MomentumCycles

MomentumCycles commentary for the open of Wednesday, April 21, 1999:

Option premium ratio finally in the .30's after the April 12 reading of 1.66 led to an oversold rally Tuesday,as well as the CODI reversal{see chart}.Whether Monday is all she wrote for selling is discussed below.

Fannie Mae,which sometimes correlates with 30 year T bond movements,gave a short term sell signal today at 72.

XAU hit the 14% upper band Monday,and unless this is the start of a new XAU bull leg,showed typical behavior when tagging the overbought zone,down 3.3% Tuesday,as predicted Monday p.m.{open 69.02 ,low 66.78,close 67.38}.A fall to below the 14% band would be normal here,which would be signalled by another down day,similar to the December/January pattern.On to short term OEX action...

Will she or won't she or is it will he or won't she or he? The gender of bear markets haven't been established yet. For no uncertainty, bull markets are masculine. Some men are rumored to die from Viagra, some are rumored to die from the new arthritus drug. What is this bull market going to die from? How coincidental is it that these new drugs enter the scene as bull becomes geriatric?

OK, enough of that, what do the tea leaves say tonight? First the seasonality thing. We need to keep looking ahead; short term positive seasonality can start as early as 4/26-28 and as late as 4/30. The remainder of this week is booksquaring and broker calling time to clear the inventory. That means a flat market at best and down into Friday morning at worst. Longer term, as measured in months, we should be entering the long consolidation before summer. Making money by buying puts and calls could become more difficult in this period. The technicals are deteriorating again as the pullback from new highs consolidates. Remember, the period from Easter to Thanksgiving is the underperforming period, except for the summer rally. New Highs have dropped into the danger zone on the ADHL, and the recent Buy signal may soon be aborted. Five Day Advancing and Declining volumes are on a collision course as money chases prices that chop accounts up. Pretty soon, only brokers will be making money. Pricewise, the Adaptive Modified Option Strategy Spectrum and MOSS are on the lower edge of neutral, and they can drop further into oversold before we have a buy. CODI has hit the Buy alert level, but it can go higher before we have a definite oversold buy (that's personal bias speaking). SuperT is beginning to roll over in time to meet its cycle low. McOsc is maxed out, etc. The Cone chart has an oversold projection oscillator, but it also has a failure pattern now that the OEX has moved up to the underside of the regression channel. EquityC/P and Sentiment are neutral looking. Money flows peaked last week and formed those topping candles. Just take a peek at the INDU chart and its On Balance Volume indicator. This market is due for some serious transfer of valuations into cash for the wise while Joe Consumer sits back and is talked into lowered expectations as he is encouraged to buy and hold. Sayonara to the bull and put him out to pasture for some fun. He deserves it. Besides, the bears are through hibernating.

Here are the charts:

5 DAY ADVANCES CHART. CYCLE CHART. DSP9M CHART. DSP9MD CHART. DSP9MW CHART. INDU FIBRET CHART. NHNL CHART. NYA CHART. OEX FIB CHART. OEXFIBRET CHART. OEX HOURLY CHART. OEX WEEKLY CHART. OEYQP CHART. PITCHFORK CHART. RSISTO CHART. SUPERT CHART. VIX CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, April 22, 1999:

Often the market will reverse within one or two days on a closing tick of over +400 or -400.Closing ticks of +1000 or -1000 are relatively rare.Wednesday saw a +1038 closing tick.Often the market will roll over and drop after an early a.m. pop on the day following such a high closing tick,or the day after.

Also, we could say "Whoa again!", the EquityCP and Sentiment are back in the outright buy puts area. The market was just too strong to fade it today, and it is living up to its "W" name. Well, we need one more day to prove that. Even though Wednesday wasn't the high of the week, it has a high probablility of closing higher than Tuesday or Thursday. Time will tell. We came into the day with a narrow range between S3 and R3, so it was easy to engineer a breakout. It looked like R3 was going to hold and TICK momentum looked like Monday, but by the last hour shorts were squeezed again with pre IBM earnings announcements. We now know they were better than expected. So, maybe we get a pop on the open and another chance to go against the crowd. Moontide was flat to up all day, and we should not have tried to countertrend it with such oversold price oscillators. Indexes were hitting the fib resistance, and it seemed like a put trade would work in spite of the mixed indicator situation. It just doesn't pay to anticipate a trend change. It also shows the virtue of using a mechanical stop of the 1.5 variety,which we traditionally use. It is also advantageous to wait for the daily fib resistance for puts or support for calls. The change from yesterday brings the oversold price oscillators back up to neutral in some cases and the breadth oscillators are still in overbought. We will be running into trendline resistance early on Thursday. Sometimes the simplest things work.

DJIA projection bands have a high for the DJIA on Thursday of 10704. Here is another case where the Haurlan breadth oscillator is reaching a sell alert level.

Our concern that XAU had tagged the upper 14% trading band at 69.04 3 days ago and was in "guaranteed sell territory" with STOCHASTICS at 100{as overbought as it gets}worked perfectly with a tradeable 2 day move {Tuesday/Wednesday open to close} of 69.02 to 65.52...5%.If you bought puts or went short,cover here.

We were apparently early or wrong on the bond selloff/FNM sell at 72,as FNM closed at 72.5,and 30 year T bonds gained .04%,admittedly just a smidgen of a price increase.

Here are the nightly charts:

AMOSS CHART. CODI CHART. CONE CHART. CYCLE CHART. FIBRET CHORT. INDU CHART. MCOSC CHART. OEX FIB CHART. OEX WEEKLY CHART. OEYEM CHART. OEYQM CHART. PITCHFORK CHART. VIX CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, April 23, 1999:

Well,we were perfect on the rate call and the XAU.Several days ago,our FNM/T bond correlation indicator said rates on the 30 year T bond were set to rise.Wednesday open rates were 54.75-55.00.Today an intraday e mail said 55.71-55.76 was a good profit taking level{e mail misprint was 51.71-51.76,but timing was correct!}.

XAU short or long profit taking level several days ago at the upper 14% was at 69.02.Today an intraday e mail said cover short {open to early afternoon saw 64.75 to 65,before an exlosion to 68.41!}.Both of these trades were almost perfectly timed.

So much for liquidation Thursdays. Perhaps it will be liquidation Friday. The only thing liquidated were people short IBM. Nothing has really changed in the breadth and sentiment indicators. What has changed is the synchronization with the price/breadth/sentiment oscillators. We are closer to having an ideal short configuration now that the OEX is moving up into the overbought zone on the AMOSS chart. Additionally the EquityCP and the Sentiment are armed. In fact, the Sentiment has made the ominous turn down as price peaks. That is a key ingredient to the setup, as you recall from previous put trades. You see, a rising market needs bullish sentiment, and if that sentiment wanes, so will the index. It's the late comers and short squeezed that take the index up the last step before armageddon. The Breadth indicators are armed, and oh gosh, CODI, our change of direction indicator, is nearing the whipsaw zone. Could we be that close, or will CODI have to drop all the way down to Sell Alert? Surely we will get one washout before seasonality kicks in next week. Maybe so, maybe not. It would be even better if VIX would make it down to its lower band and everything else remain where it is.Notice the second closing +1000 tick. Wow, what a trade.

Here are the charts:

5 DAY ADVANCES CHART. ADHL CHART. THURSDAY'S CONE CHART. FRIDAY'S CONE CHART. CYCLE CHART. DSP9M1 CHART. DSP9MD CHART. DSP9MW CHART. INDU CHART. INDU FIBRET CHART. MOONTIDE CHART. NHNL CHART. NYA CHART. OEX FIBRET CHART. PITCHFORK CHART. SPX FIBRET CHART. TYX CHART. XAU CHART.

MomentumCycles commentary for the open of Monday, April 26, 1999:

Next week can be hazardous to your wealth if you listen to the bearish gurus on CNBC. This is a very hard lesson to learn. There are so many ways to look at trading that it can be confusing and misleading. Among these indicators are breadth, valuations, trends, oscillators, option sentiment, statistics, Fibonacci, Gann, channels, moving averages, volatility, etc. You see many of them here on Momentum Cycles. Furthermore, each analyst may have a different interpretation, with the result that one says buy and the other says sell. This diatribe is not meant to be self-critical, but to point out the fact that 99% of the analysis can say the market is going down like the Titanic, but the other 1% is what keeps it from sinking and even lets the ship ride one more wave up. This is what we are faced with next week. Think back about some previous end of month weeks prior to the next infusion of cash. Haven't you seen buy programs come in as early as five trading days before the end of the month and as late as 3 days or even the last day of the month? So, here we are with the all the technical analysis and even the fundamental valuations saying there is only one way to go and that is down. The 1% Seasonal factor says next week has a positive bias, and if you get caught on the wrong side you will be spanked in an unforgettable way. Yes, it is possible that we could have a down Monday and Tuesday{see the option premium ratio analysis below for why}, but by Wednesday extra caution is urged. We just want to throw out the possibility that the first three days could be very choppy (as the CODI indicator is implying with its presence at the Whipsaw level). In spite of the overwhelming technical evidence justifying shorting, there is a caution from the Sentiment. It has dropped back to the neutral level, relieving the selling pressure. This might be a clue that seasonality will win out next week.

Now why is there short term caution on the long side for the first several days of the week? Friday's reading of .84 on the option premium ratio generates several short term sell signals.The reading of .84 is a necessary ,but not sufficient condition for over 100 point DJIA declines,as these declines often start with readings of .83 to .85.The S and P 500 had an almost unchanged day Friday on the .84 reading.Values of .83 to .88 on marginally losing or unchanged days often generate short term sells.In addition,the option premium ratio was more than .08 below its 2 month high of 1.66 Thursday and the DJIA made a new high.When 10 session highs for the OPR are made 7 to 10 days before a new monthly high in the DJIA,you often get a short term decline.The OPR high was April 12 at 1.66,and the DJIA high was Thursday,April 22,8 trading days later,on an OPR of .74.The predicted rally off the .36 OPR and CODI buy zone did materialize early last week,and now probability seasonals say the next likely buy date using the NASDAQ 1 week rate of change indicator is about Wednesday,April 28,implying a possible correction into that date from Friday,April 23.So about Wednesday is the most likely date for the long OEX trade we see materializing.

XAU found resistance at the upper 14% trading band above 69,sold off last week exactly on our overbought STOCHASTIC 20 at 100 reading, and rallied from oversold at 64.75,as we called on intraday e mail.A short term double top near the upper 14% band above 69 suggests a pullback to the upsloping colored trendlines on the XAU chart below,however,no trade is recommended currently.Its best to take a position at the extremes,as when we called the sell at 69.02 and cover at 64.75 recently.Interestingly,longer term OBV is rising,as it has during the recent declines,suggesting longer term patient slow money accumulation.

5 DAY ADVANCES CHART. ADHL CHART. AMOSS CHART. BREADTH CHART. CONE CHART. CYCLE CHART. DSP9MD CHART. DSP9MW CHART. EQUITYCP CHART. INDU CHART. INDU FIBRET CHART. MOONTIDE CHART. NHNL CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. RSISTO CHART. SUPERT CHART. VIX CHART. XAU CHART.

MomentumCycles commentary for the open of Tuesday, April 27, 1999:

If it were not for the positive seasonality expected to kick in this week, I would "bet the ranch" on the bearish technical state of things.In fact,the option premium ratio implied a sharp selloff from Friday's closing reading of .84. Everything has moved farther into the sell mode on Monday. Even the EquityCP and Sentiment have moved back above the alert line. We are still waiting for VIX to drop to its lower line to complete the perfect setup, then the final ingredient is for time to run out on the seasonality. That is why we may have to wait until next week. The reasoning goes something like this: If you owned the store (specialists and market makers) and you had a large inventory that you wanted to dump before summer vacation to pay for new cars, trips, house, vacations, graduation expenses, etc, you would wait until after the new seasonal money is exhausted before putting the stock on sale, wouldn't you? Prices will drop to the bids when demand drops at the ask; it's called price facilitation.

XAU moved back towards the moving average as predicted;price is now 65.63,off another 2.9% today.We have found that a tag of the upper 14% trading band on a STOCHASTIC reading near 100 is a reliable sell,as seen recently;frequently a move is made back towards the center band or moving average.Double top failure was seen above 69.

FNM gave another nonconfirmation sell signal at 72.5;this time it might have been due to the negative Barron's article this Sunday.

5 DAY ADVANCES CHART. ADHL CHART. AMOSS CHART. BREADTH CHART. CODI CHART. CONE CHART. CYCLE CHART. DSP9M DAILY CHART. DSP9M WEEKLY CHART. INDU CHART. INDU FIBRET CHART. MOONTIDE CHART. NYA CHART. OEX FIBRET CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. XAU CHART.