MomentumCycles

Momentum Cycles Update for the open of Thursday, April 23, 1998:

Our suggestion that the XAU would continue up once 90 was broken decisively resulted in a 3.8 percent gain today to 92.88 on only marginally rising gold and silver prices. Perhaps the XAU is catching fire from the blowoff in palladium and platinum prices. Today June palladium was up 4 percent to 308.55. July platinum was up 3.8 to 420.7, all on continued Russian continued instability. Moving into Friday it is possible that Yeltsin will get his way and that the Russian legislators will appoint his candidate. If so, we can see a pullback in platinum and palladium ahead of the weekend. That does not alter the fact that these metals have not been shipped from Russian stockpiles. A little profit-taking here for longs would be advisable.

May copper down 55 to 8430. Resistance from producer selling from 85 to 86.

CRB retesting support at 225.

ASTN up 28% today on 5 times average volume to resistance at 3.75. CMR rebasing on the 1.30 area on light volume.

We had recommended edging into OEX puts Wednesday. Use a $1.50 stop. Normal cyclical weakness this time of month, especially after income tax payments have been made and the Roth money invested, would normally set up for a long trade to be entered into at the end of the month.

Trend:

Well, we finally have completion of trend with the OEX tagging the April 1997 regression channel intraday. The chaotic attractor has worked its magnetism and now the OEX can fall like a rock. Of course that is forecasting and not trendfollowing so tomorrow will unfold as Thursday's tend to do. Probabilities are for down action. Looking at intraday FlowRate we did have a very negative picture on Wednesday. TICK remained below the zero line allday. Net flowrate had some negative liquidation Pre-Thursday positioning action. DJI trend is seeing the advance decline oscillator and the A/D line not confirming the recent price advance. Money Flow is still inching up into fewer and fewer issues.

Breadth:

Apologies are in order for the McOsc volume oscillator for the last few days. It has not been moving up as previously illustrated(data input error). The reality is it has remained below the neutral region with the issue oscillator as the index inched higher and the Summation index rolled over. A longer term view of the McOsc chart is presented tonight for an annual perspective. By all technical breadth measures the equity index should turn down with gusto. New Lows increased to 33 even as new highs expanded to 204, still way off their earlier highs. The breadth divergences continue as the ADHL remains on a sell from last week. Since its timing signals are part breadth and part price, price can continue upward giving plenty of time to exit positions once a sell signal is registered. CODI is working upwards in an anticipatory sell mode. Here is the OEX regression chart.

Volatility:

Zone Timer made an anticipatory sell pivot in the Extremely Overbought zone on Wednesday. MVI, modified volatility index, is really getting into sell territory, still needs to pivot upwards...could happen any day.

Momentum Cycles Cones:

McCone had an average day today within the green cones. Today's candle is weighted to the lower half of the candle, more bearish than bullish indication for Thursday. Average volatility declined to below 20 and is riding on a sell band(not shown). As volatility declines the McCones narrow creating a strong day or crash day breakout setup.

Pivots:

DJI closed below its Keyline and is resting on the hourly trendline(cyan). Early morning weakness could precipitate some selling with a break below the hourly trendline. DJI hourly momentum has gone flat since 4/15 as the calm before the storm. OEX and SPX close on their keylines for Thursday. A few down ticks would trip off sell stops below the keyline. NDX is the holdout as it roared ahead again today breaking out above R3A, but its run may be about over. Take a look at the NDX fibo chart in the next section.

Fibonacci Zones:

NDX and XAU have worked their way up to the Monthly Fib Resistance zone. We should see some resistance at these levels. Unless of course momentum feeds on itself and carries prices higher, but 1300 and 92 would be logical profit taking levels. XAU looks like it could move higher as its ratio oscillator has more upside room whereas the NDX ratio oscillator is already turning down. The DJI, OEX, SPX are stalled out at weekly fib resistance in a distribution type behavior as breadth deteriorates internally as discussed above. Here is the TYX chart.

RSI, SMI:

XAU RSI has reached its upper resistance/reversal band. Nothing is to stop it from continuing up in a trend mode, but the first order of business is to recognize that the XAU often rises in anticipation of a collapse in the broad equity market and then collapses with it. SPX RSI has worked back up to the center retracement band and is now faced with a moment of reversal truth. SMI is showing the XAU and SPX still in trend mode. An upward thrust in stochastic momentum after a long trend sometimes presages a downturn in trend as the final longs are sucked in and the last shorts pack it in.

Stocks of Interest:

ASTN CMR

Momentum Cycles Update for the open of Friday, April 24, 1998:

Normal OEX cycles call for a decline between April 22 to April 27, and a rally from April 27, plus or minus 2 days.Monthly money flow takes hold strongly from April 29 into May, so a long entry about April 28-29 will be planned for.A close of put positions taken Wednesday for day traders on Thursday at the lows near the -1146 tick would have returned 11 S and P points, 36 NASDAQ points, or 6 OEX points in one day.Cycles call for a low Monday,but those still holding puts from Wednesday into Friday should use a trailing stop to protect profits.Hopefully the market will fall Friday,making the trailing profit stop lower Monday.

The long trade taken from the late April low into May is cyclically normally very rewarding.

CMR.TO rebasing in the 1.30 area on increasing volume.There are only 2000 shares asked at 1.33, as patient low bidders are cleaning up the remaining supply.

ASTN saw resistance at 3.75 again, closing at 3 and 3/8.A close above 3.75 would be very bullish.

We advised profit taking for those who are holding long palladium and platinum positions,as Kiriyenko may be confirmed Friday, which could lead to a selloff.Today platinum saw intraday highs of 424 basis July,closing at 415.90, palladium up 7.40 to an 18 year high at 315.95 basis June after limit up and down 12$ moves.

Copper at 85.50 basis July ,where producer selling is hitting resistance at 86.

Corn strong on midwest wet weather.

XAU momentum weakening ,but still up to 93.20.Dollar strength in pre opening trading Friday would suggest taking short term XAU profits for longs.

As we mentioned before,March was an aberration in the normal monthly ebb and flow of weekly OEX strength and weakness,that has worked so well cyclically for us for years past.

Trend:

ADHL indicators fully support a sell trend after today's deterioration. New Highs fell from 204 on Wednesday to 115 on Thursday as New Lows picked up two more to 35 from 33. The three indicators responded accordingly. OEXreg channel dropped further from the April 1997 channel line. A three day view of Flow rate is presented for comparison of Tuesday, Wednesday and Thursday. Starting with the top plot of Total Flow rate in millions of shares per minute we see the repetive pattern of heavy volume/minute in the morning, tapering off to less than a million shares per minute during the lunch hour and then increasing again into the close. This repeats day after day. How can you use this? Well, these distinct volume trends often coincide with continuation or change in price trends after T bonds cease trading and the interest rate outlook is known. In the second plot from the top we have the FlowRate Net that gives the directional bias to volume. For these three days, note that Tuesday had some negative spikes, Wednesday was relatively quiet, Thursday also had some severe negative spikes as stocks were dumped in heavy volume impulses. Then there is the TICK view of running below zero pretty much for three days now. Late Thursday there is somewhat of a divergence with the OEX(and other equity indexes) as TICK made a higher low and the indexes made lower lows. The Net Flow Rate also had a higher low. This isn't to say that the selling is over yet, especially with TICK ending so negative and in a three day downtrend. Looks like buyers are standing aside and specialitsts and market makers are dropping the market in an orderly manner, so far. As long as volume is contained and they maintain control, prices will drop orderly. If volume becomes uncontrollable, then bids will drop precipitously and market orders to sell will be filled at much lower prices. In this case we would see the "Crash Mode" MoCone intersected intraday which represents a 2 standard deviation liquidation washout. If you are a potential equity buyer, it really would be wise to stand aside until this runs to completion.

Breadth:

NYA breadth was extremely negative and is clearly reflected in the McOsc issue and volume oscillators(short to intermediate term indicators) and the longer term Summation indicator. CODI is in the Sell Alert region on the close. Intraday it was higher in the indeterminate region. DJI AD osc, AD line and Money flow point to more downside in the equity indexes.

Volatility: Zone Timer continued its sell pivot back to the edge of Neutral and Overbought. Given that markets swing like a pendulum, we should expect it to fall further. MVI made a nice sell pivot and has further room to travel before reaching the upper band. The middle band is within reach on Friday so maybe MVI will cross above it and pull back intraday as though it is providing some resistance. These things happen. However, with the way the breadth looks, we could have a meltdown on our hands.

Momentum Cycles Cones:

Cone for Thursday was classified as a strong down day(red cone was tagged on the intraday low). Friday's cones have been expanded and positioned near the price scale for easier identification of price intersections. These levels are similar to the ones that appear on the Pivots as you note the OEX low tagged S3 precisely intraday. However, the calculations for the cones and pivots are entirely different. Fibonacci Zones:

Fibos worked great today, thanks to Robert Krausz and his software creation. Generally we don't make a practice of promoting software, but this one package needs to be given some credit for its use with multiple timeframe indicators. What hasn't been shown on Momentum Cycles is the realtime capability of Fibonacci Trader. For example, a five minute bar chart of the INDU finds fibonacci support and resistance on the hourly bands with frequent regularity. It is well worth a traders time to take a look at the fibo demo he has available for a nominal fee.

Note how the monthly fib resistance put a stop to the NDX and XAU. Also note how weekly fib resistance finally turned back the other indexes with some dropping towards the weekly balance line(red dashes) with some closes on the triple switch stop loss line(red stair steps).

DJI NDX OEX SPX TYX XAU

RSI, SMI:

See charts.

Stocks of Interest:

ASTN CMR

Pivots:

There was a distinct change in the Keyline trend. After many days of a rising Keyline, Friday's Keyline is below Thursday's. Also the indexes open Friday below their respective Keyline after dropping to Thursday's S2 and S3 levels in corrective action. Pivot zone probabilities are for overall lower support and resistance zones on Friday.

DJI NDX OEX SPX

Intraday update Monday 10:30 AM eastern:

As a daytrading target S4 on the stat pivots has been hit. S3 is about all that should be expected.

Momentum Cycles Update for the open of Monday, April 27, 1998:

April has returned to the normal weekly money flow cycles we have used for many years, successfully.March indicators were likely distorted by the aberration of new middle class money flow into the new tax exempt Roth IRAS.

We had called for a spike high in gold, silver and XAU April 6-7, a rally to take profits into for short term XAU traders once 80 was passed, the same for the passing of 90, and taking short term XAU profits near 93 late last week,where near the open was the high for the day {about 92.5},with a close considerably lower.

We had suggested that Thursday was a good day to take short term long profits in palladium and platinum, due to the profit taking that would accompany the Kiriyenko confirmation, although no supplies from Russia or delivery dates are yet confirmed.Both suffered Friday as projected,although exits above 324 were possible intraday.

Copper resistance from producer selling was seen as 86{actual 85.5}.

OEX pivot dates were projected as high April 6-7,low near the end of pre-ex week,rally from 13th to possibly as long as the 21st, and a projected decline from the 22nd into the 27th, plus or minus 2 days, with the 27th likely as a low, followed by a pension money flow rally from the end of April into May.OEX{or NASDAQ if you prefer} put positions were advised and entered into at the rally highs Wednesday, although positions taken any time early last week would have worked.A trailing profit stop was advised for Friday, and those who obeyed our many times stated previous advice" sell half at 50% ,or take profits near a double"{see above chart for the May 545 put as an example},would have exited Friday.Those still holding the puts should exit Monday.

During the recent upleg,the 21 day DJIA moving average has proven support,and that's where support was found Friday.However,a closing violation of the moving average projects a tag of the lower band, now more than 3% lower.

It is generally wise to exit put positions at the end of the month, as positive pension money flow is due by the 29-30th at the latest.

A clue to Monday's opening action can be taken from the European markets,which recently have exhibited a high correlation with our market action.

If the DJIA goes to the lower band,a selloff can be seen as confirmed to be over once 3 day cumulative breadth and volume turn up.As of now they are still dropping.

Trend:

When a series of projected short to long term regression channels provide trend indication along with valid support and resistance then index turning points provide verification of the date ranges the channels are based on. Projected is the keyword. Intersections of price and channel lines provide probable points for change in trend. On Wednesday of last week the channel line from 4/97 provided precisely timed resistance. Next week we should expect the Blue channel line from 1/95 to be tested for support. Two books recommended for trading with regression channels are "The Option Advisor" by Bernie Schaeffer and "Trading The Regression Channel" by Raff.

Breadth:

A price top of significance is in place when new highs make a sustained decrease as they have been doing for weeks and accelerate as they did on Friday with a decrease from 204 on Wed, 115 on Thurs, and 52 on Friday. New lows expanded to 39 on Friday. The ADHL chart's sell signal from 4/13 has been followed up with further deterioration in breadth. Watch the New High and New Low Strength indicators for price trend clues. The DJI chart shows another High, Low view. The McOsc issue and volume oscillators, and the Summation index paint a similar picture. The really smart money created the issue and volume oscillator peaks in January and February. Ever since then stock has been distributed to lesser informed holders buying on momentum in the face of cloudy earnings outlooks. The OEX is finally dropping out of the regression channel originating in January of 1998. CODI may once again become a useful timing indicator if trends become shorter and cycles more dominant. The sell pivots since January have been nothing more than a few days of selling. That could be the case right now as we enter a positive seasonality cycle on 4/28. It does appear that upward momentum of the first quarter is subsiding.

Volatility:

The trusty Zone Timer nailed this sell with the anticipatory downturn on 4/22. Sometimes you just have to put a trade on in sync with the signals and have appropriate stops in place in case things don't go as expected. Zone Timer is now back in the oversold side of neutral so caution is warranted about being on the short or put side next week. Modified Volatility Index, MVI, continues to point in the sell direction.

Momentum Cycles Cones:

Friday is classified as a very strong, Red Cone, day as the intraday low tagged the 83% dotted red line. This cone contains 83% of prices based on implied volatility for that specific day. Also note that support came in near the regression channel originating in March. It looks like 530 should provide some support on Monday as it was a previous significant resistance and support level. Also it is the 50% probability level for price containment. Remember, these are just probabilities based on implied volatility. Even so, they do provide projected targets for entering and exiting positions.

Pivots:

The Keylines are stepped down again for Monday and the hourly(cyan) trendlines closed below the keylines. Something needs to be said about the participants that use "Pivot" type of trading systems. The market is an arena of participants with varying levels of technical sophistication. Some of them use the simple arithmetic pivot formulas. Others use more sophisticated ones based on Fibonacci and volatility inputs. Sometimes in some indexes the Classical pivots dominate and other times the Statistical Pivots provide the significant turning points. DJI support was eventually found inside the dark blue S3 &S4 statistical zone on Friday. On the way down it was found at S1A and S2A which are the "Classical" and more popular pivots used by the masses. The OEX worked S3 and then tagged S4 within hundreths of a point on Friday. This support level was reached on a massive negative volume impulse seen on the FlowRate chart. The Keyline is just that, key to trend. It is the "balance" point in price for each day.

DJI NDX OEX SPX

Fibonacci Zones:

Last week could be summarized as "Weekly Fib resistance held and forced prices to close on or below the weekly balance and daily stop loss levels and were accompanied by a rollover in the Ratio oscillators. Monthly fib resistance stopped the XAU and NDX."

DJI NDX OEX SPX TYX XAU

RSI, SMI:

These RSI charts are based on a shorter term period than the Stochastic Momentum charts. I.E. entries and exits could be determined on the RSI in the direction of the SMI trend.

Stocks of Interest:

ASTN now has resistance at 3.75, with long term prospects still intact, obviously not immune to a general correction.Buyers presently below 3. CMR at the 1.00 to 1.30 area,close 1.30, rebasing in its change from hot money trend followers to long term value buyers.Once a firm contract is in hand,and price improves, the value buyers will sell to the momentum players.

To quote from the Momentum Cycles Update for the open of Monday, April 27, 1998:

"April has returned to the normal weekly money flow cycles we have used for many years, successfully.March indicators were likely distorted by the aberration of new middle class money flow into the new tax exempt Roth IRAS.

We had called for a spike high in gold, silver and XAU April 6-7, a rally to take profits into for short term XAU traders once 80 was passed, the same for the passing of 90, and taking short term XAU profits near 93 late last week,where near the open was the high for the day {about 92.5},with a close considerably lower.

We had suggested that Thursday was a good day to take short term long profits in palladium and platinum, due to the profit taking that would accompany the Kiriyenko confirmation, although no supplies from Russia or delivery dates are yet confirmed.Both suffered Friday as projected,although exits above 324 were possible intraday.

Copper resistance from producer selling was seen as 86{actual 85.5}.

OEX pivot dates were projected as high April 6-7,low near the end of pre-ex week,rally from 13th to possibly as long as the 21st, and a projected decline from the 22nd into the 27th, plus or minus 2 days, with the 27th likely as a low, followed by a pension money flow rally from the end of April into May.OEX{or NASDAQ if you prefer} put positions were advised and entered into at the rally highs Wednesday, although positions taken any time early last week would have worked.A trailing profit stop was advised for Friday, and those who obeyed our many times stated previous advice" sell half at 50% ,or take profits near a double"{see above chart for the May 545 put as an example},would have partially exited Friday.Those still holding the puts should exit Monday.

During the recent upleg,the 21 day DJIA moving average has proven support,and that's where support was found Friday.However,a closing violation of the moving average projects a tag of the lower band, now more than 3% lower.

It is generally wise to exit put positions at the end of the month, as positive pension money flow is due by the 29-30th at the latest.

A clue to Monday's opening action can be taken from the European markets,which recently have exhibited a high correlation with our market action.

If the DJIA goes to the lower band,a selloff can be seen as confirmed to be over once 3 day cumulative breadth and volume turn up.As of now they are still dropping."

Momentum cycles update for the open of Tuesday,April 28,1998:

Those who bought puts last Wednesday as suggested{or even Monday or Tuesday last week} made a double in OEX {May 545 put is used as an example here}exiting Friday, or a triple exiting Monday.Even better results came from a NASDAQ instrument.

An intraday post was made mid morning Monday,when the downside action hit the mc cone and s3 support level,where prices often find support, close to coinciding with a -1755 tick.The European pre opening action Monday, as also Tuesday, proved{and may prove} to offer early clues to OEX action.We had last week projected a high and a decline from the 22nd to the 27th, with a low due the 27th.

Late last week was suggested for XAU exits near 92.5,Monday XAU down 3.85% to 86.42,palladium,platinum, silver, gold all weaker than the correct suggested high pivot dates this month.

The DJIA almost achieved the lower 3.5% trading band,and for a few days, late sellers will likely vie with monthly pension money inflow.When 3 day cumulative breadth and volume turn up, a sustainable rally can occur.Admittedly, the 3 day cumulative breadth is a lagging indicator, but in a selloff that might possibly be from an important short{or longer term!} top, lagging indicators might be a stronger confirmation of safety for longs.

ASTN and CMR both came under pressure during Monday's action, but va% still shows longer term accumulation in the issues.

Trend:

New highs fell to 17!!! New lows accelerated upward to 117. Thus we have further confirmation of the sell signal on the ADHL chart. OEXREG punched downward through the blue reg channel line.

Breadth:

NYA A-D spread was atrocious today. Remember the old adage used here a few weeks back, "In by Thanksgiving, out by Easter". Recent action is enough to make a believer out of a few traders. McOsc issue and volume is bordering on the levels of October 1997. This is extreme selling and crash mode days as we had on Monday as represented by the MoCones below only occur 5% of the time. CODI OEX broke through all the trendlines on the chart and CODI is trending up in sell mode.

Volatility:

Zone Timer became extremely oversold. Should calls be bought at this level? Puts should have been exited into a volatility peak in VIX Monday. Calls will suffer on a volatility collapse on a rally. Ideally we would like to see some basing with a decrease in volatility and drop in premiums before considering calls. They might still work out, but there is a little extra risk at the moment. MVI is nearing the buy band, all it needs to do is pivot downward in the vicinity of the band and does not actually have to cross above and then drop below. This new MVI uses a different type of band so all we are looking for are pivots in the vicinity of the bands.

Momentum Cycles Cones:

Monday's Cone was a beautiful example of how the MoCones can work as price targets. The opening took the OEX down to the red cones and then further drifting from the late comers took it down to the cyan cone. This represents a 5% occurance and occurs at panic lows. Seasonality should bring in some stability after margin calls are fullfilled. If the damage is really bad the mkt could base for a day or two sucking in bottom fishers in options with pumped up premium. Be careful. Tuesday's MoCones have a projection oscillator in the oversold level.

Pivots:

Pivots also had good firm price targets at the lower support levels on the classical and statistical pivots.

DJI NDX OEX SPX

Fibonacci Zones:

Basically the lower weekly Fib support held in the equity indexes. This makes a decent level to start a month end rally from.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

See charts. Stocks of Interest:

ASTN CMR

Momentum Cycles Update for the open of Wednesday, April 29, 1998:

An oversold bounce in up volume/down volume, issues,NASDAQ, Wilshire 5000,Midcap 400, but not in OEX and DJIA,off Monday's low.The start of monthly money flow is fighting trend sellers.A turn up in slower measures of cumulative breadth and volume, smoothed by 3 or 5 days, would likely confirm a rally, which has not happened yet.XAU bounced off support, as well as GSC and CRB.

8750 is the neckline of a head and shoulders pattern ,so a close below that level projects further trend follower selling.

5 day rate of change at -4% is oversold, but not extremely oversold.Short term RSI is oversold, but longer term RSI and STO is not.

This suggests a short term bounce here, and a possible lower low later, or a retest of Monday's lows after a bounce.

Trend:

OEXreg blue channel line was tagged at Tuesday's intraday high which was below Monday's high and Tuesday's low was above Monday's low, thus we had an inside day. The projection oscillator is at a reversal level. This could be the signal we need for a call entry. OEX implied volatility is still running average of 25 and a collapse to 19 would be counter productive to long call premium. The projection oscillator is at an oversold reversal level. Money flow should provide an underpinning to a long trade. Flow rate is spending much more time in the positive flow region now that the panic has subsided. TICK is looking better and a higher tick low and lower low OEX intraday is setting up for some upside action in the indexes.

Breadth:

ADHL chart is improved from Tuesday. It may not register a buy signal in the short run since it is a longer term trading system. Yet the new high strength and new low strength are informative as to the internal strength of any rally. McOsc issue and volume made an upward pivot from extremely oversold level and are crossing the 10% component of the McOsc which is an entry signal for call options, for a short term trade measured in days. The summation index, longer term indicator, will remain in a down trend as long as the McOsc is below zero. Problem here is the McOsc issue osc may rise to the zero line over the next positive seasonality week and then head lower again. Time will tell. CODI is in the middle of the indeterminate region but has not pivoted yet. NYA spread is much improved and is behaving as expected for an end of - beginning of month seasonality.

Volatility:

Zone Timer and MVI both made buy pivots on Tuesday also supportive of a call trade. Bull call spreads may be the preferred way to take a position with high implied volatility as a collapse in volatility would not be as deleterious as it would to a just a call position.

Momentum Cycles Cones:

Tuesday was an average day inside the green cones. A 525 May call trade could be entered on Wednesday and Thursday and held until mid to late of the first week of May, unless upward momentum reverses abruptly after the oversold bounce. An ideal entry would be on a retest of Monday's lows near 520 or Tuesday's lows. Or if you want to play the "breakout" game then place a buy stop slightly above the keyline for Wednesday at 525.As always,place a stop on an entry so less than 1/2 the trade is at risk, or maintain a 1.50 stop.

Pivots:

Indexes closed slightly below the keylines and the hourly trendlines. If breadth continues to improve we should see some closes above the keylines and hourly trendlines on Wednesday.

DJI NDX OEX SPX

Fibonacci Zones:

Lower weekly fib support is holding and makes a good platform for a beginning of month rally.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

See charts

Stocks of Interest:

ASTNfound buyers below 3, closing at 3 and 3/32. CMRpatiently clearing up supply in 1 to 1.35 area, closing at 1.25.

To quote from the Momentum Cycles Update for the open of Wednesday, April 29, 1998:

"An oversold bounce in up volume/down volume, issues,NASDAQ, Wilshire 5000,Midcap 400, but not in OEX and DJIA,off Monday's low.The start of monthly money flow is fighting trend sellers.A turn up in slower measures of cumulative breadth and volume, smoothed by 3 or 5 days, would likely confirm a rally, which has not happened yet.XAU bounced off support, as well as GSC and CRB.

8750 is the neckline of a head and shoulders pattern ,so a close below that level projects further trend follower selling.

5 day rate of change at -4% is oversold, but not extremely oversold.Short term RSI is oversold, but longer term RSI and STO is not.

This suggests a short term bounce here, and a possible lower low later, or a retest of Monday's lows after a bounce."

"Tuesday was an average day inside the green cones. A 525 May call trade could be entered on Wednesday and Thursday and held until mid to late of the first week of May, unless upward momentum reverses abruptly after the oversold bounce. An ideal entry would be on a retest of Monday's lows near 520 or Tuesday's lows. Or if you want to play the "breakout" game then place a buy stop slightly above the keyline for Wednesday at 525.As always,place a stop on an entry so less than 1/2 the trade is at risk, or maintain a 1.50 stop."

Momentum Cycles Update for the open of Thursday, April 30, 1998:

{More commentary and charts will be available before Thursday's open,due to attendance at a seminar.Recheck here at 8:30 a.m.eastern.}

We had suggested a long call entry near Tuesday's lows, or alternately, on a break above OEX 525. The rally has gone to where support was broken previously, near OEX 532. (DJIA 9000) It's do or die for tomorrow. Rally continuation would be very bullish. Conversely, a break of the trend line up from the recent lows is bearish. A very tight stop along that uptrend is recommended for all longs who entered at the lows on Wednesday.The highs 9200- the lows 8850=350 points.8850 plus 1/3 350 points=8970 today's close 8952.Previous support 9000 {OEX 532}.Now classical head and shoulder patterns often have a retracement rally before the neckline is broken, and the number of expected retracement points has been fulfilled,but not exceeded.Tomorrow is "cursed Thursday",which often has a bearish bias, and Wednesday's final minutes saw rally failure for the second time near 9000{tyranny of round numbers}.3 day breadth and volume are flat or close to flat, but 4 day breadth and volume are still declining.So tomorrow's action is critical in time as well as price.If our OEXTRADER elliotician is correct, seasonality is about to do a rare inversion, with a low occuring next week where normally we would have a high{about May 5}.Let's watch pre-opening European trading and bonds to get direction for Thursday's action.We correctly nailed the April 6-7 high,the 10-13 low, the high on the 20th -23rd, and the low on the 27th, and the rally Tuesday and Wednesday on oversold conditions and new month seasonal money.RSI longer term , and STO longer term are not yet oversold,which would be expected at a wash out bottom, along with a turn up in 3 {and preferably 5} day breadth and volume.This alone argues for a retest or possible failure on a retest of the recent lows above the right shoulder.For this reason, a tighter stop than normal for longs should be used.Option premium ratio at .75 is higher than is normal for a washout bottom.Advisor sentiment is too bullish.

XAU rallying off our fib chart support earlier in the week,with Wednesday's action along with TYX arguing for long OEX caution.{These showing strength often inversely predicting OEX weakness.}

June palladium support 299,July platinum support 396.

CMR slowly cleaning up asks in the 1.00 to 1.35 area, ASTN showing buyers below 3, strong present support at 2 and 1/2.A big ASTN discussion here within 2 days.Be sure to read May 4 Business Week page 120.

Trend:

The blue channel line on the OEXreg chart is posing a bit of a problem. Nevertheless, the projection oscillator has turned up in sync with the UC payroll indicator. Thursday may see some early statistical Thursday weakness,but for a rally continuation Thursday must end firm and Friday ideally would have follow through. This is in the context of an overvalued market longer term. There are short term tradeable cycles.. A logical stop along the up trend line from the recent lows would be above a trader's long call entry Wednesday{which is well below Wednesday's closing price } to preserve already achieved profits.

Breadth:

McOsc issue and volume oscillators continued up for the second day reaffirming the beginning of the payroll cycle. OEX held support for a third day. CODI went flat on us today as consolidation continues after the plunge from Monday. New high indicator is still in sell mode. New low indicator has slipped back under the panic level, but is neutral. See the ADHL chart. The A/D - DJI relative strength indicator is positive. This is a longer term system and may not register a buy in the short run of a week. In fact there is a whipsaw parameter built in that inhibits a buy after a certain number of days.

Volatility:

Z Timer has rapidly moved back up to the oversold side of neutral. Modified Volatility Index is still on a buy trend, but has reached its center line. This would usually cause a pause in the retracement rally, but the money flow ideally should overcome a temporary hesitation.

Pivots: No Pivots are available tonight due to being on the road and tick data not available for download. See Cones for pivot levels.

Momentum Cycles Cones:

Projection oscillator has turned up and the close is above the keyline, both positive conditions arguing for a higher retracement. At least 50% of the drop from last Thursday should be expected to be retraced. It will be very bad news if only 33% is retraced upward{see above intro for discussion of % retracement levels}. 66% would mean greater probability of continued up movement.

Fibonacci Zones:

Lower weekly fib support has held for 3 days. The expectation should be for a test of the weekly balance line(red dashes) at least.

DJI NDX OEX SPX TYX

RSI, SMI:

See charts

Momentum Cycles Update for the open of Friday, May 1, 1998:

We had suggested a long OEX call trade to be entered at the lows Wednesday, near Tuesday's lows, or alternately, on a breakout slightly above 525.At Thursday's highs, some representative calls (OEWEF and OEWEDID) had doubled from Wednesday's entrance.Traders could have, if they wished at that point, sold part, half,or even all of the position.The protective stop was not activated, as there was no retracement early Thursday.Traders were front running expected seasonal monies soon to be fully invested by pension and mutual funds.So far, our cyclic projections for April have been consistent with the normal 4th month pattern of money flow.As we surmised earlier, March was an aberration in its lack of cyclic ebb and flow due to the middle class mania for the new Roth IRA.Use a trailing profit stop to close your remaining OEX long call position,or pick your greed level to exit into.

Trend:

OEXreg closed above the blue resistive regression channel line just as the projection oscillator reaches 40%. This is where it gets touchy, this 40 to 50% level is the first expectation for retracement. It comes at a time when T bonds rally over a full point. Could it be that there is a significant reallocation of pension money into bonds above 6%? Yet stocks rallied strongly too. The price gains of the next few days are not likely to be as large as they were on Thursday. Friday should see the high tag the lower grey channel line. Breadth over the next few days should reveal the true story. Let's watch for deteriorating breadth as price possibly reaches its old highs or marginally surpasses them with another tag of the channel lines.

Breadth:

ADHL is nearing a confirmed buy signal. One more decently positive day and the new highs and lows should cross their respective blue buy lines. McOsc issues are reaching for the zero line from below. We expected this to happen during the positive seasonality period and it looks like the issue oscillator could reach the upper side of the neutral region during the early part of next week. Let's guess at May 6 for a high. Emphasis is on "guess".At this point seasonality does not appear to have inverted, but if it had, our Wednesday entrance at the lows would have been protected by a tight stop suggested before Thursday's trading. CODI is still flat and not providing a directional clue. Friday and or Monday may give it a booster shot and sink it towards the sell alert line. NYA breadth looks very good and should continue positive for a few more days. The Premium went into buy program territory near the close. We do not have the chart. This might argue for a positive open on Friday. Flow Rate did show some profit taking entering, but that should be expected after such quick profits on Thursday. What is apparent on the OEX intraday option charts is that their premium did not come off after the highs. This might also be an added argument for higher index prices. TICK also ended slightly negative, but TICK only measures the last trade and you would expect this to be negative during some profit taking. Main point is the close was higher to the high of the day and the hourly trendlines are curving upward.

Volatility:

MVI remains in a buy mode. Wouldn't it be great for the call buyers if the OEX hits 550 just as the MVI tags its lower (sell) band. Anyone still holding May calls should be in a joyful mood and prepared to exit at their own greed level. Zone Timer is reflecting a neutral level even after Thursday's gonzo move. It just looks like this upmove is not exhausted yet.

Momentum Cycles Cones:

Thursday was almost a "crash up" day as defined by the MoCones. Friday's MoCones have a Keyline that emphasises previous resistance and support dating back to late March. Let's make a guess for Friday and expect the intraday low to tag this line at 533.37 before continuing this week's upmove. It should also be obvious that the projection oscillator has hit the 50% line. Some aggressive types take profits at this level, maybe that is why the djia closed so far off its high. Or maybe it was just too far too fast.

Pivots:

Typical configuration for Friday has the indexes above the keyline and above the hourly trendline. This argues for holding the call options a little longer. Preserver profits and don't let a profit turn into a loss. Note the R3A level on the OEX is 550, mentioned elsewhere in this update, as a target for the move.

DJI NDX OEX SPX

Fibonacci Zones:

Weekly balance lines(red dashes) were breached on Thursday in a strong rebound from lower weekly Fib support. Some indexes closed slightly above the weekly balance line and others below. TYX was the standout performer by dropping from monthly fib resistance all the way down to weekly balance.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

XAU rsi has dropped back to a retracement level of 40%. It should be pointed out that in a 40 sector index field, the XAU sector is one of the few that is in breakout mode and should be bought on pullbacks. This is speaking from a relative value standpoint and not absolute value, so to each his own on this one. SPX rsi looks like it generated a short term buy signal by crossing above the lower band. The words "short term" were used because the bands are curving downward and until they curve upward we should expect resistance at the center retracement band if it is reached. The longer term SPX smi trend is pointing downwards whereas the XAU smi is still in uptrend mode.

Stocks of Interest:

ASTN up to 3 15/16 ...people read Business Week and understand page 120. CMR trying to clean up supply from 1.15 to 1.25, close at 1.25.

Momentum Cycles Update for the open of Monday, May 4, 1998:

Two doubles{at least!}last 2 OEX trades.Don't forget those trailing profit stops! Here is a sample OEX call position (OEWEG), representative of a trader's Wednesday purchase near the morning lows, or alternately, at the breakout above 525,till Friday's close.

Bullish sentiment, as measured by the Investor's Business Daily put /call ratio {item 6 of psychological indicators,section a},has turned overly optimistic since the abrupt reversal from the early week lows last week.The last selloffs occured on any daily reading of .40 or lower.Friday's reading was.42.Reason enough to be cautious for longs here,and to have at least partially exited into strength late last week.Next week, as commented on below, may be setting up for an early week short term high, a short from Wednesday into Thursday's close, a long Friday close of pre -ex week into the early part of ex week{with Monday being a high probability of an up day{May 11}.It's too soon to say,since we like price to confirm cyclical probabilities.But that's a roadmap to be on the lookout for.Any rally up to the old highs or slightly higher, accompanied by cumulative breadth or volume that does not confirm,will generate another sell.3 day breadth and volume rising, not 5 day yet.

We have been working for a long time for "black box" mechanical trades that work under many market scenarios.The last 2 successful OEX trades came from such an effort.Click here to see some of the parameters we are setting up for such an effort.

Corn near lows,setting up for a weather related rally this summer and/or fall.We will see a 30 cent move to the upside before the year is up.Looking for an entry prior to cyclically poor summer weather due this year.Drought or heat or both.

Trend:

The OEXreg did not quite tag the lower channel line from below on Friday as price momentum slowed going into the weekend. The projection oscillator is in an uptrend. Upward momentum is expected to continue on Monday baring any negative weekend news. There are few government reports next week to ruin things for the call holders until mid to late week. The following week is the well attended ISI conference in Las Vegas(5/12-5/15). Up to 9,000 attendees are expected this year. Many newsletter gurus espouse market views that are often confusing in aggregate. A market turning point is sometimes coincident with this conference.

Breadth:

ADHL chart is struggling to hold onto the sell signal two weeks ago. New low pressure has eased back into the buy region, but new highs are still lingering in the sell region. A/D-DJI RSI is weakening again towards neutral. This might just be Friday consolidation phenomena as the seasonality is just officially starting. McOsc Issues has reached the zero line. A solid crossover to the positive side could really send the market sailing upwards. Generally the volume oscillator crosses above the issue oscillator in a strong lasting rally. Currently it is lagging. Another interesting point is the summation index is turning up just as it made a retracement down to the 100 level. It would be reasonable to expect the McOsc issue oscillator to reach the upper side of the neutral region early next week. CODI has turned down in a rally mode from its halfway retracement level. Next week should be full of fireworks as the highs of a week ago are challenged.

Volatility:

Zone Timer is now back in the Over Bought zone and risk is increasing for longs. Although, as remote as it seems, a resumption of the uptrend could be in progress. In that case the Z Timer would track sideways in the upper two zones. MVI is within striking distance of generating a sell pivot any day as it is approaching the 30% level and its sell band. MVI only has to pivot in the proximity of the sell band and does not have to cross below and then above the band. A move to 550 looks within reach next week.

Momentum Cycles Cones:

An average day would carry the OEX to the green cones straddling 545 and a strong upday would carry it to 550. Probability says 550 is within one or two days price movement. The solid red cone at 548 and on the center regression channel line is the most probable target for the next few trading days. Projection oscillator is pointing upward.

Pivots:

Configuration for Monday is an open above Monday's keylines and above the hourly trendlines(cyan). The narrow pivot range for Monday reflects Friday's narrow High to Low range. It also sets up the mechanical breakout systems to drive the OEX above R3A(546) and the DJIA above 9200 as the pivot range is the narrowest of 7 days.

DJI NDX OEX SPX

Fibonacci Zones:

DJIA weekly fib resistance is at 9200 and then 9353 maximum and its ratio oscillator is still in an uptrend and has not saturated in overbought. OEX weekly fib resistance zone straddles 545 and the upper fib level is at 555. This fits in with the OEX reaching 550 and the djia moving above 9200 in the above readings. 83.50 to 84 would make a good re-entry on the XAU. The XAU ratio oscillator is gingerly touching the 50% retracement level so the XAU could turn up any day. It may have already started intraday on Friday. T bond yields, TYX, look like they have downward momentum in their future with 5.88 as two week solid support.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

XAU RSI is at reversal levels. TYX RSI has a little further to go on the downside. SPX RSI has a little further to go on the upside to reach the mid band also referred to as the retracement band. It looks like stiff resistance could enter midweek. The stochastic momentum for each of these indexes shows XAU trending up, TYX peaking, SPX weakening after a long uptrend.

Stocks of Interest:

ASTN presently has buyers under 3 and sellers over 3.This issue, not immune to a general correction,still has hot money in it aware of the story and the impatience of investors about the delay in VWAP implementation.In the next correction, if no new news comes out, a retest of the area under 2 1/2 may happen,but the long term prospects are outstanding.If you haven't done so, read Business Week May 4 issue, page 120.ASTN's president is quoted about the future of electronic trading. CMR showing VA% rising, while price retests the 1.00 to 1.35 area.Asks appear to be drying up slowly, in the transition from disappointed hot money to value buyers.This one could gap .50 if the same institutional buyers come in as before.End users of CMR's nickel-cobalt product have good reason to consider financing the mill and autoclave that will be neccessary to get the Werner Lake-Maskwa project into operation this year.{This is just a guess on our part, of course,as CMR could finance the operation with bank loans or other methods, but the quality of the cobalt numbers make end user financing logical.}

Trade Summary:

These are the OEX trades the models generated this week. They have a default exit after seven days maximum. They can be held longer given a sustained trend but the mechanical systems dictates they be sold after 7 trading days. Seven days would put the holding time perfectly in the midst of the positive seasonality early next week. Theta, or time decay, will accelerate premium erosion as May expiration is on May 15th. Therefore, officially, with advance notice now, all of these positions are expected to be exited on Mon, Tues, or Wed at the latest. They have all met the 100% gain criteria. Personally you may hold them longer with due diligence. Here is the OEX profit loss chart for OEWEG.

Momentum Cycles Update for the open of Tuesday, May 5, 1998:

5 day rate of change overbought at +4%,shorter term RSI overbought,nonconfirmations at DJIA new highs of OBV,21 day moving average of intraday volume,STO. Tightest OEX channel from the previous Wednesday lows was slightly violated for remaining longs.An exit near 546 was possible Monday.

A close above the upper 3.5% trading band with multiple day 2 to 1 a/d action could project 300 points higher,but as of Monday, cumulative breadth and volume are still negative,which makes an incipient head and shoulders pattern still possible.Close was still below the upper 3.5% band.Click here to see the status of the sample OEWEG call position taken last Wednesday.An exit Monday would have been a triple.

ASTN still finding buyers at or below 3,CMR showing patient value buyers at 1.15 -1.30,with asks slowly drying up.

Cancer drug companies hit the spotlight for hot money Monday,which may continue for awhile.These changes in investment fads usually last for more than one day.Dateline had a segment on endostatin Monday night.

Trend:

The OEXreg finally tagged the lower channel line and closed near the lows for the day. This is generally a classic sell pattern.

Breadth:

NYA breadth started out strong and then gave way to strong profit taking. This is not a bullish sign. McOsc issues and volume are still working the zero line. It is hard to say whether up or down will be the resolution. Could be that it goes sideways while the various reports come out this week. Liquidity was drained this morning during the Fed action and as usual this puts a damper on trading. CODI is still trending down as though price should trend higher. ADHL chart went back on a buy signal as new highs reached 151 and new lows 24. All three indicators worked together to generate the buy signal. It must be kept in mind that this is purely a mechanical system and the thresholds of the indicators are what has worked the majority of the time. Optimization is a bad word in technical analysis because it can result in bad trades at times.

Volatility:

Zone Timer made a sell pivot on Monday as did the MVI.

Momentum Cycles Cones:

Cones worked well on Monday for picking an upper target area. The projection oscillator is peaking again.

Pivots:

The Pivot charts have Tuesday's open below the keyline and above the hourly trendline. The hourly trendline should be given heavy weight as some systems will generate buy signals on a pullback to the hourly or half hourly trendlines if price then bounces.

DJI NDX OEX SPX

Fibonacci Zones:

Upper weekly fib resistance held its ground on all charts where it was tested on Monday. More should not have been expected.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

See charts.

Stocks of Interest:

ASTN CMR

OEX Trades:

All OEX calls were exited on Monday as forewarned on Friday as parabolic and trendline stops took them out. R3 pivots and weekly fib resistance were good targets to shoot for.

MomentumCycles Update for the open of Wednesday, May 6, 1998:

Some negatives in the technical picture, detailed below, as well as positives.Exiting OEX long calls Monday on the trendline violation seems to have been a good choice for the achieved double to triple returns from the last Wednesday's lows.3 and 4 day cumulative breadth negative and falling, 3 day cumulative volume falling and negative.In addition,Monday's theoretical DJIA tagged the upper 3.5% trading band with both cumulative breadth and volume negative, followed by Tuesday's action with a downward reversal on 11 to 18 negative breadth.This pattern often leads to a tag of the lower 3.5% trading band within 2 months, so this alone argues for caution in any long or short position with the indicators{ shown below }mixed as well.Low risk shorts or closing longs occur often at the upper 3.5% trading band{Monday,May 4},low risk buys or closing shorts often occur at the lower 3.5% trading band{Monday, April 27}.Oscillation between the outer bands is typical market behavior;running close to the the upper band for weeks on end without oscillation is abnormal behavior {March!}.Presently we are near the middle{21 day moving average},so a flat position is a reasoned position.

CRB still holding the area of 225 support with a 226.46 close.Unless this is broken decisively, the deflationary scenario is still not completly credible.

Trend:

The Last Hour chart is a subset of one used by MomentumCycles for monitoring the health of the market intraday. The last hour is often a clue for the opening the following day. In this case the last hour showed constructive activity in the DJIA(rising), TICK(positive and rising), TRIN(below one and falling), VIX(ended closer to the lows than highs). This argues for a better tomorrow. The negative is that yields closed closer to their highs than lows, but 5.966 is close to resistance(weekly balance) and the trend is down. Also the S&P Premium cycled between fair value and sell programs much of the day especially the last hour. At least it did not break down into a major sell program which just does not happen when new money is flowing into the market. OEXreg looks like it is rolling over with the projection oscillator peaking, but there is a possibility that it is working its way higher under the grey channel line towards the intersection on 5/11. 533+ is about where the blue regression channel is for 5/7 and would be expected to provide intraday support if in fact that is the direction taken on Wednesday.

Breadth:

NYA breadth was negative all day and began to improve in the last hour. The McOsc issue is still within the neutral region and a rally from here up through the zero line(pure speculation) would catch more than a few traders by surprise. One thing that has to be kept in mind are the recent negative spikes in issue and volume that the market has just endured. Spikes such as this remove a lot of selling pressure from weak hands. CODI is still on a buy trend but is now tagging the Sell Alert line. It isn't unusual for CODI to drop below this line as prices rally. ADHL is on a Buy signal from Monday.

Volatility:

The Zone Timer is back near the neutral line where a bounce is probable and the MVI has moved up to its center retracement line. Thus the short term picture is neither one of overbought or oversold. It isn't exactly the best extreme for either calls or puts unless you are a speculator and very nimble with a real time system.

Momentum Cycles Cones:

Cone for Wednesday shows the OEX close near the regression channel support line. Since the positive seasonality has yet to really assert itself we might see a cautious but steady advance up this line until the various government meetings and reports have worked themselves out this week. Wednesday has a propensity to be an up day.

Pivots:

The indexes closed very close to their keylines for Wednesday and the hourly trendlines(cyan) are flat to slightly downward. Again, it would not take much to push price up through the keylines and hourly trendlines precipitating a cascade of buy orders.

DJI NDX OEX SPX

Fibonacci Zones:

The daily trends are still up as defined by the red stairstep stop loss line which is now above the weekly balance line. This means if the daily trends are to continue up then the weekly fib resistance is going to be under siege on Wednesday. The ratio oscillators have not quite reached maximum saturation just yet. They can continue to roll over here and we will just have to see how it plays out.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

See charts.

Stocks of Interest:

ASTNcycling above and below 3, close 3 1/4. CMRchanging hands to value players from 1.15-1.30, retesting the lows.

OEX Trade Signals and Listing:

No new trading signals have been generated for Wednesday. The Trade Listings (1 and 2) since January 2, 1998 are based on theoretical option prices. Since this was a rather strong uptrending period it has performed rather well. There are no guarantees it will continue to do so.