MomentumCycles

MomentumCycles commentary for the open of Tuesday, April 6, 1999:

Seasonality officially ends on the close of 4/8/99. Now, that does not mean the next three days will be a repeat of Monday. In fact, we sold the OEYDL and OEYDJ into momentum at 30% and 50% gains and are now flat for Tuesday open. With the OEX at 664.86 we are looking at the OEYPL or OEYPM as candidates for a put trade; however, we would like to see more extreme Sentiment and EquityCP along with CODI in the Sell Alert zone. Buying power will need to exhaust itself before we can feel more confident about a multiday put or short trade. We may have an intraday put trade or re-entry on the call side on Tuesday. Preferably a re-entry would come on a pullback to Tuesday's Pivot Line on the Cone chart.

XAU STO 20 at 18,about to cross above the 20 level.In the past after 3 or 4 consecutive closes at the low of the day{we have had 2 so far}a STO 20 crossover has brought a tradeable rally after a tag of the lower 13.5% band.There are some nonconfirmations of the recent low in momentum oscillators.A further low followed by a rally up to the declining trendlines seems doable.

Top picking can be hazardous to your wealth, but let's try anyway for entertainment purposes. This technique is bound to disappoint when it comes to using the Top Finder and works better for finding support and resistance. Nevertheless we have to sit up and take note when the Price/AOBV indicator is maxed out in the upper right corner. This represents a very overextended market in terms of price and volume accumulation/distribution. The SPXWM chart shows a top at 1359 within 74 days and the INDUWM shows a top at 10205 within 73 days. With the speed that markets of recent days move we could be there in a day or two or three given a little backing and filling.

5 DAY ADVANCE AND DECLINE CHART. ADHL CHART. AMOSS CHART. CYCLE CHART. INDU CHART. MCOSC CHART. MOONTIDE CHART. NHNL CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX DAILY CHART. OEX FIBRET CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VIX CHART. XAU CHART.

MomentumCycles commentary for the open of Wednesday, April 7, 1999:

One of the slower trend change indicators we follow is 3 day cumulative smoothed breadth.When this 3 day measure turns up when price is at the lower 3.5% band,good tradeable rallies often result.When this 3 day measure turns down when price is near the upper 3.5% band,declines often result.Tuesday 3 day breadth turned down.

Other points of significance going into Wednesday include a Sentiment reading bordering on the "Buy Puts" level. We had hoped to see this level as the indexes made highs this week. Additionally, we have the Modified Option Strategy Spectrum (MOSS) at the zone boundary of Overbought and Extremely Overbought. The OEX Projection Oscillator on the Cone chart has made a double top. Moontide was in consolidation, rather distribution mode on Tuesday. TICK has continued to find resistance at the zero line and then drops back to -600 and lower in sell mode. This occurred in March before the indexes finally caved in. The five day advance/decline chart has a convergent pattern forming, implying an explosive move dead ahead. With VIX at sell reversal levels a put trade could pay off quite well. It should also be pointed out that expiration is Friday of next week. The significance of this is in what it implies for the week before. The week prior to expiration has a downward bias with a buy on the Friday close. We will just have to see how this plays out. With seasonality officially ending on Thursday we might just see a failing rally attempt on Wednesday, in which we want to be positioned in puts for what could be a memorable Thursday. EquityCP is in the Buy Puts zone.Recently one day readings near the 2.90 area have marked short term tops{Tuesday was 2.902}.Major tops,however, are often seen after 4 or 5 consecutive topping ratios.

XAU STO 20 turned down and did not cross above the 20 level.Crossings above the 20 level often confirm the start of short term rallies.

Here are the charts we examine nightly:

CODI CHART. FIBRET CHART. INDU CHART. NHNL CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX PIVOT CHART. OEX WEEKLY CHART. OEYPL CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, April 8, 1999:

What a day! What a week! Enjoy it while it lasts. Remember we have been in positive seasonality due to pension fund and IRA reinvestment since the beginning of last week.We have been scalping calls for 30 to 50% gains in one day, and then have begun scalping puts for 30 to 50% gains this week. The OEYDL and OEYDJ are posted tonight as a reminder that seasonality ends tomorrow on 4/8/99 and calls should be exited,.... The OEYPM trade today also netted 50% before TJ advised exiting and re-entering later on a spike up in the index. As of the Wednesday close, MomentumCycles is again flat. There is just too much volatility to hold positions overnight. We will again go for a put trade on Thursday as the Moontide says there is a riptide coming, and because the technicals have fallen into place as laid out previously. We have been looking for the EquityCP and Sentiment to peak and turn down as the index continues up. Also we wanted to see the Moontide in a major nonconfirmation of the index peak. We have those ingredients now. We are even getting a number of days of excessive optimism. This is revealed by what people are doing with their money versus what opinion polls are saying about trader sentiment. The polls are saying traders are bearish, but the option sentiment and the indexes say they are voting with their money by buying stocks. That is, they are buying fewer and fewer issues. The name of the computer game in stock selection these days is RSI or relative strength. As fewer and fewer stocks show up on the RSI screen, more and more money goes into fewer and fewer stocks and the index is propelled upward. This is the scary part, because until someone overrides the buying and decides enough is enough, this parabolic spike can continue. This is Put opportunity waiting like the the Grim Reaper, patiently waiting for the lemmings to drop off the cliff. This is where the VIX jumps from the low twenties to 30 or 40 or 50 and CODI ends up above the buy calls level. 5 day advancing and declining volume continues its coiling into a dynamic move. Taking a blowup view of the INDU and SPX and using the more recent launch points and pivot points, the Top Finder says we are looking at a top in this time frame. The index levels are mean prices. For the INDU it says mean top is 10042 within 8 days, and for SPX it is 1333 within 6 days. Remember, these are mean prices, so we are there now.

Other technicals,such as 3 day smoothed cumulative breadth and volume,are dropping or not confirming the new highs,and price is near the upper 3.5% band,where resistance is often seen.

Individual indices and their component breadth measures result in some ominous expert readings on 4/6 and 4/7. A 95 or greater Down reading should have a significant effect within one to 5 days of being generated. The Dow 30 has a Down 100 on 4/6. The SPX has a down 97 ON 4/6. The NDX has a Down 100 on 4/7.

XAU is lacking current investor interest,with recent inflation and oil data playing a back seat to call trading in hot internet issues that can move 5% in one day.Technically,STOCHASTIC 20 is at the 15 level,oversold,but without a crossover to signal legs to a short term rally.

Here are the other charts we examine nightly:

AMOSS CHART. CONE CHART. FIBRET CHART. INDU CHART. OEX FIB CHART. OEX PIVOT CHART. OEX WEEKLY CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, April 9, 1999:

Pre-ex week seasonality normally says "buy the Friday close,sell into the start of ex week."This strategy usually works best when the Thursday into the Friday period marks a psychological and price low,which so far is not the case.Short term indicators are, in fact,in conflict with the normal end of second week cycle.Thus,we will stand aside from a pre-opening position and try to play the Friday currents with an intraday e mail if needed.

However,note that at the close of Thursday the indicators we examine are even more partial to the short side now that CODI has dropped into the Sell Alert zone. Moontide is turning into a "breaker" wave with its parabolic slope. SMI and other price oscillators have moved into overbought. OEX Projection oscillator is trending in overbought.

5 day rate of change is +5%,finally in overbought.Short term RSI is 95,close to 100 maximum.3 day cumulative breadth is still declining.Closing tick was +985 at the upper 3.5% band,which often brings a reversal within one or two days.

XAU had 2 consecutive closes at the lows of the day.Good rallies often start from 3 or 4 consecutive closes at the lows of the day.STOCHASTIC 20 is at 15.A crossover above 20 is needed to give evidence of a rally with legs.

5 DAY ADVANCE AND DECLINE CHART. AMOSS CHART. EQUITYCP CHART. INDU CHART. NHNL CHART. OEX FIB CHART. OEX WEEKLY CHART. OEYPO CHART. PITCHFORK CHART. RSISTO CHART. SENTIMENT CHART. TYX CHART. VIX CHART. XAU CHART.

MomentumCycles commentary for the open of Monday, April 12, 1999:

Traders,like monkeys,like to "swing on the same branch"{look at the same single indicator} when looking at the technical condition of the market.That is why we like to examine so many different approaches when trying to time trades.

Currently those traders who use time cycles as the single or primary tool for price analysis on a longer term basis are becoming raving intermediate bears due to the April 9 "hit date" of the Bradley indicator.This timing tool often,although not always,pinpoints the cycle high of the year,often uncannily to the day.Last year July 19-21 was centered as the Bradley top.A 20% decline followed.

Last July 19-21 ,however,also saw a confluence of many other topping indicators unrelated to time cycles.CODI was in the sell zone,the equity call/put ratio had the rare 5 topping ratios in succession{similar to the 1987 pre-crash topping ratios},sentiment was ravingly bullish{which is bearish},we were at the upper band with multiple non-confirmations,the option premium ratio indicator and the 10 day rate of change time series analysis both had July 19 as a top.

Currently,we have the option premium ratio at 1.41,which allows for a correction,but is not usually associated with a major market top.Most major tops are found at .71 to 1.04,and usually at a much lower OPR than the previous price top.

Admittedly,price indicators are at the upper 3.5% band with multiple non-confirmations, and overbought oscillators such as RSI and STO abound,but we have not had the rare 4 or 5 consecutive equity call/put topping ratios.In fact,examining the OEX index put/call ratio of Wednesday last,we had a ratio of 1.68 to 1 on a 1% rise in price.That infrequent relationship in the past has led to a month -to -month price change over the following month of +5%,which allows for a decline and then another rise associated with end of April pension seasonality.

Also to be noted is that last Thursday's closing tick of +986 did indeed correctly call for a short term correction within one or two days {see tech comments below for the Monday followup}.

So is April 9 THE top for the year?A macro top?Correction.yes,but the evidence is not as clear for a major top as it was last July 19-21.On to last Friday's action...

Buy Friday of Pre E week appears to have been the preferred approach as mentioned on Thursday's update. Most of Friday was in consolidation until late in the day when the mechanical system traders ran the stops on the upside. OEYPP 680 put gave a wild ride after a judicious entry. Those using the 1.5 stop would have been taken out. Next week could bring these back into the money rather quickly, providing of course the market cooperates. Tech stocks are expected to take a big hit on Monday due to negative earnings reports in the personal computer area. The OEYDJ and OEYDL seasonality trades performed well, providing you were not too hasty in taking profits. Generally we like to scale out in three phases, 30% and move stop up, 50% and move stop up again, remainder use time and price stop. The Momentum Cycles Chart shows that the US dollar and T Bond yields could undermine the OEX in the near future. EquityCP and Stochastic Momentum are lined up for a decent put trade. CODI is firmly in the Sell Alert zone. MOSS is trending in Overbought. Breadth has improved a bit with the NHNL and the McOsc. 5 day Adv(green) has made a slight slowing in its momentum after the recent breakout. This precedes a peak in price.

XAU appears to be moving up to the falling resistance lines,with no STO 20 crossover to the upside yet.

Here are the charts we examine nightly:

CONE CHART. FIBRET CHART. INDU CHART. NYA CHART. OEX FIB CHART. OEX WEEKLY CHART. PITCHFORK CHART. SENTIMENT CHART. SUPERT CHART. TYX CHART. VIX CHART. XAU CHART.