MomentumCycles

To quote from the Momentum Cycles Update for the open of Wednesday, June 3, 1998:

"Normal June money flow cycles would have June 3 as a high point and June 24 as a low point.June 4th is a Thursday, which tends to have a downside bias, and weak Thursdays recently have been followed by poor Friday closes.

Nothing about the last week or so has been normal,however ,in terms of index movement.As discussed yesterday,weak bonds presently show a lessening of fear,as well as NASDAQ stronger than DJIA.That was Tuesday's action, in violent contrast to Monday's.Strong bonds,rallying defensives like Wrigley and the utes presently reveal increasing fear.A lot of motion and fury,a daytraders environment.In this climate,especially on relatively light volume, positions can be whipsawed during the day numerous times, so trading channels are the way to go.Money flow probability cycles presently conflict with the OEX mechanical trade models shown at the bottom of this page,and some of the other technical indicators,such as the CODI position.

Confusion of traders is being seen by large uptick and downtick readings within the same day on volume readings that are setting up for a big move this month."

Momentum Cycles Update for the open of Thursday, June 4, 1998:

In most months, pension fund reinvestment monies are sufficient rally fuel into the 3rd trading day of the month to counteract temporarily technical weakness.We did get a rally of sorts off the May 26-27 low, and failing rally attempts on pension money flows even into Wednesday's open.Major price strength was seen at the close of last week,however,rather than the start of this week.

Traders using the suggested technique of intraday price channels would have closed out long OEX positions well before the downside reversal into Wednesday's close.The 1.50 stop loss mentioned in the OEX trade models below would have been the worst case scenario, for those who waited to get mechanically stopped out.In transitional markets, end of day traders playing even with the correct larger trend can get whipsawed.

Price is oversold,and we ended Wednesday near the lower 3.5% band, where rally attempts are often mounted.Ending futures prices suggest the band will be broken to the downside tomorrow.No new trades recommended for OEX presently.

CRB continuing to seek new lows,with 210 and 198 as possible targets.

No XAU trade in the models presently.

Trend:

OEX closed below the July 1996 regression channel line as its Projection oscillator remains below 50% in a sustained bearish trend. NHNL is working its way below 0% in bearish trend. ADHL is hanging onto its last buy signal and won't generate a sell unless there is a sharp sudden drop in ADRrs or all three indicators cross their Sell (magenta) lines. This ADHL has been the lone holdout on the buy side, but we have to remember it is an intermediate to long term indicator. It might just hold up until and if we have a summer rally. Then as the summer wears on and breadth deteriorates further it may generate a sell.

AstroCast:

AstroCast is an attempt to place numeric weighting to various planetary aspects that occur through out the month. The numerical scale is designed to represent the forecasted Dow movement in points. Most useful perhaps will be direction and possible Change in Trend, beyond that place no trade betting that the market from the first of June to the 10th will go down 600 points...AstroCast is contributed by one of Momentum Cycles ardent subscribers.Oddly enough,he has the 25th of June as a sort of low point,close to our probable calculation of the 24th as a low point.

Breadth:

McOsc issue and volume are behaving as though the weight of a bear is on them. They have lost the resiliency to rebound above the zero line on any price rallies. The volume summation continues to track downwards. The S&P100 is sitting on the 522 level. There must be some sell orders just below here. Maybe some were activated just above 522 in the final hour of trading on Wednesday. FlowRate chart does show the last hour selling impulse that we have come to expect these last few weeks. The Professionals control the last hour. CODI moved back above the Buy Alert line. This does not mean to buy, it just means the conditions are oversold. There have been times when CODI was twice as high before it turned down into a sustained buy trend. Again, on the CODI chart the OEX is on the critical 522 level. Early NYA breadth gave way to negative breadth in the afternoon, it has been much worse in times past and so far this just looks like a correction. Bids are dropped fast when the sell volume picks up in the last hour. Good bottoms are made when the mentality is to get out at any cost. That is the "Uncle" point and we have not reached it yet.

Volatility:

Z Timer closed right on the Extremely Oversold boundary. There is room for more "oversoldness", but we are in higher statistical reversal area now. The major caveat is that you never know for sure if a real bear trend has set in until the Z timer is tracking sideways in the lower zones or cycling between the lower zones and neutral. MVI has not had a climatic trip to the Sell bands as is common when true index lows are in place. It looks like there is more selling ahead.

Momentum Cycles Cones:

Cone 1 shows a direct hit on the regression channel line as well as the Red cone(strong day). Cone 2 gives a viewer the feeling that the support will be broken on Thursday.

Pivots:

OEX pivots start Thursday in a very weak mode with the OEX far below the Keyline and the hourly trendline. R1A has been resistance for two days reflecting the difficulty for prices to advance. The path of least resistance is down.

Fibonacci Zones:

Weekly Balance(red dashed lines) provided resistance and a reversal level for equity indexes on Wednesday. Ratio oscillators are more oversold, but need to reverse upward before buy signals are generated.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

These have a bearish appearance.

Stocks of Interest:

ASTN now has resistance at 2 and 3/4, and buyers at previous support at 2 and 1/2. CMR at 1.15 still holding the double bottom.

OEX Trades:

OEX Trades have all been stopped out by the 1.5 stop loss.

Momentum Cycles Update for the open of Friday, June 5, 1998:

For new readers, and with the indulgence of longer subscribers{thanks!},we will review what we try to do with OEX ,XAU and TYX.Using a combination of probable weekly, monthly and money flow cycles,trading bands, and the various technical indicators shown on the charts below,we have attempted to set up mechanical trading models to pick entries and exits in purchases of puts and calls.We have often called major turns to the day or within one or two days.April and May projections for turns were very accurate.

Recent extremely high intraday volatility the last 7 trading days made us recommend a more protective short term, intraday trading stance that the OEX models, being end-of -day based,can not reflect.

This kind of action is symptomatic of an OEX market being driven by fewer traders{light volume}where prices are increasingly driven by day trader programs.

Normal money flow cycles had the May 26 date as a low and June 3rd as the likely end or near end of positive pension money flow.This monthly cycle is one that has been reliable for many months and years,although obviously no cycle is perfect.Over many years, probability highly favors this trade.Trading a basket of random equities, in 1929 the strategy achieved a 0% return, no mean feat in a year that saw divebomber stockbrokers on Wall Street.

The next probable mini cycle is a short term low on the 9th of June and a probable net up day on June 10.{The astrochart attempts to refine the times further below.}

These mini cycles are best confirmed with the other technical indicators found on this page.

Concerning XAU ,since May of 1997, including the large decline that followed later that year into 1998,good long trades have occurred when RSI and STOCHASTIC 15 or 20 has based below 20 and then risen above 20 on increasing volume{we use ABX volume as XAU volume proxy}.The basing below 20 has occurred, but not the cross above 20 on increasing volume.

Trend:

Thursday saw an outside day that straddled the 1996 Red OEX regression channel line. One function that the channel lines has is to provide support and resistance. Perhaps we are seeing a reversal, however, prices are still within the current blue downsloping channel. The Projection oscillator has crossed above the 50% line. Don't be surprised if by Friday afternoon the buying subsides and selling resumes. This expectation is based on the official end of begining of month seasonality. NHNL is still bearish looking. ADHL indicators weakened even with the advance in price. New highs dropped to 38 from 49 on Wednesday. Here is a DJIA chart.

AstroCast:

This chart is somewhat experimental and undergoing refinement. It is based on classic astro/market correlations. A running summation of actual DOW changes has been added to the chart. Future charts may have the intraday astro aspects that have been correlated to precise energy points. These coincide with accelerations or change in trends. DJIA chart has the 21 day average about to cross under the 50 day average. Back in January the DJIA took off when the SMI was working the 30% level. It is there now, so maybe it will at least stop going down and work sideways. The earnings outlook has not changed and stock prices have not fully discounted the slow down in growth of earnings. Countertrend rallies do occur in bear markets.

Breadth:

One more day of decent positive issue breadth will take the issue oscillator above the zero line generating a buy signal. Another day of negative breadth will generate a shorting opportunity at the zero line, which is what is expected in a bear market. CODI is indeterminate at the Buy Alert line. A real buy from CODI would be indicated by a thrust downward. NYA breadth was not all that encouraging as declines were still over 1200. Also note the NYA index did not make it back to resistance that has held since the first of the month.

Volatility:

Zone Timer did make a buy pivot right on the extremely oversold boundary where previous reversals have occurred. MVI made a buy move today also.

Momentum Cycles Cones:

Cone 1 penetrated the support line and then rallied strongly to the upper red cone. Cone 2 is targeting 535 for an average day and 538 for a strong day on Friday. Now if we get positive followthrough in the AM and continued selling in the PM, then we should expect at least 527 on the low side as that is the nearest support and is the Keyline or Pivot as some call it. For those new subscribers, these cones are forward looking, in that they are based on implied volatility of the OEX options.

Pivots:

OEX Classical pivots are targeting 534 and 537.4 as R1 and R2 on a followthrough from Thursday. Again, watch for deteriorating NYA breadth and renewed selling in the post NY lunch period. Caveat is this is based purely on previous monthly momentum cycles which are subject to inversion.

Fibonacci Zones:

The S&P was relatively stronger than the narrower DJIA. So far the weekly balance line(red dashes) is providing resistance to the equity indexes. XAU is finding support at weekly and monthly fib support. TYX closed above the daily stop loss stair step (green) as though T Bonds may have seen their best levels. This also coincides with the drying up of seasonal moneyflow. Note the TYX Ratio oscillator is beginning to rise. XAU Ratio oscillator is not as developed, but can move faster once in motion.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

Take a look at the XAU and TYX RSI charts. A turn up on the shorter term RSI and an oversold condition in their respective Stochastic Momentum (SMI) might just be telling us something. SPX RSI and SMI are not as encouraging.

Stocks of Interest:

ASTN along with other techs, has shown recent weakness unrelated to longer term prospects.For new subscribers, we had recommended a small longer term position in this NASDAQ issue between 2 1/2 to 2 15/16 based on several factors.ASTN plans to implement a new trading system on the Pliladelphia exchange that enables large institutional customers to arrive at the fairest price, called VWAP.This system is awaiting final SEC approval.ASTN recently received 18$ million in available funds from large institutional investors to implement other trading systems that may be placed in Chinese and European exchanges.Spinoffs of other divisions of ASTN could be done as IPO's and add value to ASTN's bottom line. CMR.TO was recommended as a candidate for accumulation between 1.00 and 1.60 based on a huge land position in a potentially massive nickel /copper deposit known as the Thompson belt, its almost ready to produce Werner Lake cobalt deposit{they were recently named as North America's ONLY primary cobalt producer}, the present attractive prices for cobalt,the low prices of CMR shares,and the possibility of the discovery of an elephant sized deposit on the CMR claims.

As always, only a small position should be taken in any one speculation.

OEX Trades:

We officially use a 1.50$ stop loss from the initial price taken on any one option position.

The OEWFE, OEWFF and OEWFG intraday option charts are presented as an example of what can occur under current market conditions. One thing is for sure, time decay works against a position if it is held too long and stops are not used. On the other hand, the small stop losses of the last week can be erased in a few hours of a strong market. The above Zone Timer appears to have correctly indicated an opportune entry for Thursday. The mechanical model will exit another position in the morning at the estimated price due to the 7 day limit and the others are officially stopped out with the 1.5 point stop loss. The models are still holding them, but Momentum Cycles is officially out of them. Here is a trade sum chart.

Momentum Cycles Update for the open of Monday, June 8, 1998:

A close just above the 21 day moving average on the DJIA.Seasonality of pension fund reinvestment appeared later than usual;at the very last 2 days of normal early month money flow, where normally profit taking appears from early bird buyers from the end of May.

The 6th trading day of the month{Monday} often has a downside bias, and high closing ticks often bring a retracement within 2 days.Last 2 closing ticks were +554 and +710.

Major market bottom last week?Maybe.However,not the total wipeout in the option premium ratio in the .30's often seen at major bottoms,not the basing levels in the put call ratio for as many consecutive days as we like to see.

Admittedly price tagged the lower 3.5% band and CODI hit the buy zone,and 3 day breadth and volume are rising.

Friday was a messy day, with DJIA stronger than other indexes,often considered a nonconfirmation.

XAU Stochastic 15 and 20 still meandering around 15;we need a close above 20 on much better volume to make a run for the upper 12.5% band of price.

Some nonconfirmations in our FNM /bond model of price;leading to a doubt whether the bond breakout to 5.5% everyone is waiting for is going to occur near term.

Trend:

OEX closed on the high for Friday which just happens to be the Jan 1995 Blue Regression Channel Line! The projection oscillator is entering the overbought area. ADHL remains on a Buy signal. NHNL is still bearish looking and not confirming this latest rise in prices. Last Hour trend was about as strong as it gets. The PREM moved into the buy program territory, TRIN was bullish at 0.52, TICK was bullish at 700. In fact it just looks too good to be true. You know what they say about that.

Experimental Astrocast:

The Astrocast and the market were not in synchronization on Friday. This technique is provided for curiosity's sake at this point and may become a trading tool in future as it evolves.

Breadth:

DJIA closed above the 21 and 50 day averages as its stochastic momentum indicator turned at a retracement level of 30. McOsc issue closed above zero bringing in the buyers from the sidelines. The volume oscillator closed just below zero in an uptrend. The Volume Summation will turn up if the Volume oscillator moves above zero. CODI is still hanging out in the Buy Alert zone. NYA breadth looked good all day with a minor corrective blip after 1PM. Flow Rate Net was a real yo-yo in the afternoon. First there were two heavy negative flows followed by two strong positive flows. Strong is defined as greater and less than 1.5 million shares per minute. One million shares per minute is a trend inducing level.

Volatility:

Zone Timer has performed quite well with a tag of the Low Risk Zone on 6/3. After Friday's move it is now back at the upper edge of Neutral. MVI and MVI adaptive have moved to Sell Alert levels.

Momentum Cycles Cones:

Cone 1 hit the Red cone with the projection oscillator closing in on the 90% overbought level. Cone 2 gives the impression that 544 could be reached on an average strength day, say with a little followthrough on Monday.

Pivots:

OEX Pivots closed in a positive posture with the OEX above the Keyline, above the hourly trendline(cyan) and with the Keyline stepped upwards. R2A is also targeting 545 level.

Fibonacci Zones:

DJI, NDX, OEX, SPX all start next week near the weekly Fib resistance zone. The expectations would be for followthrough on the upside to tag the weekly fib resistance zone and then pull back to the weekly balance line(red dashes). TYX and XAU are neutral looking with a start on the weekly balance line.

RSI, SMI:

RSI for the XAU, TYX, SPX is working the lower side of the channel. SMI is near reversal levels for all three.

Stocks of Interest:

ASTNhas sellers at 2 and 3/4, support at 2 and 1/2.We still expect some positive developments to be announced this month.ASTN has many initiatives in the works.CMR.TOis reworking what appears to be the double bottom.Presently less than 50000 asked appear between the present price and 1.50, with asks above that level quite thin.A company strategy to deal with the cobalt production at Werner Lake is likely to be devised{and announced}this summer.Supply and demand of high quality cobalt makes this a logical deduction.

OEX Trades:

OEWFE, OEWFF, OEWFG had some nice gains today. The TRIN model is closing out its position. Since this is an end of day model, the close will be on Monday a.m.

Momentum Cycles Update for the open of Tuesday, June 9, 1998:

Important week for OEX and XAU.If we are to achieve new OEX highs, we need better breadth and much higher volume.Above the DJIA 9300 level the specialists will likely run the buy stops, in a pattern familiar to readers who have seen breakouts from new highs.As of now, volume is lousy, and 16 to 13 is poor breadth.That doesn't mean some of the OEX models shown at the very bottom didn't catch the rally,because they did, and the RSI model is still long{see last paragraph}.Readers may elect,if they wish, to use trendline stops on remaining model positions,with a chart example shown here.

All good XAU rallies are confirmed with a breakout of Stochastic 20 above 20 on good volume.One more good up day on XAU should achieve that, as XAU STO is at the 20 level after meandering around 10-15.

Trend:

OEX regression channel scored a bullseye on Monday as the Projection oscillator hits the overbought zone. The red channel line would be first serious support on the downside. NHNL

exponential averages have not crossed nor come above zero yet just as the SPX worked inside the triangle. ADHL

remains on a Buy.The DJIA chart shows where we are in relationship to the 50 day moving average.

Astrocast:

The divergence between the DOW cumulative change and the AstroCast is occuring as the equity indexes reach historic fundamental valuation levels and technical overbought levels (see the Zone Timer below). If the AstroCast is painting a valid picture, then we should see a downdraft in the DOW this week bringing the indexes in line with the Cosmos. Remember that the technical indicators shown on this site very often agree with cyclical projections. When they don't, we point this out. The disagreement between normal seasonal rally tendencies at the start of June, and the actual oversold conditions present at that time led to a late week seasonal rally where normally profit-taking would have been seen. For that reason, the action of this week is especially critical. In many months, the second week, especially mid-week to end week, is where profit-taking is most likely to occur prior to expiration week's normal upside bias.

Breadth:

Bear markets tend to witness downside reversals as the McOsc issues rises to the zero line and drops away. Both the issue and volume oscillator have closed above zero and the Volume Summation is turning up. CODI has dropped back in the vicinity of the Sell Alert line. Friday's chart had a misprint.

Volatility:

Zone Timer has made a Sell Pivot at the boundary of Overbought and Neutral as you would expect in a trading range market. MVIs made sell pivots also. It would not be too surprising to see some price retrenchment on Tuesday.

Momentum Cycles Cones:

Projection oscillator is overbought. An average down day would hit 537.5. A strong down day would see 531 and erase all of Friday and Monday's gains, again that would be the consequences of a bear market rally. A Crash down day would tag 527.

Pivots:

OEX closed right on Tuesday's Keyline giving 50/50 odds for up or down, except for the overbought technicals weight the odds in favor of a trip down to S2A. This is where the hourly trendline is and where the implied volatility cone above indicates an average down day would visit.

Fibonacci Zones:

This weekend's update suggested that Monday would see prices encounter resistance at the weekly fib resistance zone. That is in fact what happened. Closing breadth and volume support the notion of a trip towards the weekly balance line(red dashes). A typical pre expiration week gyration would be a downward bias into Thursday close and up on Friday.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

XAU, TYX RSI are looking up. SPX RSI is overbought. XAU and SPX SMI are attempting a turn whereas TYX is still in a downtrend. The RSI is a short term measure and the SMI is longer term.

Stocks of Interest:

ASTN is cycling between 2 11/16 and 2 3/4, which is now the new resistance point. Important support was seen before at 2 1/2. This issue needs both increasing volume and some important news. CMR.TO appears to be dying, but at $1.05, a triple bottom appears to be intact. When an issue makes a double or triple bottom, it is often instructive to look at the asks above the present price. As of Monday's close, there are 3500 shares asked at $1.15, 3000 asked at $1.30, 5000 asked at $1.40, 5000 asked at $1.65. So a total of 17000 asked up to $1.65. This is one good day's trading. Now admittedly, more supply may come out as the price rises. But, the amount of selling pressure present does not appear at this point sufficient to break the triple bottom. One determined buyer could take this to $2 in short order. It is to be noted that cobalt is the healthiest of all the commodities. In 99% pure form, prices in October '97 were $20.50 to $21.50. Present prices are $25.50 to $26.25. There is just no new supply coming out into the market. It is also to be noted that many base metals have only a 4 week inventory at the LME, where normal inventory is 6 to 8 weeks.

OEX Trades:

The TRIN model exited into strength as the weekend's update indicated it would exit on Monday a.m. The RSI model is still holding a position. These models are "canned" mechanical models using factory defaults and are not based on the above commentary. Thus, in a sense they are a comparison measure of whether the above perceptions, interpretations are on track. Performance could be improved with a little jiggling of the parameters, but at this point they are being left alone for evaluation purposes.

The use of parabolic or intraday trendline stops for money management is one tool we have discussed previously.Intraday channel stops were suggested as profit protectors at the end of May due to excessive intraday whipsawing.They worked quite well.

Currently,for instance, those holding long OEX call positions based on the RSI model discussed here,knowing some indicators are becoming shorter term overbought, might well place a stop at the bottom of the trend channel seen since the start of the rally.This would entail "jiggling the parameters",but is a practical money management tool useful in all but the most severely trending market conditions.

Momentum Cycles update for the open of Wednesday, June 10, 1998:

{Apology for some of the chart backgrounds,due to glitch in the paint program background color,won't happen again!} A distributive day in many issues,but not much in index price.Equity put/call slightly bearish.A formation of descending tops has formed in many indexes, and a pullback or hesitation often occurs in this chart formation.When {or if}the descending tops are broken to the upside, you can get short term fireworks-witness the transports on Tuesday.

Greenspan due to speak Wednesday,and our PRE indicator did not give a clear signal as to what the market reaction is likely to be.We use certain patterns of BKX action the day before a report to gauge likely market reaction,and Tuesday's BKX did not give a clear signal.

CRB heading towards the predicted chart target of 210,which tags the bottom of the descending channel.Break that, and its the 12 year low of 198.Close was 211.51.

XAU had a marginal Stochastic 20 crossover above 20,on light volume.The 70 region seems to be recent support.

Trend:

OEX is resting on the 1995 regression channel line for another day with the projection oscillator at overbought. DJI 21 and 50 day moving averages place the DJIA at 9000.

Astrocast:

It is going to take a rise in interest rates or a slew of bad earnings reports to narrow the DOW - Astrocast divergence. Caveat - this is experimental at the present. Markets get overbought and divergences such as this are created, so just maybe we are in for some early fireworks.

Breadth:

NYA breadth weakened and the McOsc is rolling over in the neutral region just above zero. CODI is near the Sell Alert Line. ADHL remains on a tenuous buy. NHNL is still indicating a corrective mode or the start of something worse. Flow Rate had multiple negative TICK readings in the afternoon casting a suspicion over any upside on Wednesday.

Volatility:

Zone Timer is near the overbought boundary and MVIs have given sell signals.

Momentum Cycles Cone:

OEX cone projection oscillator is overbought. OEX is in the center of the regression channel with ten point moves to support or resistance.

Pivots:

OEX keyline stepped upward a notch and is above the hourly trendline.

Fibonacci Zones:

Equity indexes are still working the upper weekly fib resistance zone as the ratio oscillators close in on the overbought level. Time is running out and a catalyst is needed to break above or pull back. The indexes could fall of their own weight even without a news event.

DJI NDX OEX SPX TYX XAU

RSI, SMI:

XAU, TYX are "oversold" and the SPX is overbought.

Stocks of Interest:

ASTNvolume drying up due to a lack of news on its many initiatives.Support near 2 1/2 was hit today.We still expect positive developments this summer with this issue,including possible spinoffs of various divisions as IPO's. CMRmore bids than asks near the triple bottom,with now less than 17000 asks between 1.05 and 1.65.One good day's trading could eat up all that supply.

OEX Trades:

The RSI 525 call position triggered an exit on the close(tomorrow AM)leaving no open positions going into the upcoming newsmaking events. The trade prices on these models are based on theoretical option prices and sometimes are slightly above and other times slightly below what could be obtained in realtime trading. The OEX P&L is totally mechanical and does not reflect the commentator's timing interpretation of the above categories. Here are samples of some representative option price charts (OEWFE, OEWFF and OEWFG) so we can see the action of the recent late seasonal rally off the lower 3.5% trading band.