well as XAU carefully.Lot of determined silver sellers at our short term sell on the Buffet spike at 8$,lot of support at 6$.

The rise in the OEX and S and P to new highs should be accompanied by a rising cumulative tick.This last week ,it has not.OEX longs should be aware of rising risk as this adds to another set of nonconfirmations."

Momentum Cycles Update for the open of Tuesday, March 3, 1998:

CRB up again,the double bottom seems strong,silver seems to have tested the breakout after the retracement following the Buffet spike,yields either moving to test the longer term downtrend line or moving to violate it.More nonconfirmations in OEX, with NASDAQ weaker than the DJIA,new highs on lower RSI readings.

Breadth:

NYA breadth weakened later in the day as the NYA dropped below its regression channel originating from early last week. This is at least the beginning of a consolidation of the upmove and possibly the beginning of a more significant correction. One long term cliche is "In before Thanksgiving, out by Easter." Just a little over a month remains in the cliche indicator. McOsc issue has gone flat and the volume oscillator is rolling over right in the middle of this beginning of month seasonality. Earnings reports are due in a few weeks,and tax money is going to be needed soon to pay for last year's party, and, well, the weather is becoming just too distractive. Seriously, the cumulative issue and volume both issued sells on Monday, but were aborted later in the day. CODI continues its uptrend in making higher level lows.

Volatility:

Z Timer continues its downtrend from last week and the MVIs are still on a sell. A well respected midwest brokerage firm analyst suggests that the next two weeks are going to be rather choppy until earnings reports begin to be released. Rising yields this time of year due to home buying demand and refinances can no longer support the low dividend yields and high PE's. Stocks can rise simply because of money flowing into them, but the prices won't stick longer term. And of course Asia and Iraq will add to the volatility of the coming weeks.

RSI, SMI:

TYX is the standout in the crowd. Yields closed decisively over 6%.Long term readers will remember that we said it here when we were lonely voices in the wilderness-6% before 5.5%.

Fibonacci Zones:

This was somewhat of an indecisive day except for the T bonds and the NDX. Both went opposite directions. Yields up dramatically and NDX closed below its weekly balance line (red dashes). NDX stocks are more interest rate sensitive than their brethren, who, in many cases are self-funding. It should be noted that the Ratio oscillators on the DJIA, OEX, SPX are maxed out and in position to turn down. XAU

Stocks of Interest:

CMR ASTN.Both, as discussed yesterday, are at this point retesting their apparent price breakouts.CMR should move back above the $1.50 level on good volume if the next $1.70-2.00 resistance is to be exceeded and the breakout succeed.ASTN is having a battle royal between the bulls and bears on good volume right at the downtrend line, similar to the Sunshine Mining chart above in today's first paragraph.For ASTN $2.75 is that price intersection.A close above 3.25-3.50 for 3 days would be very bullish.

Momentum Cycles Cone:

OEX price was neatly contained by the inner cone. The Projection oscillator has turned down.

Pivots:

Once again the S&P future and cash closed below their keylines whereas the DJIA closed above its keyline. This is a sign that the broader market is weaker. The NDX has a particularly wide downside skew to its pivots. OEX

Momentum Cycles Update for the oopen of Wednesday, March 4, 1998:

"The best of all possible worlds-low interest rates,low inflation,low commodity prices,strong bond market, strong dollar,gold and silver moribund..."This has been the Wall Street mantra.Do you smell a faint odor of change?

CRB 52 week low 221.56,today 227.46{admittedly off 2.17 today}.Bonds seeming to form a new trading channel to test the multi-year downtrend in interest rates{or violate it},XAU seeming to have made its lows in January at 61.23,presently 73.89.Silver buyers seem to come in at 6$.The mark/dollar relationship-it may be the mark is bottoming and setting up for an upmove.

Breadth:

There always will be some someone left holding stock at the top. As the indexes make a high the NYA advances are declining and the declines are advancing. Even the new highs dropped to 197 from 250 and the new lows are inching up a stock or two a day although the new lows won't increase very rapidly until the index has crossed over to the downside. The McOsc issue and volume oscillators look like they did at the high back in the first week of December 1997. It is time for a correction, past time for a correction. Remember, overvalued stocks will move up with new money flow, but the prices won't stick when the flow stops. Positive seasonality has peaked, is peaking. CODIs are touching the sell alert line again.

Volatility:

No change in the Z Timer and MVI or the MCcones, there is certain to be some changes if TYX continues to rise.

RSI, SMI:

TYX is again the outstanding performer. It definitely appears to be making a seasonal transition into a period of greater demand for long term money and or the fear of higher short term rates.

Fibonacci Zones:

Weekly upper fib resistance is in vogue on the DJI, SPX, OEX. NDX is breaking down. TYX is breaking out. XAU found quick support at the lower fib zone.

Stocks of Interest:

CMR ASTN CMR ASTN. See comments on the charts. Both stocks seem to be behaving as we had expected.

Pivots:

All closed in zone 4 and overbought on 5 minute charts. Wednesday is hump day, Thursday is give up day, Friday is profit taking day.

DJI NDX OEX SPX

Momentum Cycles Cone:

This makes three days in a row with a +,-0.5 std dev cone range definition. What this shows is a tug of war between those who have to buy stock and those who can unload it at antique prices. It is an inflection point. The advice is that most of the gains for 1998 have been made. It is now time to protect those gains for quarterly performance reports. With the advent of short term gains rules and the use of derivatives this protection can be achieved through shorts in the futures market while dumping big cap stocks and holding put options. There is no longer a need to hold stock into the end of the quarter to show performance. Hedges and the new short term gains tax rules give money managers much more flexibility. The MVIs are warning of a volatility expansion in the days and weeks ahead.

Momentum Cycles Update for the open of Thursday, March 5, 1998:

Anticipation of Friday's report is causing some rethinking among weaker OEX longs who are itching to leave the party.Bonds also fear a stronger report than the consensus.CRB still acting like a double bottom,and mark looking like basing action versus the dollar-note the triple stochastic nonconfirmation of the repeated mark lows near .55{see Investors Business Daily futures section charts}.

Classically, a close above the over 8600 DJIA all time intraday highs on good breadth should mean more to the upside.We would prefer to go long such a rally from an oversold position.

Breadth:

Regardless of how many bullish analysts the business channel brings to support the market, they cannot overcome the natural process of profit taking. Soon, the questions will be, "how far is down, how much further to go?" Bottom fishers will buy too soon only to see their short term profits turn into losses the same day or in a few days. That is unless we get the fast cruise missile detonation back to the breakout where support is sure to be found. With reduced earnings expectations and flues of various international persuasions, NYA breadth is quite negative for this time of month. McOsc issue and volume will drop through zero on Thursday if today's momentum follows through, and it should if the globex market is any indication. CODI bounced off the sell alert line today in its ongoing series of sells.

Volatility:

Z Timer is trending down and is touching the boundary of overbought and neutral. Statistical behavior would be to see it accelerate through neutral to the oversold side at zone 1 and 2 boundaries. We need a significant price drop with expansion in volatility to do this in a short time. Otherwise it can coast back to neutral and oversold just with the passage of time. As the psychology of a slowdown catches on the Z Timer may even track inside the lower zones for a period of time as it has in the upper zones. So once it gets there traders should not be in a rush to buy calls, but wait until it "bases" and starts an upward zone crossing. MVI

RSI, SMI:

This week should see the SPX turn down in the RSI and SMI.

Fibonacci Zones:

After failing at upper weekly fib resistance the weekly balance point provided intraday support. If the after market selling continues tomorrow, then the lower fib zones will be the attractant.
DJI NDX OEX SPX TYX XAU

Stocks of Interest:

CMR ASTN CMR ASTNBoth these issues were up today in a down market, attacking resistance levels.CMR longs who averaged into prices several times these last few months are sitting on an initial even position entry,and with repeated lower priced entries,from.30 to .55 cents profit with Canmine's close at 1.65 today.Determined buyers are presently found at 1.50.ASTN longs who bought on weakness got prices at 2.5 to 2 and 15/16.ASTN close today- 3 and 3/16.Determined buyers are found at 2.50-2.75.See above charts for daily analysis.Rising issues in down markets are generally considered under accumulation.

Momentum Cycles Cone:

Today saw an expansion in price distribution to the downside as the red cones contained prices. Note that this recent top was characterised by numerous green cone distributions. Basically what it said was daily volatility had reached a low as buyers and sellers were in balance and stock changed hands from the strong to the weak, from the savvy to the unwary. Those who bought with this payroll cycle's money will have immediate losses. A move back to at least the prices of early last week should be expected.

Pivots:

NDX is down 30 points on Globex. Semiconductor high tech is reporting lower earnings. NDX should hit the S3A support line on the open on Thursday. DJIA, OEX, SPX closed on their keylines. S&P futures are holding down 11 points on Globex. Lower support zones should be tested on these three indexes also as cumulative volume turns down. Question is how much of a retracement from the breakout will we get. Talk is of 80%. 50% is a given in many texts, especially amongst GANN aficionados. Last week the advice in Momentum cycles was to average into puts this week.

Momentum Cycles Update for the open of Friday, March 6, 1998:

As of Thursday's close traders who were short from any of the starting days of the week were ahead {from just today's trading} 53 NDX points {4.5% off the index today},from the NASDAQ early week high 60 some Nasdaq points,and 8 OEX points just today.Assuredly, the middle of February was disappointing as our posted put trade was closed at a loss.Remember, however, the late January -early February posted long OEX call trade was closed at a double or more.Prior to that, we had about a year of almost uninterupted profitable trades, usually doubles.

Click here to see at what prices traders could have averaged into put OEX positions from the start of the week.Traders might well be advised to place a protective initial stop at 7.08 to 8.02 to protect profits. Between 7.08 and 8.02 is above all put entry prices from the first part of the week.We would move the stop if the market declines further tomorrow.A similar strategy should be used for those who traded NDX or other indexes.

If a trader had used an adaptive parabolic stop, the puts shown on the above chart were already stopped out with a 55% gain on Thursday, which is the first profit taking level anyway. One could at least take half off at that level. A well respected OEX options player has suggested to take half off at -1200 tick and the other at -1700 or liquidate the puts by the close on Friday if the TICK levels are not hit.This seems sensible also.

CRB still holding the double bottom,so the" inflation is dead" scenario is not yet confirmed by this index. Bonds weak again to 6.063-expected- as we were looking for a probe close into resistance at the long term downtrend line.Still looking for a place to make a mark long entry at the start of what may be a change in trend.

5 day NYSE breadth turned down yesterday- a turn to up in this measure from an oversold position is a good point for a long entry.5 day rate of change is -1% , not deeply oversold.-5% is a good oversold position.Shorter term RSI is 40,a good short term oversold position is under 20.

Breadth:

NYA breadth continued its deterioration driving the issue and volume McOsc down through the zero line. OEX closed below the "codi" confirming trendline. Congrats to those who heeded last weekend's advice to average into puts early this week during the so called positive seasonality. Remember call trades were not advised here because of what we perceived as a high risk period in an extremely overbought market. Rather the situation favored put trades. This is contrary to all beginning of month psychology and yet the indicators were clearly deteriorating from Monday on. See the new CUM chart. Some have questioned why we did not recommend a specific put strike each day. No one knows for sure the day ahead where price is going to trade. The most they have at their disposal are support and resistance levels used by the pit, trendlines, channels, etc. The MCcones also define probabilities of support and resistance where profits can be taken. When it was said to average into puts, that meant to buy them at pivot zone or Fib Zone resistance.That is why those charts are posted here daily. Trading options from either the call or put side exclusively without the use of spreads, straddles, combinations, requires a bit of anticipatory action. Likewise, when closing the position it should be done during momentum runs(with excessive tick readings)and again, use of the pivots and fibs can help. Otherwise traders must be satisfied with a certain percent gain and/or place a sell stop order. End of day option traders are at a big disadvantage in that the intraday swings of option premium leave you out of the major profit taking periods.

Another point should be made about option selection in regards to how deep in or out of the money the strike selected is. Most novices, and most failures come from buying out of the money options too close to expiration, in addition to holding them too long. The strike should be either in the money or at least within the probability expectations of being reached in the remaining time period, or if out of the money, then the holding time should be measured in a few days.

Volatility:

MVIs closed below their lower bands as the much anticipated volatility expansion began on Thursday. Close was below the lower band implying more selling ahead. Z Timer made a gonzo move to oversold. ZT should trend sideways over the next few weeks as the earnings reports come out. Best not to buy the dip here as the specialists are waiting to distribute more overvalued stock. S&P PE is 25 in a market that has been fueled by pure speculation against a wind of declining earnings. In the 1960's an average or fair value PE was 16. It is even worse than it seems as the corporate debt to GDP is two thirds again as high as it was in the '60s. With a slowdown in growth and a decline in earnings, stock prices will gravitate lower as bottom fishers are caught on their own hooks.

RSI, SMI:

SPX is weakest of the three,SPX, TYX and XAU.

Fibonacci Zones:

Weekly balance failed to hold for the DJI, OEX, SPX and closes were near Fib support except for the NDX. Ratio oscillators are just beginning to turn down, implying more selling is ahead. XAU closed on its weekly balance. TYX

Stocks of Interest:

CMR showed good buying on relatively large blocks at 1.55 near the 1:45p.m. low.P.M. shows 50 bid at 1.62, 21 ask at 1.65.1.55 seems to holding as support.ASTNis retesting the breakout at 2.50- 2 and 7/8.Close was 2 and 13/16.Stop losses by round number traders were triggered on trades below 3.Most computer related stocks were weak Thursday.The potential on this issue will be realized when ASTN's electronic trading system is put into place at one or more exchanges.This, like CMR, is again a small speculation with a possibly very large return.Some well respected analysts view 36$ as doable in several years.ASTN plans spinoffs in the near future , of which they would retain a large stake, adding dollars to the inherent share value.

Momentum Cycles Cone:

Thursday came close to a crash type day by almost tagging the 95% cone. Projection oscillator is still pointing downward suggesting a little more selling is ahead.

Pivots:

Support was found at S3A on the DJIA, OEX, SPX. Support for the NDX was found well below S3A. All the pivots have lower keylines for Friday with the zone distribution skewed to the prices below the keyline. Prices still have not fully discounted lowered earnings expectations and slower growth for the next 6 months. That, historically is the market's nature. The discounting process is just beginning. The next two weeks are likely to see lower pivot zones as the premature bottom fishers reduce their portfolio values.

One measure of price movement taken from chaos theory is called the PFE or Polarized Fractal Efficiency Ratio. On this chart the hourly has turned down and is tracking oversold whereas the daily is just beginning to turn down. A truly oversold condition will exist when both are oversold. Cum chart shows the beginning and end of this seasonality. It also shows the deterioration beginning on 3/2 and why it was not advised to be holding call options this week.

To quote from the Momentum Cycles Update for the open of Friday, March 6, 1998:

"Traders might well be advised to place a protective initial stop at 7.08 to 8.02 to protect profits. Between 7.08 and 8.02 is above all OEWOT put entry prices from the first part of the week."

Momentum Cycles Update for the open of Monday, March 9, 1998:

Could bears make money last week?Good question for end of day traders.We had mentioned before that the market was speeding up,and that eventually bull and bear moves would be compressed into single days.We had advised a put trade last weekend on OEX or other equity indexes that we post fib and pivot charts for{obviously the DJIA,OEX,S and P 500,NASDAQ, and NDX tend to move together in this increasingly commoditized equity market}.On Thursday, traders who were long puts who used a trailing parabolic stop would have been stopped out with a 55% or so profit.We cannot post such a stop PRIOR to the next day's action,because it depends on the next day's action.For those still short into Friday,we averaged the costs of a representative OEX put series purchased ANY TIME during the early part of the week as $6.75,and suggested a stop between 7 and 8 to retain profits.On Friday,the open on the OEWOT put used as the example was 7.5.Many traders would have been filled at 8 or more which was the price immediately after the opening quote.The similar NDX or Nasdaq puts would have been stopped with greater profits.

Now , what about next week?February was the exception in the tendency of the OEX and sister indexes to top out and reverse after beginning of the month money flow ends.Officially ,that would have been Friday,March 6.Trading the short side after money flow ends worked for us in August,October,December,and January, just to name a few recent occasions.

In addition,one of the more reliable seasonal patterns is a correction that often occurs between March 15 and April 15.So monthly money flow ended Friday, and Seasonals say risk increases for longs after March 12-13.Interestingly enough,March 5-12 marks several multiples of previous highs and lows in weekly and monthly cycles.3 months after the December highs,5 months after the October highs,12 months after the March 97 high ,to name only a few.

The market continues to rise because of momentum, regardless of valuations, earnings disappointments,interest rates,and a whole slew of other non-confirmations.5 day cumulative breadth for instance, is still dropping.5 day rate of change is 0.So those who elect to trade the long side should be aware that they are more at risk than normal.Momentum investing works during trending markets,so any decline, intraday or not,is being used to buy.That suggests musical chairs,i.e.,it will work until someone is left without a chair{usually the public retail call buyer}.

What are the fundamentals that suggest risk?% Bearish advisors are 27.2%, the 5 year low at the August 97 top was 25.8%.Public/specialist short sales are .68,5 year low .56.Put/call is .51.A single put/call of .40 or lower often preceeds corrections.P.E. is 21.9%, 22.4% preceeded the August 97 top.Price to book is 5.84, a five year high.The premium ratio has had two readings in the 80's.Readings in the 80's, although not always bearish , often precede corrections, just as readings of .52 often precede rallies.

However,in all markets,it is true new highs most often beget new highs, until the new highs become resistance after a decline.At what price would the present resistance at 8600 or thereabouts be convincingly exceeded, and imply a move to the next "pitch" level of 8900?A close above 8645 gives high probability to 8900.So there are likely a large set of buy stops above 8645.Shorts above that level be warned.2 higher successive daily closes above 8645 would make the 8900 level likely next resistance.

There may be weakness early Monday related to tech earnings preannouncements, so no OEX trade is recommended for Monday.

When we look at other markets, such as the CRB,bonds, silver, and currencies,it is often to see how they will impact equities.Always alert for a reversal in long trends,our advice at under 6% on the bonds was that there were historically high levels of bond bulls.Bonds spiked up to near the major psychological level of 6.10-6.15%, before reversing {tick high Friday was 6.09}.The new channel implies trading the extremes, so short profit taking at 6.09 was to be expected.Bonds are at an important juncture here, and a rally under 6% could retest the 123 highs {thanks to Clyde Lee for this swing chart}.Further declines in bond prices past the above mentioned support levels would cause major liquidation.Click here to see our bond channel chart.Silver seems to have buyers between 6$ and 5.80$.5.50$ would be very oversold.CRB low of 221.56 is being retested,as Friday's close was 225.84.A close much below 220 would likely mean commodities will have to wait to the 2nd half of 1998 to begin an overdue rally.Grains may be the leader this summer and fall in a CRB rally.

Click here to see a view of the OEX based on Clyde Lee's swing chart.

Breadth:

Seasonality switchers got lucky on Friday as the markets rallied right up and into their exit. Seasonality switchers are those who go long in the last three days of the month and exit on the fifth trading day of the new month. The common switching vehicles for this are money market funds and aggressive growth funds. Momentum Cycles choses to use call and put options for this purpose. The Feb/March cycle did not have supporting technicals(in the MC contrary view) to trade it from the long side and the advice was to average into puts as the risk appeared to be too high for calls a week ago. Thursday proved that to be precient advice and the puts were stopped out with profits. Various indicators were so oversold by the close on Thursday that a pop on Friday was inevitable. Again, Momentum Cycles took no call position for Friday because such oversold bounces can last as short as a few hours to a day and the "seasonality" was scheduled to end by Friday close. NYA breadth was indisputably on the positive side for Friday bringing the McOsc issue oscillator back up to the zero line. This forms the left leg of a complex bottom with the middle leg lower than the left leg. If we are entering a corrective phase as evidenced by the CODI/OEX trendline, then we are only one third the way through the breadth pattern. Middle legs and true lows tend to occur with oscillator readings below 120.

Volatility:

Z Timer dropped to the oversold region on Thursday and rallied to the high side of neutral on Friday. It did not base long at all in zone 1 or 2. MVIs were in a buy alert position on Thursday close but needed a close above that band to generate a buy on a closing daily basis. Now after Friday's action the MVIs are about to run into resistance at their center lines. The MVIs tend to make multiple thrusts at the lower band before a new uptrend begins. So caution is still urged against the long side for now. Also the MVI bands are still curving over to the downside. Numerous professional moneymanagers are not finding value in an S&P market with an average Price Earnings ratio of 25 and are looking to small caps and overseas markets in addition to asset reallocations into short-term fixed income instruments. They consider Friday as a short covering rally that is not likely to last very long, if it isn't over already.

RSI, SMI:

SPX is the weakest of the three including the SPX, TYX, XAU.

Fibonacci Zones:

Daily trends on the DJIA, SPX, OEX are at a transition point where the trends are attempting to turn down. Note the appearance of the green Triple Switch stair steps. Also note the very nearby upper weekly Fib resistance zones. NDX daily trend has switched to down and its Fib zones for next week have shifted lower. TYX

Stocks of Interest:

CMRwill within months likely have the autoclave ready to produce high quality cobalt, at which point income will turn this issue into a producer.The Canmine claims at Binco north of the present Thompson belt{ which has 18 producing mines} recently found a vertical 1x5 kilometer system which may be the target for the nickel shows found already.Recently, after the price breakout,volume has been dropping on this issue.We would like to see a move on good volume into the 1.75-2.00 level.1.50 has held recently as support.50,000-100,000 shares or so would likely clean up supply in this price range.ASTNhas a higher VA % than CMR presently.There is great interest in electronic trading systems for financial institutions and exchanges, and ASTN has the technology to supply such systems.

Remember, both these issues are not quick trades, but special situations that are for a longer term time horizon.Low priced issues can be quite volatile.

Pivots:

The keylines are higher for Monday, but still below the levels of 3/2 showing a loss of upward momentum. On an intraday stochastic momentum basis the markets are set up for another sell.

DJI NDX OEX SPX

Momentum Cycles Cone:

Thursday was of the 95% crash down type and Friday was of the 83% crash up variety based on implied volatility projections. After two days the projection oscillator is now touching the center line from below.

Momentum Cycles Update for the open of Tuesday, March 10, 1998:

There is a tyranny of round numbers in human behavior.People will gladly buy a car at $14999 and won't touch one at $15000.Round numbers often become resistance and support, the larger the rounding, the more significant.Traders knowing a break below 6% was psychologically important on the bonds could have seen the follow- through on the day trade as obvious.Similarly 6.00 for silver as recently tested support, which if broken, implies more selling, and the 100 levels on the DJIA and the OEX,etc.Prices often cluster, hesitate,spike to resistance and support at round numbers.Specialists love them because they can acquire inventory by taking price to 2 and 15/16 instead of 3 on a decline, or in reverse, taking price to 3 1/8 to cause buy stops to be tripped to unload inventory.

DJIA price is hesitating at 8600.Many longer term traders bought the DJIA at 7600.1000 points up or down is a big round number.

Breadth:

Friday's enthusiasm did not last long as NYA declines outpaced advances except for a brief intraday period. This pushed the McOsc lower and pressured prices to almost unchanged. There was a significant divergence today between the DJIA and the S&P and NDX. The narrower DJIA was supported by a few issues whereas the broader market was undergoing a distribution. This is typical topping action accompanied by warnings by those who sell the public stock that they had better be careful. There are clear warnings by those who follow earnings and valuations that the pros might take the market down to reasonable levels. That makes the market sound like an ethical place to do business. Since when did the pits and exchange floors ever self police themselves on valuation measures? Prices will be taken as high as trading will facilitate them. Cash is a viable alternative for short periods of time. Even 90 day T bills yield more than S&P dividends. Panic buying and panic selling are the two major times to exit and enter, in that order. This is of course an oversimplification, but Friday looked like panic buying. Volume was heavy at 664 million shares but prices were stalled and retreated in the majority of issues. CODI closed near the sell alert line and the OEX closed right on top of its trendline.

Volatility:

Z Timer ended virtually on neutral as did the Modified Volatility Index(not shown).

RSI, SMI:

XAU up, TYX(yields)down, SPX down. Anyone notice that yields below 6% did not set a fire under stock buying. Got to watch those intermarket relationships. When they don't act as expected, watch out.

Stocks of Interest:

ASTN- ASTN's president today clarified the expected time horizon for the introduction of the company's electronic trading system at the Philadelphia exchange.Next week they are to show the final working product to the SEC.He looks for it to be in place and trading by April 15 or so.He is comfortable with the earnings estimates of Westergard,who did an analysis on ASTN at his site.{in the "ball park"}One day does not mean anything, but ASTN was up today in a weak tech sector to 3 and 3/32, testing resistance at 3.10-3.50.Average tech stock was down 1.98%. CMRstill has buyers at 1.55.Today small block sellers were seen on downticks, and larger block buyers on upticks.CMR was unchanged at 1.60- it's temporarily stalled here.A large institutional buyer may come in and clean up the bids between 1.60 and 1.75- 2.00, which is the next resistance.The last drilling results at BINCO were very promising.Cash flow from Werner Lake cobalt within months to give this issue more institutional appeal.

Fib Zones:

The NDX is really headed south on the Fibo charts. Weekly support is nearby at 1120+,- with extreme support at 1080+. Its Ratio Oscillator is headed down so best not to be long this one until support is reached and based. The DJIA hit weekly fib resistance at 8600 and decided it was premature to go further. A 3% correction would take it in the vicinity of 8300. 3% to 5% is what some street pros are calling for. Its Ratio oscillator is breaking down and the daily trend Triple Switch(green steps) is making its presence known. Minus 3% on the OEX is about 485 where the lower Fib support is located this week. 1020 to 1030 on the SPX would remove some of the pit's guilt about taking things too high ahead of weak earnings. Stocks have been trading like commodities for some time and there will be egg on some faces before too long. Let's look for a smashing low on Thursday/Friday to wash out the two to one equity Call to put owners and then rally late Friday afternoon. This would be in keeping with the cycle that normally occurs in pre-ex week.

DJI NDX OEX SPX TYX XAU

Momentum Cycles Cones:

OEX ran into weekly resistance today and the Projection Oscillator ended flat on the 50% line. For the mathematically inclined, the first derivative of a peaking curve is "0". The second derivative is a downward facing curve. If this comes to pass, then prices will drop to the lower half of the cones in the coming days, at least until Thursday PM or even Friday PM when we get the pre expiration Friday bias. This would fit with a McOsc dropping below zero in the formation of the center leg of the three leg complex bottom. March 13th and 14th have the highest cycle energy points of the year. Could be a low, a high or just an acceleration. Just need to watch the trend going into it for clues.

Pivot Zones:

The general pivot position for Tuesday is an open below the Keyline for the DJIA, OEX, SPX. Their keylines are shifted upward and are narrower in range than last week. The NDX is another matter. It has downward shifted pivots and keyline. The immediate expectations would be for a test of the keyline from below to shake out a few weak shorts and then a test of S1A for these four indexes.

DJI NDX OEX SPX

Momentum Cycles Update for the open of Wednesday, March 11, 1998:

Seasonal changes often show up in reversals in the March15- April15 area.One change equity traders may not be watching is the strong possibility of a cold ,wet spring which is bullish for beans and grains, as it inhibits planting and timely growing.Unseasonally unpleasant spring weather, if it continues, might give a lift to natural gas as well,so a long trade in gas looks good here. The CRB,which is still in a bear trend, has not yet broken yearly support at 221.56.Other trends to watch are the dollar, which recently has correlated well with our other paper markets.

Date "hits"occur from March 6-12{13} area as multiples of previous highs and lows.A close much above the 8650-8690 area could very well mean a wild spike up to the next price "pitch"of 8900.Normal seasonals usually show equity weakness in the March 15 to mid April area.

Breadth:

NYA breadth was positive, but not as positive as last Friday. A wedge may have been forming over the last three days. Upward sloping wedges are classic failure patterns. Just when the the McOsc was dropping through zero the big gurus were marched out in the public's view to save the trendline once again. Today we had RA pronouncing 10,000 is in the bag in 98 and JB saying the speculative fires in the secondaries are yet to be ignited. It really makes you wonder what is going on when dividend yields are at historic lows, and growth rates for 98 are expected to be slowing. When market behavior defies rational explanation, it is called a mania. Our contrary indicators, CODI and Z Timer are now overbought again.

RSI, SMI:

XAU has the strongest RSI, followed by the SPX and then the TYX. The XAU has a way of rising in anticipation of an equity collapse and then within a day or so follows equities down.

Fibonacci Zones:

NDX is clearly in a daily downtrend and is working on its weekly uptrend line(white dash line). The DJIA is struggling to keep its daily trend classified as up as the green and red Triple Switches contest for direction definition. OEX and SPX are in a little better shape, but both are jammed up against the weekly fib resistance zone. This zone is a decent place to consider partial profit taking on the long side. A classic sell here would be for the indexes to make highs not confirmed by the ratio oscillators.
DJI NDX OEX SPX TYX XAU

Stocks of Interest:

CMRtested resistance again today,up 2.5% to 1.64.Tonight's bids are 100 lots at 1.62,and 90 asked at 1.63.Large blocks of 5000,12000 and 7500 were bought at 1.55, 1.60,and 1.65 respectively.Much smaller blocks traded on downticks.A large buyer could easily take price through the 1.65-1.80 area,since the number of asked lots do not appear to be overwhelming in this area. ASTNhad a delayed reaction to tech weakness today.ASTN's core business is in the process of final testing and approval by the SEC this week,at the Philadelphia exchange.That exchange offers stocks, options and other financial instruments, and is open to innovation.ASTN's proprietary system of matching bids and asked to achieve the fairest possible price, called VWAP {volume weighted average price execution},eliminates market impact from large institutions.These large players can affect market price inordinately.ASTN gets a commission on every transaction using VWAP.Resistance was found at 3 today ,support at 2.97,on good volume of 177000.Approval of VWAP in final form in Philadelphia would mean a good income stream for this company.

Both of these special situations are positioned for good gains in the undercovered small stock area,where few analysts spend any time.They are not immune to a general market correction but their longer term potential is outstanding.

Pivots:

Closes today and opens tomorrow above the Keylines describes the pivot pictures. The NDX pivots have an extremely narrow range which is conducive to breakout types of moves.
DJI NDX OEX SPX

Momentum Cycles Cones:

Today's OEX candlestick is half above tomorrow's keyline and half below. This keyline also extends backwards a week and rests on the the previous highs. I guess you could say that Wednesday 3/11 is a Key Day. Speaking of momentum it should be mentioned that pre expiration weeks historically tend to have a downward bias.The second week of February was an exception. Does this mean the downward bias is going to be compressed into two or three days? Maybe it won't occur at all. On the other hand when pre expiration week has an upward bias, expiration tends to be a downward affair. Of course these two weeks are the choppiest of all. So far it has been unidirectional. The usual "shake 'em loose" out of option positions has not occurred. Only time will tell if the cycle date on Friday has stimulated the speculative hormones to excess and prices wane in reaction next week.