MomentumCycles

MomentumCycles commentary for the open of Wednesday, May 19, 1999:

CODI ended Tuesday stuck in the Whipsaw zone with continuation sell alerts on the BRTT and BRTT%. These red and green Plus signs are one day look ahead weak strength indicators. The red and green dots are strong sell and strong buy signals. As one might expect, the weaker signals occur between the stronger signals. The future looks like more of the same choppiness. INDU OBV is still headed down. A forecaster might be inclined to say that the INDU is headed for the minus 3.5% band and OBV is headed for its mid band. Rather than the end of a correction, it looks like things are just beginning. At first a few see it coming, and most don't believe it, then more see it and more believe it, then everyone sees it and believes it. By that time, it's over. Stage 3 is a ways off yet. EquityCP and Sentiment are reflecting an increasing bullish bias, yet the index is still in its Stochastic Momentum correction. If you looked at the OEYQR or any other nearby calls and puts, you experienced the real meaning of "whipsaw" today.

The volume oscillator on the bottom of the 5 day volume chart gives the impression that the correction is not over yet, as it is still in a down cycle.

Here are the charts:

AMOSS CHART. BREADTH CHART. TUESDAY'S CONE CHART. WEDNESDAY'S CONE CHART. CYCLE CHART. DSP9M CHART. DSP9MPD CHART. MOONTIDE CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEXWM CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VIX CHART. VOLATILITY CHART.

MomentumCycles commentary for the open of Thursday, May 20, 1999:

There were numerous buy signals popping up on the Wednesday charts. CODI has two "weak" buy singals along with a Thrust Oscillator turning up at oversold levels. The Momentum Cycles chart has a very positive outcome for equities in the present relationship between a rising dollar, falling yields(rising bonds), falling commodity index, and falling XAU. How could the OEX go anywhere but up under these conditions? MOSS has crossed above its center neutral line with AMOSS back to neutral. McOsc and STO oscillators on the Breadth chart have turned up at oversold levels. SuperT has survived this recent turbulence by spiking off the "Correction" level, sparing us a more bleak expiration. Even the XAU was not to be left behind, as the 30 minute chart edged into buy mode. Moontide is partially back in buy mode as the NYA closed above R1 resistance. Accompanying all this was a very nice drop in TYX and VIX. Technically, it looks like the start of a very good two days for Call holders. EquityCP is turning up in encouragement for call buyers, whereas Sentiment is remaining neutral. If we get a very strong Thursday, the OEX could tag the upper red cone at 690, making the 675 call worth 15. If we only have an average day, then the green cone is the target at 685, still making the OEYEO worth 10. If the OEX moves above the green cone, use the mean between the bid and ask of the OEYEO at that time as a stop. If the OEX hits the red cone, take all profits. Use an initial stop at 6. If you are not in this, as it was not officially posted on www, then look for an entry on Thursday. Maybe we will have a pullback, but there is not very likely to be much of one.

Here are the remaining charts:

INDU CHORT. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEXWM CHART. OEYQR CHART. PITCHFORK CHART. SUPERT CHART. VOLATILITY CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Friday, May 21, 1999:

There appears to be something significant about to occur in the next few days. In each commentary we have posted an INDU OBV chart based on INDU price and INDU volume. This time we also take a look at a chart of the INDU with NYSE volume. This chart goes back a bit further in time and accentuates the situation when the OBV zigzags sideways for more than a few days. If past is prologue, then the EquityCP and Sentiment charts are peaking at the right time. If the INDU heads down from here, we can get some clues for support on the INDUwm chart. This view is a bit contrary to the oversold condition set up on the Breadth chart. Traders/investors that use the typical breadth oscillators are looking at this as a time to re-enter the market or add additional funds. Our Implied/Historical volatility chart has been pointing to a seasonal consolidation into early summer. This hasn't changed recently and the advice is to stand aside for intermediate to long term investors. CODI ended the day with two weak sell signals. As we found today, a weak buy/or sell signal when CODI is in the Whipsaw zone will do just that. The stronger buys and sells have more staying power, and the weak ones have lower probability of occurring and not lasting longer than a few hours. Even though VIX did not close below the lower band, it did move below and then back above, generating an intraday sell signal. This was commensurate with the late day sell and depicted in the collapse of the OEYEO.

Here are the other charts we examine:

5 DAY ADVANCES CHART. CYCLE CHART. DSP9M DAILY CHART. DSP9M WEEKLY CHART. MOSS CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEXWM CHART. PITCHFORK CHART. SUPERT CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Monday, May 24, 1999:

Mechanical system traders will be looking for a long entry next week to start as early as Monday to Wednesday and as late as Wednesday to Friday. The grander picture from the Volatility chart shows the market still in consolidation. The most important thing on this chart is where the 5 day and 20 day historical volatilities are headed... down. Options perform better if a compression of buying builds up and then explodes, so what we would like to see during the next two or three days is for the indexes to quiet down and maybe drift lower with narrower range days, and then explode upward on Wednesday or Thursday. The breadth oscillators appear to be building up to such a scenario. CODI remains stuck in Whipsaw territory, and neither of the accompanying indicators, CODI_A and CODI_A%, had strong or weak signals at Friday's close.However,we note that even though Codi Regular is in the whipsaw zone, Codi Dynamic is pivoting in Buy mode at its buy alert level. CodiD is more sensitive to changes in the whipsaw zone.

The MOSS and AMOSS charts are as neutral as they can be. The INDU OBV chart is still making anything except puts on rallies to be the operative mode. Option sentiment as measured by EquityCP may have been influenced by the Friday expiration, but if we ignore that, then it has dropped all the way to the Buy Calls level, whereas the Sentiment has dropped back to the neutral after a sell for Friday. Still, the MomentumCycles intermarket chart is favorably positioned for a stock rally, as the US dollar is rising, yields are dropping, and commodities and gold are dropping. The rising dollar is arguably both a positive and a negative.

One positive is the Investor's Business Daily option premium ratio,which ended with a Friday reading of .53.Readings in the low .50's,particularly .52 and .53 are often seen prior to basing for short term rallies.

On the XAU chart below,a crawl upward into downsloping resistance lines seems to be in the cards.Stochastic 5 and 20 are in the areas normally seen after washout declines,prior to at least retracement rallies.Sentiment has been dampened by international bankers trying to prevent a bustout rally.

AOL is a stock which until recently typified the momentum crowd's "darling that could do no wrong",as many internet stocks were prior to the recent seasonal tech weakness.AOL appears to be becoming a trading vehicle rather than a "buy the dips and hold forever" stock.Negative articles in Barron's and more reasoned articles in Investor's Business Daily are providing the fodder for recent whipsaw action in the price{recent resistance 140 or so,support 115 or so}.We have found that STOCHASTIC 5 under 20 is presently a good signal for a short term long trade in AOL,and STOCHASTIC 5 near 80 a good signal for a short term sell.STOCHASTIC 5 is presently 35,so we are getting close to the short term oversold bounce area,although not quite there yet.

Here are more charts:

5 DAY ADVANCES CHART. BREADTH CHART. CONE CHART. CYCLE CHART. DSP9M DAILY CHART. DSP9MPD CHART. DSP9M WEEKLY CHART. INDU CHART. MOONTIDE CHART. NHNL CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VIX CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Tuesday, May 25, 1999:

We had called the short term top of May 13 exactly, ahead of time,due to the confluence of several indicators including the rate of change of NASDAQ price.So far that announced top has held.

And then,to paraphrase from the weekend update, we were looking for a Call entry this week and figured seasonality might provide the timing of that between Monday and Tuesday at the earliest. Well, that's one day down, four to go. Option premium sentiment from another service had forecasted the SPX to end this week at 1319 or less and next week at 1314 or less. Years ago this writer of MomentumCycles used to subscribe to this other service, and the pattern was for the market to discount the forecast early in the week and then spend time working its way back higher. Conversely for upward forecasts. The net sum here is that Monday's action discounted two weeks of his forecast. This isn't to say we saw this week's low on Monday, but it could be a good possibility we may see it on Tuesday AM if Monday was not it. We did get a minus 1196 TICK which helps put in a trading low. A half hour before the close extreme support was being tagged on numerous MoCycles charts. SNP futures on the DSP9Mpd hit came close to previously posted 1305 support level. INDU On Balance Volume hit the middle band. The INDU has more room to go to the minus 3.5% band, but we could also see a retest of the mid band before dropping to the lower band.{Theoretical DJIA came close to tagging the lower band;actual is a bit away.} INDUfbrt hit the lower side of its fib retracement channel. This could imply a bounce at hand, or something worse. INDUobv.gif still looks ominous. Basically we are expecting seasonality to kick in when price facilitation is accomodated. EquityCP and Sentiment bounced off the Buy Calls and Neutral levels respectively and now reflect the expired options from last week.

The S and P 500 futures hit the WEEKLY fib support on the DSP9M weekly fib chart. AMOSS and MOSS hit the lower side of Oversold(they can go lower, though). OEX 30 minute chart hit a 1.382 extension. NYA hit the Cyan line support at 623.57.When we examine the Breadth chart we see the MCOSC did not dip as low as last week, yet the NYA did dip lower. SuperT hit INDU support at red line 10656.2, dipped below and then closed essentially on it. SuperT itself has dipped back to the Correction level. We may have had some price breadth divergences setup today because of the light volume.We will just have to wait and see. So, the email update was to buy the June 660 calls, OEYFL at 17 by 17.5 or lower. No sooner had the post been made than the Bid/Ask dropped to 16.25 by 16.75. Then it rallied a couple of points and settled back into the close. Now, the temptation here is to do what is normally advised against, and that is to average down. At this moment the advice is to average down in strike price, staying with a strike one level above the OEX, if the OEX drops on Tuesday. CODI did close above the Buy Alert level. A downturn from here would generate a Strong Buy. As of Monday's close there are two weak sells and one weak buy on the Codi_A and Codi_A%. That hints at more weakness Tuesday Morning. Yet, as seen in the past, a downturn in CODI from high levels has resulted in some tradeable rallies. Also note that the OEX closed near the upper red regression channel line on the cone chart. Perhaps it will dwell there to test for support. The OEX Cone chart now has the Projection oscillator firmly in oversold territory.

We were looking for a rally in the XAU up into the downsloping resistance lines.So far,Monday brought more selling into deeper oversold territory.XAU STOCHASTIC 5 is 20 and STOCHASTIC 20 is near 10.These levels are normally seen prior to a rally setup-however,momentum has not yet turned up,so we would wait for that.

We were correct that AOL had further to go into deeper oversold territory.Unless AOL{and other net stocks}are setting up for a complete breakdown,we are getting close to support.21 day intraday volume % has not yet turned up,however.

BREADTH CHART. CYCLE CHART. DSP9M DAILY CHART. EQUITYCP CHART. INDUOBV CHART. INDU FIBRET CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX WEEKLY CHART. PITCHFORK CHART. SENTIMENT CHART. VIX CHART. VOLATILITY CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.