MomentumCycles

MomentumCycles commentary for the open of Wednesday, June 23, 1999:

We almost lost confidence in the short term AOL sell Tuesday,as seen on the AOL CHART,until volume dried up on the second test of 116+.Resistance can be seen a little above 116.Short sellers should use that as their stop loss.Short term traders had a good exit for long positions.

The FNM CHART shows an ideal opening entry,near the lows of the day.We had suggested a 3 point protective stop loss from the entry price.21 day moving average is 66.125,upper band is 68,a good profit taking point.

XAU went a little below 60,closing at 59.5 on low volume.We had a triple nonconfirmation of XAU lows Tuesday,on STOCHASTIC,momentum and RSI.

We had pointed out on the weekend and Monday that the Friday/Monday DJIA highs were tagging the upper theoretical 3.5% trading band with cumulative breadth and volume negative, and this was a typical setup for a short term sell.So it was.

However,unlike the previous rate of change highs or lows that coincided with price extremes,Tuesday's DJIA action only tagged the 21 day moving average of price,not the lower band.We had looked for a possible post-expiration low in this time frame-ideally at the lower band.It appears that low may be extended somewhat,in line with the post-expiration comments below.On to Tuesday's action in the OEX...

The outcome of having a plan and then executing it depends a lot on the plan, and also the market's cooperativeness in facilitating the execution. Globex can foul up the best laid plans for OEX traders by gapping before you can get a trade off, or gapping against you and leaving you with a loss from having held overnight. Daytrading OEX at those times requires a strategic entry on a retracement or a fade of an opening move. Projection bands, probability cones, support and resistance with pivot lines, and regression channel lines can help in the entry and exit. Sometimes the first move outside of a triangle is the fake-out. For example, the NYA triangle on the Moontide chart was a perfect trap. The plan laid out on the weekend commentary was to buy puts at the CODI upper channel line near 690, which also corresponded with fibonacci resistance zones and Cone zones. The reason we focused on puts is because the EquityCP, Sentiment, and VIX indicators said we were closer to a Sell than a Buy. Lately, the swings have been large enough in both directions to make money either way. This is the choppiness that keeps the OEX inside the consolidation channel on the Volatility chart. The MOSS chart and other charts suggest that we have more selling ahead of us as the end of quarter portfolio washing occurs. There should be a good downdraft to dump the losers, and then another run up to put "new clothes" on for the quarterly reports.

Here are more charts we examine nightly:

CYCLE CHART. DJIA FIB CHART. DSP9U CHART. DSP9UPD CHART. INDU CHART. MCOSC CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEYSP CHART. OEYSQ CHART. PITCHFORK CHART. TYX CHART. XAU CHART.

To quote from the Momentum Cycles commentary for the open of Tuesday, June 23, 1999:

"XAU went a little below 60,closing at 59.5 on low volume.We had a triple nonconfirmation of XAU lows Tuesday,on STOCHASTIC,momentum and RSI."

To quote from the e-mail at 11:51 am Wednesday:

"If you went short AOL at the sell Tuesday,mentioned on the Monday p.m. commentary,prices from 113 to 116+ were available most of the day until the late afternoon selloff.Currently the action is unclear;we might break up through yesterday's close;or breakdown like late Tuesday afternoon.Let's cover short here at about 108.5.Don't go long."

To quote from the e-mail at 12:26 pm Wednesday:

"Many of you did better than the 108.5 cover short as the e mailer was late.Most of you got 107.5 or so.That's 116+ to 113 Tuesday short entry most of day,cover short Wednesday 108.5 to 107.5."

To quote from the e=mail at 12:35 pm Wednesday:

"Move the protective stop loss on FNM longs to 62.125 {recent spike low}.Most entries were at 64 from what I heard."

MomentumCycles commentary for the open of Thursday, June 24, 1999:

XAU responded to the extreme oversold condition discussed Tuesday p.m. by rallying 5.43% Wednesday-open to close- from the lower trading band to the upper band.More rally should be seen early Thursday,at which point any short term long positions should be closed that were taken from 60 or below-probably with a move of 7% or more over 2 days.

Those who shorted AOL on the sell got a good cover short Wednesday as the low was 105.875,the cover was 108.5 to 107.5,and the close was 111.75.

FNM looks like we may be stopped out as the close was 63.375.Bonds are slamming interest rate related equities.Stop remains at 62.125 from the average 64 entry.

On to OEX action...

After the bell, Abbey said the S&P was fairly valued and has been so for the last three months... sort of like our OEX Volatility chart of 650 to 700. She looked kind of tired after all the "bull" this last year, and must have had a hard day praying that yields would back off, and finally decided to face political reality. Some might say the "preying" is about over by the fast talking brokers. I've been wondering lately how much of that $1.027 billion kitty in the NASDAQ Market-Makers Antitrust Litigation will be coming my way. How fitting to commenorate such a bull run. Info is available at http://www.nasdaqlitigation.com. Maybe you are due some too. Abby's comments sounded kind of like a top after her egregious forecasts of the last year or two. Egregious is meant to be positive for the few and negative for the many in the final analysis. Now for some rumors.

Bond bears see 7% T-bond yields by the end of the year and three 0.25% fed funds rate rises. That just gets back to parity of the fall of last year. Now think again. Last fall was a period of weakness, and those in control see inflationary kindling in the fire pit. So, let's get serious and start a rumor that it will take more than 3 0.25% hikes. Let's start with 0.5 next week, followed by two 0.25's at a minimum each quarter (3 months). "They" say the market has discounted one 0.25 next week but not a 0.5. You know, this rate rise is not unexpected from the election year cycle. The Fed can't afford to raise rates in an election year, so they have to do it all this year. It is etched in concrete on the cornerstone of the White House that "Thou shalt not raise rates in an election year." If anything, you have to buy votes by easing rates. So that leaves one course of action next week. Oh boy, thin summer markets make for volatility, and we need some volatility to get the OEX in gear again. It sure is boring with VIX at 21.57. To daytrade OEX, we need implied volatility in the high twenties. We need some red Cone ranges instead of Green cones. There have been some changes in MomentumCycles's technical picture from the day before. They amplify the CODI sell posture. McOsc has dropped below zero. It should be noted that the INDU has closed below the 21 day and 50 day averages, with the 200 next in line. This sure looks like a trip down to 10300 is in order. That is the -3.5% band as of Wednesday close. But if you insist, then make it 10400 on the SuperT chart, as it weakens into the Correction level. EquityCP and Sentiment have lost their bullish enthusiasm. It's too early for calls, as we have to wait for price to catch up (I mean down) with option sentiment. There are a lot of other things not shown here that have deteriorated too: the 5 day advancing/declining volume and new highs/new lows have crossed over to the short term bearish mode. Thursday just does not have good vibes at the moment. Money managers are really in a pinch this quarter to make quarterly performance improvements. The best they can hope for is to support the market where it is and not suffer too much damage in the remaining week. Call out the hedge funds to short futures to protect equity positions and generate a delta neutral position into month's end. Or maybe they need to keep the hedge on until the end of the third quarter.

Here are more charts:

AMOSS CHART. CYCLE CHART. DJIA FIB CHART. DSP9UPD CHART. INDU CHART. MOONTIDE CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEYSP CHART. OEYSQ CHART. PITCHFORK CHART. TYX CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, June 25, 1999:

We predicted a follow through early Thursday on the XAU rally that started Tuesday at 59.5.Thursday XAU prices from 10:30 a.m. to 2:30 p.m. ranged near 63.87,near the high of the day,enabling exits for longs as advised,before closing at 61.98.The tendency of XAU to rally from the lower 3.5% band on highly oversold conditions and stall temporarily at the upper 3.5% band enabled us to predict Thursday's behavior.Components such as ABX,for example, track the index behavior quite well.{In this case a quick move in two days was seen in ABX from 17.25 to 18.875,before selling off at 2:30 p.m.}.Now if XAU and its components can close back several days above the upper 3.5% band on increasing volume;a rally to the upper 14% band can be expected.In March a fakeout rally during falling trading bands stalled at the upper 3.5% band before falling to the lower band.In April a rally during rising trading bands went up to tag the upper 14% trading bands.Currently the trading bands are flat,so the exit Thursday into strength was advised.

OEX options are quite tricky to trade. It is possible to be extremely mechanical about the process and miss an exit by fractions of a point. The OEYSN is an example of a trade by a very mechanical service that bought the OEYSN at 10, target of 15.75, stop loss of 7.5. They did not exit today, and must expect more downside selling to take it to their target. There was no mention of a trailing stop. It may still work out for them; however, we are entering that positive seasonality period which may produce a flat market until the middle of next week. Flat sounds optimistic when investors and traders don't wait around for the Fed to end the party. It's as if the party goers know the police are coming, and so they are scattering early. Funds must be dumping those stocks they bought at 200 which are now below 100 so they don't show up in the quarterly reports. Whew! Glad we don't have that problem. With the INDU below the 50 and 20 day averages, more liquidation could produce the Gonzo Friday syndrome followed by the double Gonzo Monday heart attack.

MomentumCycles utilizes a number of exit technics because the market dynamics change as the participants change. Have you noticed in June that the VIX has dropped to the low 20's? It must have something to do with traders leaving the market, and instead of 800 million share days we have 600 and 700 million. Strategies that worked fine in the fourth and first quarters of the year suffer in the late 2nd and 3rd as the dynamics change. Years back, when the NDX options first started trading, it was easy to make a killing until summer came along. The same was true for the OEX. When the professionals are at work as a crowd, then the fibs work quite well for support and resistance. When everyone is panicking, the Cones work quite well because they are based on statistical probability. For example, today the OEYSP and OEYSQ peaked when the OEX dropped to the lower Red Cone. That is the entry and profit taking connection between the Cones and the options. On most days, the green cones will provide support and resistance. On stronger days, it will be the red cones. Admittedly, those are pretty general terms, but when you also look at the NYA chart with advances and declines and the 1200 and 1500 levels, you get a feel for strength. Like today, the declines were way over 1500 and advances way below 1200. That is defined as a strong downtrend.

So what do we have for the next few days? Well, Thursday closed with the Moontide in a waterfall. CODI is three days into a trading sell, and can be as long as 6 or 7 days. No one in their right mind wants to step in front of the Fed, and if the market drops again on Friday, more weekly newsletters should have sell signals on Monday. Those who follow the McOsc are on a Sell. EquityCP and Sentiment are not in Call buying territory yet. SuperT is bordering on the Correction level, so we could be one day from a buy signal... never a dull moment. The DSP9U chart shows a futures price distribution with support at 1320. That should be a critical level for Friday.

Unless T bonds show some relief we will be stopped out of FNM with a 2 point or less loss.

Here are more charts:

AMOSS CHART. CODISYS CHART. CYCLE CHART. DOW CHART. INDU DAILY CHART. INDU WEEKLY CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VOLATILITY CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Monday, June 28, 1999:

The DOW fibos were the star of the day again Friday, as the daily fibzone and the pivot did a super job of helping to sell resistance and buy support if you had a mind to. The city power went down early Friday AM for this writer, and the ISP failed to come up for hours afterwards, so no www updates were posted from MomentumCycles except the Buy Alert from the CODI System for Monday. The SuperT came pretty close to the Correction level on Thursday, and if you recall, the OEX tagged the lower Red cone. It was suggested that a bounce had high odds of occurring, and that we were entering that high risk period to be holding puts. Needless to say, those who bought comfort for their psyche paid dearly for hanging onto puts.

You see, the media has created a climate of fear in people's minds, and puts are in vogue now. That is, of course, the wrong time to be entering them, since as an OEX trader, you have to do the opposite of most people most of the time. Thus, our EquityCP and Sentiment indicators help us to stay on the profitable side of buying options. Friday's commentary also said we might be in for a neutral "wait and see" market going into next Wednesday. This time, decay or theta would be hazardous to your wealth.

Believe it or not, there are some money managers that don't care what interest rates do,as their prospectus says they have to be 80+% invested at all times. Ask them, or read the prospectus. This means when pension money flows into their kitty next week, they are going to spend it, regardless of what interest rate fears do to the trend. If the fears make the market tank, then so much the better for those money managers to buy lower priced stock. Also, a good portion of money might just flow into fixed income instruments for perceived security, dropping yields back below 6%. This, of course, will send stocks soaring, and begin the post Spring Consolidation rally as depicted on the Volatility chart. Sounds like a game of poker and a lot of bluffing, doesn't it. Well, who knows... At least we can enjoy the weekend without a position to be concerned about when Globex starts trading on Sunday, and options don't trade until Monday morning. You just don't want to be in calls or puts when the market is in neutral, as in the MOSS and AMOSS charts. We are playing a game of ODDS and Risk with these things. Another view is from the CONE chart projection oscillator. It is now in oversold territory (it uses a different time period). McOsc is back on the lower edge of neutral, etc. You should understand why it is risky to be holding puts when the rubber band is stretched to the fear side. That is when we should be interested in calls. Likewise, when the rubber band is stretched to the optimistic or confident side, that is when puts are preferred. Right now the odds favor calls due to the "oversold" levels of many indicators, and more importantly, seasonality. Make a note that the Moontide appears to have made a double bottom on Thursday and Friday.Also, 3 day cumulative smoothed breadth turned up Friday.

What follows is a special treat for MomentumCycles subscribers. Every week Dave Allman provides an audio interview for free at http://www.elliottwave.com/wsu. The list of past interviews is growing like a list of "Who's Who" in conventional and unconventional market analysis. The most recent interview is with P.Q. Wall, cycle analyst extraordinare. I have memories of PQ from a decade back on FNN when he was somewhat of a controversial analyst because of his attention getting forecasts that became reality... sort of like Arch Crawford and his star forecasts of turning points down to the second. Also, anyone who traded during that period could not forget Prechter's dynamite forecasts. The 1980's were a great decade for personality figures in the market, and in retrospect, I am glad to have participated in that decade in spite of that famous October. What seems to be missing from the 1990's market is this personality color, which has been replaced with the businesslike gurus. You can now find the "color" in audio at www.elliottwave.com/wsu. Allman's lead in to the PQ interview reads like this: "You're a simple guy with simple needs. All you really want is to know where the markets are going. But nooooooo. We give you the Greek philosopher Heraclitus, the Russian economist Kondratieff, the German historian Spengler, and to tie it all together, the sullied virgin from Louisiana, P.Q. Wall. He's Dave Allman's guest on this week's Wall Street Uncut!" After thoroughly enjoying the interview on Real Audio over the internet, I decided to check out his forecast for the summer of 1999. As you know, I don't often venture any more into forecasting than the probabilities for the next day, but this weekend we are going to compare PQ's 1999 August/September forecast of 12218 with that of the TopFinder in WinMidas software. Here is the DJWM99 chart. The basic theory behind the chart is one of accumulation and distribution. The S point is the start point for the TopFinder, and the C point is adjusted so the TF fits just below the lows of the price line mean. There is a bit of artistic license in adjusting point C, whereas the starting point S is from a launch point in which the public is sucked back into the market and a distribution begins. The Top point occurs when the distribution is finished and prices collapse. The WM chart forecast points to a top near 12229 around 63 trading days from Friday, June 25th, 1999. That would put it into PQ's September price & time window. Something else of interest is the bottom plot of OBV (black line) and the summation of change in price times volume (red line). Note how they began the trend together, then separated, then converged again this summer. The implication is that of a serious inflection point in the making. I would encourage you to check out the other 13 interviews at Dave's website for an interesting internet experience found nowhere else on the net.

Even though the longer term trading bands turned up on XAU and thus ABX,we got a Stochastic overbought signal and nonconfirmation at the recent tag of the upper 3.5% trading band.That's why we recommended closing longs after the recent 7% + move from the lower band in 2 days.

FNM was stopped out with about a 1.50 to 1.75 point loss at 62.5.Entry was 64.A bond rally next week,if it occurs on positive news or relief after the FED announcement,could allow FNM and thus other interest rate sensitive issues to rally.We may have placed the stop too tight,but that's a decision we had to make based on correct money management.

Here are more charts:

CODI CHART. CYCLE CHART. DJWM99LT CHART. INDU CHART. INDU DAILY CHART. INDU WEEKLY CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEYSP CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VIX CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Tuesday, June 29, 1999:

The CODI Buy Alert generated prior to Friday close was fortuitous for those who utilized Globex on Sunday. As was mentioned in a previous commentary, the advent of Globex is making it much tougher and riskier to trade OEX options as psuedo futures for those who don't want the leveraged risk of futures. Seasonality and the tug of war between the 0.25 or 0.5% rate hike officionados kept the OEX daily fib and INDU daily fib in a support/resistance trading range much of the day. What we are faced with technically for Tuesday is more of the same with a stronger payroll seasonality influence. CODI is still in a buy mode subject to the first downdraft. You must have noticed that we run two kinds of bands on CODI, the dynamic and the fixed. The dynamic should catch more trades than the fixed, especially when CODI is in the whipsaw zone. The BR_Momentum oscillator looks oversold and poised for a bounce on the CODI chart. The popular McOsc is bordering on crossing the zero line to the upside again... another one of those breath-holding moments of truth. It's strange how all these things come together at the same time. If it were not for the apprehension with Fed policy, the market would be off and running to new highs, as it shows little inclination to let cash sit idle. Corrections have been short and sweet, rather than long and painful or short and painful. The bullish psychology will not change until there is more pain, or a long term policy of raising interest rates is made public. Perhaps the bias towards tightening should be construed as "tightening will continue until it stops", sort of like a Greenspan momentum indicator. It is said that it takes three rises or steps, before the trend sinks in. It was mentioned on the e-mail update today that the INDU found resistance at the 21 day average and we took 10% out of the OEYSP. EquityCP and Sentiment have moved back towards the Buy Puts alert. This comes somewhat as a surprise, as the index has not become fully in synchronization. The strategy in the past has been to wait until these peak and turn as price moves up, so it might be advisable to wait a bit longer before acting on them. Seasonality is being given a higher weighting here. The Volatility chart is closing in on the hypothetical breakout day. Of course it may or may not happen, since the market does not follow the same day to day pattern each year.

The Moontide chart shows the double bottom on 6/24 and 6/25 along with the current compression between the 5 day and one day. Seasonality would have the moontide crossing above the 5 day on Tuesday or Wednesday. You should be prepared to enter at the money OEX calls on weakness on Tuesday and or Wednesday.We will just have to see how it plays out.

XAU found resistance again near the upper 3.5% trading band,where we suggested at a minimum hesitation would occur.We got a short term sell long on XAU/ABX after the 2 day 7% + move from the lower band.

5 DAY ADVANCING VOLUME CHART. AMOSS CHART. CODISYS CHART. CYCLE CHART. DSP9U CHART. INDU CHART. INDU WEEKLY CHART. NYA CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. VIX CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

MomentumCycles commentary for the open of Wednesday, June 30, 1999:

Happy days are here again. For how long, of course, nobody knows. Now what did the previous commentary say about Monday, and what should be done on Tuesday? To paraphrase, it said: "CODIsystem Buy remains in effect. What we are faced with technically for Tuesday is more of the same with a stronger payroll seasonality influence. The BR_Momentum oscillator looks oversold and poised for a bounce on the CODI chart. The popular McOsc is bordering on crossing the zero line to the upside again. If it were not for the apprehension with Fed policy, the market would be off and running to new highs... The bullish psychology will not change until there is more pain... EquityCP and Sentiment have moved back towards the Buy Puts alert, but wait until they turn as price continues to make its peak. Seasonality is being given a higher weighting here. The Volatility chart is closing in on the hypothetical breakout day.... The Moontide chart shows the double bottom on 6/24 and 6/25 along with the current compression between the 5 day and one day. Seasonality would have the Moontide crossing above the 5 day on Tuesday or Wednesday. You should be prepared to enter at the money OEX calls on weakness on Tuesday and or Wednesday. We will just have to see how it plays out."

Now then, what actually happened? CODI buy gained momentum. McOsc crossed above zero, bringing the buyers back in the game. Seasonality weighting was correct in spite of the Fed fear.{In fact,much of the selling in advance of the meeting was done last week early on.} Moontide went on a 6 arrow maximum buy configuration. EquityCP and Sentiment are confirming the price rise, but are also near and in the Buy Puts Alert area. Seasonality should delay taking action on that Alert a bit further into this week or next, unless, of course, the CNBC briefcase indicator fails miserably this time. We would like to see the SMI more developed. The Volatility channel is at the make or break point, just like the OEX channel on the CODIsystem chart. It is not too surprising to see the OEX engineered above the upper trendline during this seasonal strength.

Markets are closing in on old highs as though they are laughing in Greenspan's briefcase. Well, they shouldn't taunt a serious fellow. MomentumCycles will not take credit for issuing a Buy Calls trade (OEYGP) Tuesday morning, even though everything was laid out the night before, in terms of what to look for. The clues to buy calls were there in both issue and volume breadth on Tuesday. We did post a put trade, OEYSQ, late in the day to partially protect gains made earlier and to capture an expected retracement that did not occur... yet. Seasonality was as strong as it can be, and the UC payroll indicator will strike tomorrow regardless of what the Fed decides at 2:15PM ET. You see, raising rates during a positive seasonality minimizes the damage to trendlines and such. It's a way of avoiding immediate blame for consequences. Also, there seems to be a consensus that a 0.25 rise is guaranteed and has been discounted and we are seeing a relief rally. And, there is a consensus that a 0.5 hasn't been discounted. This pre-holiday weekend is notoriously strong.

SuperT chart shows we may see some cycle resistance tomorrow, as the SuperT is at a peaking level, and the index may run into that trendline drawn across the cycle tops. The OEX fibret is at the upper channel line which is one of numerous reasons that prompted the issuing of the late day OEYSQ trade. Now, we can always have a breakout, but it just seemed that the odds (yellow cone) might be saying we are due for some mean reversion attempt after a bit more upside. Also, the Cone projection oscillator is in overbought and will soon run into a downsloping trendline. There is nothing to say the projection oscillator can't go higher than that trendline, since it is the nature of such lines to provide resistance or to be penetrated. It is just a significant point in time that may provide a timing clue. The PitchFork has quite a bit more room on the upside to the upper fork line, or the OEX could pull back inside the lower set of forks. Really now, an interest rate hike tomorrow should change the valuation differential equation for stocks vs. fixed income and should start capping the index rise. With additional rate increases in the works, then the indices should have reduced upside momentum over the next month or two and then roll over into the fall in classic fashion. Tops have a rounded nature when looked at long term.

End of month and end of quarter buying has given some additional strength to XAU/ABX.If the rally continues strong resistance would be found at the upper 14% trading band-now at 70 on the XAU.We recommended closing XAU/ABX longs after the 7% + rise in the two days after the recent oversold bottom from 59.5.Note STOCHASTIC 5 and 20 are above 95-very overbought.

Here are more charts:

DSP9UPD CHART. INDU CHART. INDU DAILY CHART. INDU WEEKLY CHART. NYA CHART. OEX FIB CHART. OEX WEEKLY CHART. VIX CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.

To quote from the e-mail to subscribers at 3:29 PM Wednesday:

"The combination of these two entered when the OEYGP was at the money and went into the money, then later adding the OEYSQ provided a compromise on the pending rate rise. It limited the maximum gains but protected the gains to a degree and provided additional participation on the upside due to the Deltas. I would close out both positions now."

To quote from the e-mail at 3:55 PM Wednesday:

"After the rate hike the 680 call gained ten points and the 685 put lost 6 points for a net gain of 4. Still not bad for some insurance and ability to make money regardless of which way it went."

MomentumCycles commentary for the open of Thursday, July 1, 1999:

From the update for Wednesday's open:

"Markets are closing in on old highs as though they are laughing in Greenspan's briefcase... The clues to buy calls were there in both issue and volume breadth on Tuesday. We did post a put trade, OEYSQ, late in the day to partially protect gains made earlier and to capture an expected retracement that did not occur... yet. Seasonality was as strong as it can be, and the UC payroll indicator will strike tomorrow regardless of what the Fed decides at 2:15PM ET. You see, raising rates during a positive seasonality minimizes the damage to trendlines and such. The pre-holiday weekend is notoriously strong."

From the Monday update, "be prepared to buy calls on weakness on Tuesday and or Wednesday."

Now that the end of the quarter has passed, there is no reason for fund managers to jack up the price of stocks. Their bonuses are assured at near market highs. How convenient. It's called Fed facilitation... not too much... not too little. Perhaps they had to get a little extra bonus to prepare for a weak third quarter. Everyone believes the quarter percent rise does not impinge on the bull's testosterone, and it may not, but at some point in the 3rd quarter the liquidation begins. By prospectus mandate the funds can only distribute gains and not losses and these dividend distributions are in cash or more shares and occur in the fourth quarter. So there is a need to raise cash in the third quarter regardless of market trends or earnings. It is purely a tax timing issue.

So far this week has played out in true seasonal fashion. There may be more to come, but some stock may have to be sold to pay the bonuses based on the NAV of the 6/30 close. So, just maybe, the EquityCP and the Sentiment will finally get vindication for their buy puts Alert. McOsc finally made it just above the upper side of the neutral range, where it has found resistance in the recent past. CODIsystem remains on a Buy, but we need to hedge that by noting that CODI is in the Whipsaw zone, which means Thursday could see a backlash from Wednesday. We also need to point out that the BR_MOM has had a big run from -2 to +2 in a fashion that is not sustainable and implies taking some option profits. INDU is back above the 21 and 50 day averages, also within one day's reach of the upper 3.5% band.{Wednesday the DJIA theoretical did tag the upper 3.5% band.} SuperT is rolling over as the INDU pushes on 11,000. Volatility channel had a breakout. NYA hit R3 as the Moontide continued to rise. NYA breadth chart went from a down trend in the AM to an up trend classification in the afternoon. The 1200 and 1500 levels mark three basic price inducing trends. The lower spread plot shows the balance of power, and when its direction reverses, the index usually reverses.

EquityCP and Sentiment are clearly within the Buy Puts Alert area. This is the setup. Now we need to see them turn down as price makes its peak. This should happen during this beginning of month seasonality period.

We were stopped out on the recent FNM long by a fraction of a point{entry 64,stop at 62.5,low 62.125} although we correctly saw an interest rate relief rally and thus an FNM rally in the works in this end of month period.FNM is now 68.25.Sometimes money management stops you out of a trade that immediately turns profitable-and causes dismay.However,it is more often that loose stops will cause increased dismay.

XAU/ABX rallied into end of quarter buying.70 on XAU is the upper 14% band,where resistance is often strongly seen.STOCHASTIC is strongly overbought.

Cone projection oscillator is overbought and the OEX is pushing on resistance channel line at 710. There might be a put daytrade on Thursday.

CYCLE CHART. DSP9U CHART. INDU DAILY CHART. INDU WEEKLY CHART. MOSS CHART. OEX FIB CHART. OEX FIBRET CHART. OEX WEEKLY CHART. OEYGP CHART. OEYSQ CHART. PITCHFORK CHART. VIX CHART. XAU 30 MINUTE CHART. XAU DAILY CHART.