MomentumCycles

MomentumCycles commentary for the open of Wednesday, June 9, 1999:

The Tuesday followthrough from Monday per the CODI sell signal could not have been better. Wednesday will also start off with the bias to the sell side per the CODI signals. Moontide crested on Monday and curled over on Tuesday down to the five day support line. Wednesday holds the key for a bounce or accelerated selling if the five day line is broken. AMOSS peaked in the Overbought zone as the McOsc on the Breadth chart dipped back below zero. However, McOsc is still in the neutral zone. Sometimes it takes four crosses of the zero line before the ultimate direction is resolved. It looks like the PPI on Friday is the holdup this time, not to mention the backup in yields to 5.987%. Option sentiment is still on the nonconfirming side for either buying calls or puts. Consider EquityCP and Sentiment in the whipsaw zone (similar to CODI's white central zone).

Here are some charts:

BREADTH CHART. CONE CHART. CYCLE CHART. INDU CHART. NYA CHART. OEX FIB CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. TYX CHART. VIX CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Thursday, June 10, 1999:

If it looks, smells, growls, and claws like one, it must be one, as they say. Technicicians say, "Don't fight the tape, and don't fight interest rate trends." Everyone must know by now that TYX closed above 6%. Most of the price oscillators have been turning back from overbought as the positive seasonality ended on Monday's close. We anticipated downward action into Friday, and so far, that has been the path, but there is strong support at current levels. AMOSS has dipped back into the neutral zone, where a bounce at the zero line should be expected in another day or two. Otherwise, it's down to the oversold zones. Moontide is also at that critical point of dropping below the 5 day average. When the one hour, one day, and five day lines converge as they are now, we will get a strong reaction bounce or further drop. CODI ended Wednesday with no buy or sell indications. It is close to the Sell Alert, and the momentum oscillators are overbought and rolling over. Cone chart projection oscillator is also peaked out. You should take caution, because peaking does not necessarily mean a trend change and could be consolidation before further rally. We haven't looked at the ADHL intermediate system in some weeks. The new low strength has picked up to the sell mode and the new high strength is weakening. The AD/DOW rsi is also weakening. It hasn't signaled a sell yet. There has been no change in the option Sentiment and EquityCP. The reading is still neutral or whipsaw tendency.

Here are some charts:

BREADTH CHART. CYCLE CHART. DJIA FIB CHART. INDU CHART. NYA CHART. OEX 30 MINUTE CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. VIX CHART. VOLATILITY CHART. XAU CHART.

MomentumCycles commentary for the open of Friday, June 11, 1999:

Well, well, we are finally getting some signals from the option Sentiment. It is closer to the Buy Calls level than it has been for months. Equity CP is also close to buying calls. The only fly in the ointment is the stochastic momentum of price. It can reverse at the zero line. Maybe buying the Friday of pre-expiration week will pay off this time. MOSS is back to the center neutral line and AMOSS is into the lower side of neutral. CODI is back to the whipsaw zone. This is not exactly the best call buying configuration yet. There does seem to be congruence or synchronization throughout the indicators, though, in painting a picture of slightly oversold. The Cone projection oscillator has dipped into oversold, but is a long way away from really oversold. McOsc has dropped back to the oversold zone after dropping through zero again. This interest rate situation with the TYX appears to be doing exactly what the Fedspeak desires, i.e. to avoid a blow off rally into super overvaluation levels. At least now, a summer rally might be engineered, and could just take the market back up to previous highs. Then we can sell it off into the fall as the funds do some real dumping in the third quarter per the Volatility map. Moontide provided some nice surfing on Thursday. The ride looks like it is about over. The OEX 30 minute chart looks like some bounce is possible in the short term. Even VIX made a midband retracement buy signal today. Remember PPI is this Friday, CPI is next Wednesday, then there is expiration on Friday. That's enough to keep CODI in the whipsaw zone, so trades in either direction should be short lived. The CONE and Fibo charts are useful for picking entry and exit points. Today the OEX found support between the two lower red cones, as posted on the www email update. There are many ways to trade and make and lose money. MomentumCycles has found that probability plays a part in the action. One way to use this to your advantage is to trade in the direction that the odds favor your position. Today was a case in which if you held puts, odds said you should close some when the OEX hit the red cone zone. The OEYRL is an example of what happens to an OEX option that expires one week from now. The downside index momentum had run into support in the red cone zone and the auction market mentality quickly dropped the premium by 30%.

My apologies are in order in regards to having promised to post the results of "DeMark On Day Trading Options" indicators. As was stated in preliminary review of the book, it was obvious that the book was a promo for the indicators. If you have traded thousands of options over a decade in time and read numerous other options books, this book will be a disappointment. If you are new to the field and have read little or nothing, then you will pick up some pointers, but will be left without the means to implement them unless you spend another $500 to $600 for the software. Without the software, the book then becomes just another beginner's primer on what options are and describes the basic strategies in which they can be used. The demo disk arrived and that is just what it was, another promo-demo. It did not convince me to buy the software. It has become fashionable among publishing traders in the industry to write books in this fashion, i.e., get you to pay for the advertising of their software. If you buy the book, be sure to buy it from a source that lets you return it if not satisfied and where you can buy it at a big discount from list price. Some books provide usable code either in print or with an enclosed disk and you feel you get something for your money. This book provided no code and nothing new in terms of option trading that I could discern. It was more a rehash of freely available strategies and a history of their code development and evolution. Of course this says nothing about their software, since it wasn't evaluated here, and it may in fact be useful. Everyone wants something for "free", me included. I would feel better about the matter if there had been just one tiny bit of code I could stick in TradeStation and say, "Aha, they have something there".

Here are some charts:

BREADTH CHART. CYCLE CHART. DJIA FIB CHART. DJWM CHART. INDU CHART. NYA CHART. OEX FIB CHART. OEX FIBRET CHART. OEX WEEKLY CHART. PITCHFORK CHART. SUPERT CHART. XAU CHART.

MomentumCycles commentary for the open of Monday,June 14,1999:

We have been able to use our various timing methods to give subscribers a very accurate predicted market scenario from mid-May till Friday,June 11.Readers will remember that the rate of change indicator called well in advance for a top on May 13{the exact DJIA top},confirmed by CODI, and a whipsaw week at the end of the month,followed by a predicted rate of change short term DJIA low on June 1st{the exact day of the DJIA low}.We predicted a short term high on Monday June 7 or Tuesday,June 8,on the previous weekend commentary{Sunday,June 6th} from studying the unusually high number of large intraday and closing ticks in succession during the end of positive beginning of month money flow at the end of the first week of the month.Indeed,the DJIA high was Monday and the very beginning of trading Tuesday,June 8.We had predicted a down week into the close of Friday,June 11,from the high that would be seen at the start of Monday,June 7,due to seasonal factors and overbought technicals.So the roadmap for readers has been highly accurate,and well in advance of the actual price action.

Currently, TYX is the pin that is deflating the INDU and DOWobv. AMOSS is oversold short term whereas CODI is back in the whipsaw zone. Also CODI provided no continuation signals except for the last one, which was a sell. EquityCP is flirting with the Buy Calls level, but is out of synch with the stochastic momentum of the index. Perhaps next week they will get in sync, otherwise the OEYFK will be exited. TJ made an astute entry at 7.5 on this one.

Remember, the usual cycle is to buy OEX calls the Friday close of the second week{pre expiration} and sell into the first strength of expiration week.

The big negatives Friday were, of course, the interest rates rising to multiyear highs, and the new lows expanding to 199. XAUwas the star Friday rising from the abyss of neglect and suppression. In fact it achieved a 99 up expert rating and crossed above a resistance line,as we had projected earlier with the green buy arrows at the recent short term STOCHASTIC oversold lows.

Fortunately {or unfortunately} the equity markets will be under pressure the rest of the month due to the fear of government reports and Fed speakdom. Expiration weeks can exercise a bias all their own unrelated to the world events around them, so this week is bound to not disappoint those looking for volatility in order to place fast moving trades.In addition,Wednesday will see the following reports:Consumer Price Index (CPI), Industrial Production, Capacity Utilization, Housing Starts, Building Permits, and Real Earnings.

INDU is approaching its -3.5% band as the 21 day average approaches the 50 day average. This occurs as the Force Index approaches its Buy Alert level. It is looking like the potential for a richochet bounce is in the works early to mid week.

We correctly called for a stand aside position on NASDAQ/tech/internet bellweather issue AOL in spite of its oversold position at 105/106.We saw the probability of a breakdown due to seasonal factors into the 92 area.Friday saw 99 as the close.

Occasionally we discover other sites that have interesting trading information. http://www.glen-net.ca/sp500_daytrend has some seasonal statistics that could play into the odds factor of trading:

"10.) Seasonality factors:June tends to be a mildly positive month - over the past half century the worst loss in June was in 1962, down 8.2%.

11.) Past performance (past 10 years) Most data sources calculate changes over a month. Our orientation is from option expiration to option expiration. Therefore I am gradually building a data base, beginning August 1987, for changes from month end (ME) to option expiration (OE), also from OE to ME and from OE to OE. These data will be given and updated regularly.

ME to OE: average (all yr) 0.86% (per month - past 11 years) May to June 0.35% (range -3.10 to 5.94%)

OE to OE: average (all yr) 1.02% (per month - past 11 years) May to June 1.89% (range -1.56 to 8.31%)

OE to ME: average (all yr) 0.23% (per month - past 11 years) June - 0.05% (range -3.09 to 3.02%)

ME to ME: average (all yr) 0.79% (per month - past 48 years) 1.21% (per month - past 11 years) May to Jun (11 yrs) 0.74% (range -4.79 to 4.79%)

It is interesting to note that ME to OE (average 18 calendar days) has nearly twice the daily gain compared to OE to ME time frame (average 12 calendar days)"

Here are the other charts:

CONECHART. INDUdfibCHART. INDUwfibCHART. NYACHART. OEXdfibCHART. OEXfbrtCHART. OEXwfibCHART. PITCHFORKCHART. SUPERTIMERCHART. VIXCHART. VOLATILITYCHART. XAU 30 minuteCHART. SENTIMENTCHART. MOONTIDECHART. OEX 30 minuteCHART.

MomentumCycles commentary for the open of Tuesday, June 15, 1999:

Monday began with a modest rally that permitted exiting the OEYFK twice near ten, which completes the "Buy the Friday of Pre-expiration week,sell into the first strength in Ex week" mechanical/cyclical trade. The Cone charts do a fairly decent job of providing targets. Note that the Cone projection oscillator is tracking on the bottom of oversold. Moontide was in a tidepool all day, with few ripples to get excited about. It is beginning to look more and more like the pre-report selling is about over. New Lows inched back from 199 on Friday to 193 on Monday. The ease of movement may be to the upside in the short term, providing the economic reports have been fully discounted. Yellow buy caution flags are popping up on numerous charts due to the oversold perception. We are flat after the profitable www e mail OEYFK exit awaiting further developments. The Seasonal Volatility chart continues to map out the spring consolidation trading range. What we are looking for here is a low spike in the 5 day historical volatility. We are also looking for a pickup in the EquityCP and Sentiment and a turn in the SMI and 3X indicators to accompany a move out of the AMOSS oversold zone. It may just take another two weeks of basing before the summer pattern can rise from the CODI choppy zone. We still have no change from the last sell signal on CODI.

Our continued caution in AOL/techs/internets was and has been correct due to cyclical seasonal weakness and the giveback inevitable after a burst bubble.We noted that a breaking of the recent 105-106 double bottom in AOL would target 92.Monday's close was 90.5.Close enough.Remember AOL was 175 not too long ago,and everyone loved it.Stochastic shorter and longer term readings for AOL{and thus the sector}are about as oversold as you will see;near 0.Due to the oversold numbers we recommend closing shorts in AOL or selling any put positions Tuesday.AOL tagged the lower 25% trading band.25% bands historically contain the AOL chart action.We will wait until momentum reverses to the upside before going long this sector or proxy.

XAU stochastic shorter term readings are overbought,which allows for a decline here.

CYCLE CHART. DJIA FIB CHART. INDU CHART. INDUWM 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 CHART.

To quote from MomentumCycles commentary for the open of Tuesday, June 15, 1999:

"Our continued caution in AOL/techs/internets was and has been correct due to cyclical seasonal weakness and the giveback inevitable after a burst bubble.We noted that a breaking of the recent 105-106 double bottom in AOL would target 92.Monday's close was 90.5.Close enough.Remember AOL was 175 not too long ago,and everyone loved it.Stochastic shorter and longer term readings for AOL{and thus the sector}are about as oversold as you will see;near 0.Due to the oversold numbers we recommend closing shorts in AOL or selling any put positions Tuesday.AOL tagged the lower 25% trading band.25% bands historically contain the AOL chart action.We will wait until momentum reverses to the upside before going long this sector or proxy.

XAU stochastic shorter term readings are overbought,which allows for a decline here."