MomentumCycles

MomentumCycles commentary for the open of Wednesday, June 2, 1999:

It is an undeniable fact that the market direction hinges on what Chairman Greenspan says. In the short run it even hinges on what market participants think he is thinking. In the meantime the market will chop around in the neutral zones of the AMOSS chart. The modus operandi has been to buy support and sell resistance. CODI has dropped back into the whipsaw zone. The BRTT and BRTT% have minor continuation sells for Wednesday. Perhaps we will have another chance to buy the OEYFJ on weakness Wednesday morning until Greenspan clarifies the interest rate issues. Bonds tend to discount his proclamations so the TYX yields backed up to 5.948 before consolidating.

AOL,as representative of the seasonally weak techs and hot money internets,is searching for support.AOL has numerous price "hits" at 112,with a recent spike low at 106.Resistance is 120,then 130.Close was 113.125,near first support of 112.A trade below 106,the recent spike low,will bring 92 quite quickly.Above 120 will bring 130.Although AOL,the internet index and the NDX are quite oversold,we would not trade them on the long side until momentum reverses to up.As of now,DJIA and OEX are much stronger than NASDAQ.When that relative strength relationship reverses, a return to confidence will be seen for the entire market.Trading the OEX from the long side intraday,as we have done during recent intraday www updates,can work successfully during the types of declines that are not the end of waterfall panics.IIX and NDX are best traded from the long side during periods of investor elation.

XAU is stuck at the STOCHASTIC 20 cellar at a reading of 10.A crossover above 20 usually signals a tradeable rally,not just a short term pop.Traders are still mulling over the central bankers' apparent war on gold.

Here are the addtional charts:

CONE CHART. DSP9M CHART. EQUITYCP CHART. INDU CHART. OEX FIB CHART. OEX FIBRET CHART. PITCHFORK CHART. SENTIMENT CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, June 3, 1999:

Wednesday was pretty much a repeat of Tuesday, i.e., down in the AM and up in the PM. We bought support and sold resistance, albeit a bit prematurely. There is a bit of anticipation in the signals so that subscribers will have a chance to get in and out at {or better than} the posted prices. Once the market moves, it moves fast. Today it would have been impossible for a sub to get the 12 X 12 1/4 entry unless he/she was watching the daily fib support on the OEX daily fib chart and timed the call entry on the lower half hour. That will put the odds in your favor for a short while. When the exit at 15 was posted, we knew that momentum can gain speed if the OEX crossed above the daily pivot, and it did. Fortunately anyone exiting got out at a much better price than 15. The 4 day Moontide average is providing resistance to cumulative breadth. Wednesday's rally stopped in its tracks right on the 4 day line aborting the rally. So far this usually positive seasonality is looking more and more like a distribution than a cycle low, as we had anticipated last week.{We had calculated a short term DJIA low for June 1st using the rate of change indicator,and so far the DJIA low for this move was June 1st.Remember we did call the short term high on May 13th.} Time is running out for the confirmation of a short term cycle low. Of course, this is all relative once it becomes history and is looked at in a longer time frame, such as on the DJWM chart. We should have some downhill skies on with a backpack of puts onboard. AMOSS and CODI are pointing to more whipsaw, indecisive choppiness. CODI, BRTT, and BRTT% gave no signals for Thursday. Once again we have indecision due to the Friday Labor Report. Thursdays tend to have that unexplainable gutwrenching downdraft, so we are tempted to wait for an early morning shakeout rally to get on board some puts as the Friday labor report becomes the nearby dominant fear. Neither EquityCP nor Sentiment are extremely bullish or bearish. In fact, they are rather neutral looking. The price oscillators at the bottom of these two charts have turned up but have yet to cross above their "mid" band at zero. They could actually turn down at the zero line.

AOL marginally retested the 106 level,but closed below previously strong support of 112.The STOCHASTIC downdraft in AOL has not yet been broken to the upside,so whipsaws and lack of direction still appear to be the order of things.Another break of 105-106 will bring 92.Above 120 will bring 130.AOL is symptomatic of the presently seasonally weak techs/internets.

XAU STOCHASTIC 20 still at 10;no crossover confirmed rally has yet been seen.Shorter term oscillators are showing an oversold bounce in play.

Here are more charts:

CONE CHART. INDU CHART. OEX WEEKLY CHART. OEYFJ CHART. PITCHFORK CHART. TYX CHART. VIX CHART. VOLATILITY CHART. XAU CHART.

To quote from the Thursday,June 3rd 4:24 e-mail update:

"So far this week we have had two distinct daily patterns. Tuesday and Wednesday, it was down in the AM and up in the PM. Thursday almost had the up in the AM, flat, then down in the PM(oops, got a last minute rally). This seasonality and rotation is still burning money in choppiness activity. Main point here is we bought puts in resistance in the first half hour(between 11 3/4 and 12 1/4) and sold into support in the last hour before the ending rebound. Second main point is a profit taking stop was used to exit at 14 or better. Now, at the close the OEYRL is almost back to the entry. Moral of the story, if handed a profit, no matter how small, protect it by moving a mental stop and don't let it become a loss. Also have some reasonable expectation of gains based on current volatility. With a position on don't leave your screen with fingers crossed, even for a potty break or a refrigerator raid. A market that is neutral from day to day will have a cycle mode on intraday data. This is great for trading, but gains are going to be limited to a few points until it gets into a trending mode again."

MomentumCycles commentary for the open of Friday, June 4, 1999:

As we predicted on the Wednesday p.m. commentary,Thursday would live up to probabilities by offering profits intraday on the short side in OEX puts.This was possible in spite of the DJIA upside bias.From the above summary of Thursday's www intraday e mails,readers can see how this was accomplished.Remember that we were able to pull out long call OEX profits in late May when the market fell strongly and then recovered intraday;also using www e mail updates by buying support and selling resistance.

Indeed,we may take an opposite position from the other advisors on OEXTRADER intraday,and often we may ALL pull out profits the same day by taking and closing positions at support and resistance.

In the position CODI is in,daytrading and quick profits are the way to go.

From recent action, we all now know the full meaning of "whipsaw". CODI ended Thursday in the same whipsaw zone as it did on Wednesday. This time there are two minor Buy continuation signals on the chart. Momentum and Market Thrust are also headed higher. TYX yields still hold the key, and they hinge on an employment report and hourly earnings report Friday morning at 8:30AM ET. Fortunately we are going into this with no open positions. The BKX index this time did not give a clear sign of Friday's likely reaction to the reports. The so-called positive seasonality does not end until the close of next Monday. Maybe we will see the compression of buying that has occurred because of the long holiday and moderating effect of economic reports. Let's include the rumors about a pre-emptive interest rate hike. Some say it's too late for just a 0.25% increase, and a 0.5% is needed for psychological effects.

June is a tough month to trade on the long side for numerous reasons. Negative earnings pre-releases will be leaking out. Portfolio managers give up on stocks that have not met '99 earnings projections in the first two quarters. Greenspan is very public throughout the month. CPI is released 6/16, and he meets with Congress on 6/17 to share his actions and planned actions. Then the FOMC meets again on 6/29 and 6/30. In the middle of all this, we have the expiration of futures and options on 6/18. One positive note will be when Congress goes on recess. Mark that one on the calendar and trade the long side in their absence.

The B&D Moontide kept climbing upward all day even as the INDU was stuck in the Fib Resistance zone and the other indices chopped around trying to find direction. Believe me, holding a put option with the Moontide climbing was not an easy matter. The important point here is that by the end of the day, the upward force of the Moontide floated everything else back to positive or break even territory. This is what neutral markets are: choppy and directionless. Such markets facilitate profits both long and short only if you get the correct timing.

We said the XAU would climb upwards back towards the falling bands,and it has,in concert with the green up arrows on the XAU chart seen below.So far its an oversold pop.STOCHASTIC 20 is now at the 15 level,climbing out of the cellar;a defined cross above the 20 level by STOCHASTIC 20 usually gives good legs to an XAU rally to the middle or upper 3.5% trading bands.

We cautioned that trading the NDX and IIX {proxy AOL}from the long side was risky because of current tech/internet seasonality.Thursday saw IIX down 3.06%,SOXX down 2.24%,NASDAQ down 1.2%,and DJIA UP .81%.Strong markets usually see NASDAQ stronger than DJIA.A return to a stronger NDX versus DJIA would show investor confidence increasing.

Here are more charts:

AMOSS CHART. CONE CHART. DSP9M CHART. EQUITYCP CHART. INDU CHART. OEX FIB CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEYRL CHART. PITCHFORK CHART. SENTIMENT CHART. SUPERT CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Monday, June 7, 1999:

To quote from Friday's update, "Could be we will see the compression of buying that has occurred because of the long holiday and moderating effect of economic reports." How true that turned out to be. Even the CODI continuation buy signals were correct. Even positive seasonality added its bias, with one more day remaining, i.e., Monday close. Breakouts do occur, and we had them at daily fib resistance, but it was late in the day and forced a small loss on the OEYRM,where we counseled an intraday exit by e mail. OEX went on to the red cone resistance, and after the OEX crossed above the weekly pivot, it went on to almost tag the weekly fib resistance. For almost four days it looked like positive seasonality was going to be a distribution top. Counter trend trading has its risks and rewards. It appeared there was enough of a move Friday morning and enough interest rate sentiment to drop the market later in the day, but it wasn't to be.

A new book on options trading titled "DeMark on Daytrading Options" is out now. It is a bit different than most option books in that it focuses on the simpler aspects of directional trading with only calls or puts. Granted, the book is a promotion for their indicators, which they sell after a free demo period. I haven't finished reading it yet, but it does seem to have some merits.

Friday's action closed the week with CODI in a Buy trend very close to the Sell alert level. VIX closed below its Sell alert band and needs to close back above it for a sell signal. OEX Pitchfork hit the mean reversion line near 670. It is also close to the center tine of the blue fork. NYA breadth improved in the afternoon in strong trend mode with advances greater than 1500 and declines below 1200. Not to be outdone, the INDU bounced off the 50 day average and stalled at the downsloping 21 day average. OEX fibret is close to the 2/3 retracement channel line. MOSS jammed on up to the Overbought zone. SuperT once again picked the low. The Volatility chart suggests that we may be beginning the summer rally if the pattern this year repeats that of last year, after several months of consolidation. Some traders may be reasoning that if 6% is the maximium upside in yields for now, then bonds may have a retracement rally that drops yields and fuels the typical summer market rally. Time will tell.

By Friday's close the NYA had shot up through resistance bands on the Breadth chart. McOsc is about to cross the zero line and will probably do it at least intraday on Monday. Plus, minus 50 is a neutral zone, and you would think that the McOsc might just hang out in this zone until the interest rate picture clarifies. One characteristic of Bear markets is that the McOsc is turned back down at zero or from within the neutral zone. This bears (pun intended) watching next week. Do we dare say that pre-expiration weeks have a downward bias until Friday close?

There is some evidence supporting the possibility that the present action since the June 1st DJIA low{which we called in the last week of May using the rate of change indicator}may be a bear leg countertrend bounce.Volume has been low recently.Note also that last week saw a series of high intraday upticks,and 4 days of high to very high closing ticks{+404,+303,+867,+1135}.Very often a closing tick of +1135 will support a correction within one or two days,which fits in with a second week of the month high often seen on Monday or Tuesday,followed by a decline.The repeatedly successful pre-ex strategy is to buy the Friday close of the second week and sell at the start of ex week{third week}.

Here are the other charts:

DSP9M CHART. EQUITYCP CHART. INDU CHART. MOONTIDE CHART. OEX FIB CHART. OEX 30 MINUTE CHART. SUPERT CHART. TYX CHART. XAU CHART.

MomentumCycles commentary for the open of Tuesday, June 8, 1999:

One key to options trading, according to "Demark On Daytrading Options", is to anticipate trend change. Much has been written by others on how it is death to traders to attempt top and bottom picking. The authors of this book claim to have a set of indicators that can be used at the end of the day and intraday with high success to achieve just such a goal. A demo disk of the TD indicators will be evaluated once it arrives, and the results will be posted here. Some of the MomentumCycles indicators are momentum related, others are breadth related, and others are statistically derived. CODI is one of our favorites for anticipating trend change by its proximity to the Buy Alert and Sell Alert lines. Monday ended the day with a minor trend change in CODI near the Sell Alert Line. There was also a minor sell red cross signal, and there were no green dots or crosses for Tuesday. The conclusion here is that we could see some pullback on Tuesday. Note that the last good sell came with CODI at about the same level as on Monday. The AMOSS is overbought, along with numerous other indicators posted here. From the breadth standpoint the new highs are improving, yet new lows also increased on Monday. Advancing volume is shaping up. McOsc crossed above the zero line but the significant event is that it did not cross above on strong volume. That is a negative, and it may be turned back below zero shortly, as happens in bear markets. VIX is very close to generating a sell signal with its proximity on the lower band. Perhaps this is why there was not heavy volume on the upside on Monday, i.e., because the pros know it is a risky venture to be long at this juncture. What is most surprising is that option sentiment is as neutral as can be. Neither EquityCP or Sentiment is at an extreme... bullish or bearish. Usually a bull trend is accompanied with these two indicators rising, along with the stochastic momentum of the OEX. Maybe this is another warning signal that this rally is short lived. Once again we have the forecasters talking about 11,000, 13,000, 20,000, etc, but note that they are paid by brokerage firms. 11,000 is within the one day "bid", so to speak. Round numbers can be major resistance.

Here are more charts:

CONE CHART. CYCLE CHART. DSP9M FIB CHART. DSP9MPD CHART. INDU CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. XAU CHART.