MomentumCycles

MomentumCycles Commentary for the open of Monday, July 13, 1998:

Predicted money flow cycles stated the XAU would rise on unconvincingly light volume for the end of quarter rally from June 23 to June 30, and then decline.The actual top was June 30,and XAU has fallen back to tag the lower 3.5% trading band, and is in between the moving average and the lower 12.5% trading band.Volume makes price move, and though XAU STOCHASTIC 5 is at 20, oversold,good volume must come into this index to get a move to the upper trading band.A rise in fear will likely be coincident with an XAU move.

FNM made a new high trading breakout by closing above the previous rally high.Normally following a pullback in this chart formation, FNM makes a further higher high.

It was suggested that money flow would see basically an OEX rally from July 7 to July `17,then we would have higher risk of a selloff.A choppy upside bias rally during this period was interupted by the predicted pre ex week selloff ,leading to a countertrend successful put trade from Wednesday into Thursday { or for last minute holders, exactly into the Friday predicted low }.This advice was precise, as the pre -ex Friday cover short go long trade that is normally exited into the first signs of OEX strength in ex week{which starts Monday},seems to have started in concert with the predicted low of the post lunch time frame.

All puts were closed as of Friday,due to the normal tendency of ex week to punish put holders.

Japanese political turmoil,however, may cause uncertainty in global markets Monday,which is guaranteed to cause higher volatility{a day trader's environment!}next week.

CRB hit the predicted short term target of 210,next possible target 198 ,the 12 year low.

Trend:

ADHL has one of three components on a sell. The New High strength is close to going on a sell and the New Low is turning up. NHNL is indicating market topping characteristics by its decline back towards zero percent. Actually we may see a mode change from trend back to cycle,however, it will be with a higher ceiling and floor as July and August unfolds. DJI SMI did make a crossover at the 50% line. OBV is lagging price. The 3.5% band proved to be resistance once again. OEX regression channel is working the underside of the 4/97 regression channel line. Its projection oscillator is acting like it is oversold, but prices have not dropped yet.

Astrocast (Friday's chart redisplayed):

Choppy with an upward trend.

Breadth:

This was one of those NYA negative breadth days with wide swings in index levels. CODI is finding resistance at the center band as the index works the lower side of its regression channel. A decisive break of the trendline should shoot the CODI higher. McOsc issue and volume continue to deteriorate underneath an index held up with fewer and fewer issues.

Fibonacci Zones:

Daily and weekly trends are still up. The daily trendlines were penetrated intraday on the futures and equity indexes but the post lunch Pre-E-week rally postponed the trend change. Any downside action next week will definitely challenge the Triple Switch daily trend line. Ratio oscillators are overbought. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Momentum Cycles Cones:

Cone 1 shows a perfect fit inside the one standard deviation cone and a drop to the lower regression channel line. Projection oscillator is looking oversold. Cone 2 shows more loss of upward momentum. Cone boundaries provide statistical support and resistance intraday.

Pivots:

Friday's scenario came to pass with a move up to the keyline, down to S1 and a post lunch Pre-E week rally. The OEX and DSP8U pivots have keylines at the same levels as this week. A broad range between S3 and R3 is evident. We could have a rather wild expiration week with multiple strike price range shifts in both directions.

RSI, SMI:

SPX RSI is weakening, and SPX SMI is rolling over.

Stocks of Interest:

ASTN still cycling between 3 and 3 1/2.Short term traders sold at 3 5/8, long term holders are waiting for announcements of trading system placements.Long term this could be a 10 for 1. CMR.TO basing near 1.00,awaiting cash flow projections from cobalt milling.Institutions that cannot purchase explorers can institute coverage of this issue {likely with a long term buy bias} once it officially becomes a producer.

OEX Trades:

Update for Friday opening advised exiting any July puts on weakness. A great opportunity was provided to do just that with doubles in hand from Thursday. Then the Pre-E week "buy the Friday close" provided an excellent rally. It has to be pointed out that the "buy the Friday Close" mechanical trade just means that the rally can start any time on Friday. Years back it had been optimized to be the actual close, but as the technique became popular, the rally started an hour earlier, then right after NY lunch. The CBOE call and put trin chartshows the bullish mode after lunch was rather strong. A sharp flip in the call and put trin orientation is a strong signal that the trend has changed. It was also advised that July options could be daytraded and it was not adviseable to hold them over the weekend. August options could be position traded. Taking a look at the July calls, OEWGM, OEWGN and the July puts OEWSL, OEWSM, OEWSN illustrate the risk involved in trading July options with one week of life left. The August OEWTL gave back its gains from Thursday. Time decay is beginning to have more of an effect on the deep in the money July calls OEWGD and OEWGF.

MomentumCycles Commentary for the open of Tuesday, July 14, 1998:

The OEX downside bias from Wednesday into late morning Friday was captured by a successful and predicted put trade.The switch to a long bias at the Friday noon low could have been played as a 2 day quick trade by exiting into the first signs of strength Monday of ex week{that is,on July 13th's high.Click here to see that chart.Even better results would have occurred using the NDX as a quick trade.

CRB broke the 210 low as discussed,closing 209.36,with 198 as a possible target.

XAU on light volume still showing June 30 as the short term top, now working to more oversold.XAU close 67.04.

Yesterday's FNM discussion looked for a pullback before a higher high down the road.FNM down from yesterday's 67 and change to today's 65 13/16.

Trend:

Trend is topping. ADHL is weakening. NHNL indicates change in trend from up to to cycle or consolidation. DJI SMI is rolling over at the retracement level and OBV still not confirming the recent rise. This is characteristic of the downslope of a rounded top. The new DJI support chart has support at 8140.79. This will change gradually each day and is where support is expected to come in during a crash mode. This is where you would expect to cover shorts and close put positions. OEX is climbing the 04/97 regression channel line.

Astrocast:

Astrocast says down into Wednesday and up into Friday.Money flow cycles{different methodology}looked for a high about July 17.

Fibonacci Zones:

TYX was the standout in the fib zones. XAU is working lower fib support. Other indexes are in topping mode with Ratio Oscillators rolling over.

DJI NDX OEX SPX TYX XAU S and P futures

Breadth:

McOsc issue and volume are rolling over. NYA breadth was decidedly negative today and was also in evidence by the negative TICK on the Snapshot chart. CODI is in that indeterminate region.

Volatility:

Zone Timer is generating a sell signal. MVI is also on a sell trend.

Momentum Cycles Cone:

Implied volatility has increased a bit over Friday and that widens the cone aperture. This increases the probability of wide swinging days.

Pivots:

OEX and S&P pivots had narrow range days on Monday, thus their pivot spread is narrow for Tuesday. Stop running can work just the opposite and cause wide ranges in price from high to low.

RSI, SMI:

SPX RSI is weakening. RSI for XAU is increasing.

Stocks of Iterest:

ASTNstuck between 3 and 3 1/2. CMRforming a new bottom about .95 to 1.00.

OEX Trades:

Even a slight increase in the OEX caused the OEWGD and OEWGF to make new highs. We have been tracking these since the June expiration to illustrate the behavior of deep in the money options. Perhaps we will get a similar trip out of the August puts. OEWTL, August 560 appeared to have supporters today. July puts for day trading only are OEWSL, OEWSM, OEWSN. July Calls are OEWGM and OEWGN. CBOE TRINs indicated a bullish bias with the put trin above 1.0 and the call trin below 1.0 after the opening whipsaws. This is one reason why pros don't advise trading options in the AM until the choppiness settles down and trend develops. The preference here is to go for the August puts on rallies. Speculators going for the kill with July's really need to give them intraday attention. The time span is too short to give confident advice on them here with an end of day service. Theta and Gamma can produce some spectacular results in a very short time and if you get a big winner it is best to have played it with multiple contracts and peel some off when even and let the others ride. As was shown in the June expiration, big gains one day may be lost entirely the next day.

To quote from the MomentumCycles Commentary for the open of Tuesday, July 14, 1998:

"The OEX downside bias from Wednesday into late morning Friday was captured by a successful and predicted put trade.The switch to a long bias at the Friday pre noon low could have been played as a 2 day quick trade by exiting into the first signs of strength Monday of ex week{that is,on July 13th's high.Click here to see that chart.Even better results would have occurred using the NDX as a quick trade.

CRB broke the 210 low as discussed,closing 209.36,with 198 as a possible target.

XAU on light volume still showing June 30 as the short term top, now working to more oversold.XAU close 67.04.

Yesterday's FNM discussion looked for a pullback before a higher high down the road.FNM down from yesterday's 67 and change to today's 65 13/16."

MomentumCycles Commentary for the open of Wednesday, July 15, 1998:

FNM immediately made that higher high discussed above-Tuesday's low 66,close 68 5/16.

Recent pattern of strong stocks/weak bonds continued,with strong global markets anticipating Tuesday's spike.OEX closed up 6.27 points.Traders could have sold Monday for a quick 2 day trade{see above chart from yesterday}or held into Tuesday,as the chart commentary offered a "pick your greed level"option.

Last 2 discretionary OEX trades more than made up for the 1.5 stop losses we've sometimes had to take.In a representative July series, the OEX put trade from last Wednesday into Friday early, combined with the OEX call trade from there into Monday or Tuesday works out to a 5 or 6 bagger.

Normally ,after 150 points up in one day, you take money off the table,or cover your cost.

Projected up cycle money flow bias from July 7 -17 seems to have been accurate.One can't always get the turn days exactly,as there are over 18 different intersecting cycles working simultaneously.

Trend:

Trend is still up with a top in 7 to 10 days and a target of 9302 to 9344. This target will under go slight modification with each day's data. There will be backing and filling within the regression channel lines. OEX broke above the 04/97 regression channel line. DJI SMI worked a bit higher as the +3.5% band was challenged. We are still getting a nonconfirmation from breadth. Stats say the market is in the level(+3.5%) where odds are improved for put buyers(but not for July options unless you are glued to the tube).Here are the ADHLand NHNL charts. ADRs is falling deeply below the sell line. Using the SPX and NYSE volume we have a top at 1184 this Friday which also is the same as the Fibonacci upper weekly resistance.

Astrocast:

Projects down into Wednesday, up into Friday.

Fibonacci Zones:

Upper weekly fib resistance is under attack. This upper fib level is in the vicinity of lower risk put option entries. Best to average into the August puts for position trading and leave the July's for day trading. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Breadth:

Don't let the TV pundits talk you out of ignoring breadth nonconfirmations. They speak with forked tongue and it is your meal they are eating. McOsc issue and volume budged a bit but have already peaked and the sparks fly when they cross down through the zero line. NYA breadth was decidedly positive, but take a look at the declines and notice the constant ramp up in the decline to 1200 level. That means someone is selling into this rally. Also a rally of this magnitude should have declines below 1000 if it is to be believed. CODI is heading back to the Sell Alert line. Notice again how the regression channel contained prices.

Volatility:

Zone Timer is still in trend mode at the zone boundaries. One of these days it will drop into the next lower zone and not return to the extremely overbought zone. It could happen any day. That is why the advice here is to reduce exposure, take on insurance, and buy some puts at the extreme levels on the fibonacci charts and pivot charts. Everyone is expecting an upside expiration unfortunately it may be their expectations that expire. Wednesday may see an early morning high for the week. MVIs have a little more room on the upside.

Momentum Cycles Cone:

Projection oscillator is back to the retracement level and closed above it. We have to be prepared for another downside here as this retracement tag is occurring just as the indexes are tagging the upper weekly fib levels. It is entirely possible for the projection oscillator to go all the way to overbought, but remember, expirations are fraught with two way streets.

Pivots:

Both the OEX and S andP Sept futures close near their keylines and extended above the hourly trendlines. The trend is up until we get a close below the keylines and the hourly trendlines. These are two things that should be monitored during the day, especially in the last hour as prepositioning for the next day occurs going into the close.

RSI, SMI:

See the charts.

Stocks of Interest:

ASTNbetween 3 and 3 1/4.Short term traders sold at 3 5/8 for positions bought between 2 and 2 15/16.Long term holders awaiting placement of multiple exchange trading systems. CMRat .98, rebasing, awaiting cobalt production figures.Long term small speculative positions taken between 1.00 and 1.64.

OEX Trades:

CBOE put and call trins kept day traders in the calls right from the opening. Put TRIN stayed above 1 and call TRIN stayed below zero. Some July call options now have made a four for one move up. OEWGD, OEWGF, OEWGM, OEWGN, OEWGO, OEWGP. July Puts, on the other hand are vaporising into thin air. Remember it was advised here last week repeatedly to sell all puts into Friday morning weakness, primarily because expiration weeks have an upward bias and because you can lose the entire wad. Even July calls, as tempting as they are, can eat you alive unless you trade multiple positions and take some profits when the pit gods grant them to you. After all, if it is made out of thin air, it can disappear into thin air. If you did go for a Call ride, then you should be more than even and should have taken the initial stake off the table. Leave the rest for a roller coaster ride, or like the old wise broker said, "If it is at ten now, and you place your stop at 8, why not go ahead and sell it at ten." Don't lose perspective on what a reasonable return is in this game. If this momentum continues into Friday{and don't forget about down Thursdays!}, then there is a possibility of a ten for one from last Friday in many of the calls. This kind of move does not come along very often. Don't forget implied volatility, VIX, is running at overbought levels,and at some point it will shift to the mid twenties. You want to be in puts at that transition point. Here is what the July puts look like intraday, OEWSL, OEWSM, OEWSN and the August puts are OEWTL, OEWTM, OEWTN.

MomentumCycles Commentary for the open of Thursday, July 16, 1998:

Wednesday's IBD put/call of .43 {near the level of .40 that often precedes a pullback} and .79 option premium ratio at an all time high{major nonconfirmation},and the 5 day rate of change between 0% and 2% {another nonconfimation},makes yesterday's short term "take long OEX and NDX profits advice" sensible.Price often pulls back from the tag of the 3.5% upper band for a couple of days.

Intraday double OEX high at morning and afternoon at 578.61,close at 575.69, made profit taking possible into an upspike.NDX made even more money for longs, being up 31.45 or 2.22%.

For several weeks now, our money flow cycle had the 17th as a possible OEX high point from a rally on the 7th.Other cycle analysts are beginning to center around similar dates{see below under TREND}.

We nailed the short term XAU high on June 30 to the day.XAU 67.98,-.82% on continuing light volume.

CRB about 210,meandering at the support/resistance cluster.

Last 2 discretionary OEX trades,the puts from Wednesday to Friday morning, and the calls bought Friday morning and finally closed out Wednesday into strength, have been very gratifying.

Trend:

ADHL in a weakening posture but intermediate term trend is still up. NHNL weakness makes the current rally suspect and short lived. DJI stalled out at the +3.5% band just as its Stochastic Momentum nears its overbought band. OEX regression channel also has stalled out. Various cycle gurus have targeted the next two weeks as a significant turning point. One technique used here targets 7/17 for the SPX at ~1193 and 7/20 for the DJI at 9308. An alternate on the DJI is 7/24 at 9344.

Fibonacci Zones:

Major equity indexes stalled out at the upper weekly fib resistance in an early morning failing rally. It was advised yesterday to short at that upper fib level this morning. Ratio Oscillators are overbought.

DJI NDX OEX SPX TYX XAU

Astrocast:

Negative energy correlates with a weak market on Thursday.

Breadth:

NYA was negative as it made a rolling top. CODI made a sell pivot, but the index is still within its regression channel and has not broken trendlines to the downside. McOsc issues and volume continue to deteriorate. Snapshot manifests more distribution with negative TICKs and uptrending TRIN as price deludes the public with positive numbers.

Volatility:

Z Timer is making a rolling top with zone change. MVI bands are pinching as a prelude to a volatility expansion.

Momentum Cycles Cone:

Projection oscillator is stalled above the 50% retracement level.

Pivots:

Both the OEX and S and P futures closed below their keylines for Thursday. The futures also closed on its hourly trendline. The weight is for Thursday weakness since both closed below the keylines. The hourly trendline has been known to provide support for a bounce in uptrends.

RSI, SMI:

See charts.

Stocks of Interest:

ASTNlooks like another short term retest of the area under 3 may be in the cards,action being similar to the previous action before the spike down to 2.Long term holders are awaiting the placement of trading systems or IPO rollouts.Short term traders sold at 3 5/8. CMRat .95 to 1.00 awaiting cobalt production figures.

OEX Trades:

CBOE put and call trins were very choppy today and ended the day in a bearish posture for Thursday. Indexes remained little changed from Tuesday after an early morning failing pop. July OEX option day traders had little action and any July position holders lost due to time decay. August position traders fared better with little time decay. Monitored July call options are OEWGD, OEWGF, OEWGM, OEWGN, OEWGO. July puts are OEWSL, OEWSM, OEWSN. August puts are OEWTL, OEWTM, OEWTN. The same advice still applies here to average into the August puts on rallies into upper fib resistance.

MomentumCycles Commentary for the open of Friday, July 17, 1998:

We had looked for a good OEX rally from July 7 to July 17, and that has been fairly accurate.Note that the Investors Business Daily has bearish advisors at 24% {they see risk at 20%} and bullish advisors at 52% {they see risk at 55%}.In the 1960's, rallies topped at higher readings of bullish advisors, but recently, the IBD numbers have been fairly accurate.These numbers, accompanied with the recent .43 put/call reading and Thursday's closing tick of +665, would normally signal at least a short term top and pullback.The recent breakout above all time highs in most indexes may imply, however, higher highs after a pullback.Seasonals suggest a mid October low is possible.Mid October has several geometric rhythmic relationships to the mid January and mid June lows.

Several timing procedures see a short term top in the July 17-24 area.

CRB 209.94,still no energy seen yet for a breakout of the downtrend.XAU action Thursday may have been partly expiration related, and partly the 14% rise in palladium.

Remember to use no more than 10% of trading capital for any one option trade, and maintain a 1.50 stop loss from the initial purchase price, or else risk less than 50% of the initial purchase price as risk.

Trend:

Trend remains up as evidenced by the ADHL, OEX regression channel and DJI SMI. That DJI is riding on its +3.5% band so we should expect a reversal anyday. The NHNL is diverging from the index lending some credibility to an upcoming reversal. A theoretical trading top is near if we can believe the SPX and DJI charts. The SPX tops on Friday near 1190 and the DJI tops on Monday at 9378.

Fibonacci Zones:

Interesting that the Day session of the S and P 500 futures closed Thursday at 1191.5 and that is Friday's SPX projected high for the S and P 500 Cash index. Coincidence, maybe. It isn't too surprising that the equity indexes have challenged their upper weekly fib resistance during expiration week. Also not too surprising that there has been an NDX, SPX, OEX, DJIA rally Thursday afternoon. Remember the NDX and SPX options settle on Friday morning trades. Typical pattern is for the opening pop, then flat into mid day and rally into the close for the OEX. The name of the game during this week is the utilization of leverage by the pros.

DJI NDX OEX SPX TYX XAU

Astrocast:

The astrocast has forecasted a choppy upward movement for the past several weeks.

Breadth:

NYA breadth was still not convincing as the declines were running over 1200. McOsc issue and volume have been diverging from the index in typical topping formation. CODI is approaching the Sell Alert band again as the OEX moved back inside its regression channel and has yet to drop below the short and long term trendlines.

Volatility:

Zone Timer jumped back into the Extremely Overbought zone, and encourages the purchase of August puts into rallies. If the index moves up, then move the strike up to stay within a strike or two of the index level. This keeps you within the statistical probability of payday. MVI bands are contracting in anticipation of a volatility expansion implying a trading top is at hand.

Momentum Cycles Cone:

It is best to enter puts at the cone levels above the apex of the probability cone. The higher cone the better. Follow the blue date line vertically to where it intersects the cones. The green cone is a half std dev move, the red cone is 1 std and the outer cone is 2 std. The most that most pros expect in one day is 1 std dev move. The outer cone is a crash up or down day and is often a trend reversal day. The projection oscillator is not as overbought as desired for put entries. Maybe Friday will take it higher.

Pivots:

Both the OEX and S and P 500 futures made pivot ranges from S2 to R2 and closed above the keyline and the hourly trendline in typical pre expiration maneuvering. OEXvm shows the OEX in a reversal setup where a put entry should be looked for. As usual, it is best done in the higher Pivot and Cone levels.

RSI, SMI:

See charts.

Stocks of Interest:

ASTNstill has a mix of buyers and sellers between 3 and 3 1/2 CMRat 1.00 is awaiting cobalt production news, which should come soon.

OEX Trades:

CBOE Trins were bearish in the AM and bullish in the PM completing the setup for equity and index options expiration on Friday. Here is a review of the July calls, OEWGD, OEWGF, OEWGM, OEWGN, OEWGO, OEWGP, as they illustrate the Gamma effect of short term options. Remember what happened in June to calls that made a gonzo move in the days prior to expiration. July puts illustrate the Theta and Gamma of expiring options, OEWSL, OEWSM, OEWSN. August puts are OEWTL, OEWTM, OEWTN, OEWTO. The post expiration week has a way of reversing the trend of expiration week.

MomentumCycles Commentary for the open of Monday, July 20, 1998:

Investor's Business Daily put/call ratio has been trading recently in the .43 to .46 area.Any one day reading in the low .40's region has often marked a good short term sell point, often to the day or within several days.For example,on February 25,we had a .44 reading, followed by a correction from 1775 to 1725 on NASDAQ.On April 1 we had a .42 reading, followed by a NASDAQ correction from 1825 to 1775.On April 20 the .40 reading was followed in 1 day by a NASDAQ correction from 1931 to 1804.On May 1 the .41 reading was followed by a major correction into June 17,from 1875 to 1715.Readings since July 12 have been .42 to .46,currently .45.Although not the extremely overbought .40,this is entering a higher risk area for longs.

The option premium ratio leads the market up and down.This is item number 5 of psychological indicators,on page A 31 of Monday,July 20th Investor's Business Daily.Major bottoms are characterised by readings under .53 ,and the best rallies come from readings in the .30's.The June bottom was .45.High volatility in the option premium ratio at low levels often mark major rally starts.The March 1994 bottom had readings from .30's to .50's and back again.

Readings in the .80's ,specifically .83 to .85 often mark the starts of selloffs.In addition, new highs in the DJIA not confirmed by new highs in the option premium ratio often lead to short term selloffs.Recent bullish readings over 1.00 have now declined to Friday's lower reading of .72,at an all time DJIA high.

% of bullish advisors is currently .52.Investors Business Daily counts as short term bearish readings over {or at} .55.Bears at .24 approach IBD's short term caution point of .20.

These numbers cannot predict subsequent price action perfectly,just as cycle and volatility tools cannot measure future price behavior absolutely perfectly.They are useful tools that reveal the likely degree of complacency, fear and greed.

Commercial hedgers versus speculators positions in commodities, when at an opposite extreme, often mark short term reversal points.This information is printed in Barron's July 20th issue{and every 2 weeks thereafter} on page MW95.Currently the commercial hedgers{read smart big money} hold positions bullish on many commodities and bearish on bonds.These are position traders,not short term swing traders.Commercial hedgers are also currently net short the S and P 500.They have VERY deep pockets, and can afford to be wrong for awhile,unlike small traders.

Long term readers know we recommend a 1.50 stop loss, or to risk less than 50% of the initial investment for any one index option trade.As there are multiple trading styles and indicators shown on the various pages associated with OEXTRADER,readers should feel free to pick the trading style and indicators with which they they feel most comfortable.

We do feel, however, that readers should read the ENTIRE page and examine the charts to get a feel for the indicators and techniques.This page alone can take as much as 5 hours nightly to prepare, with additional posts or corrections done if warranted before the NYSE open.We may occasionally post intraday, especially if we have a large point up or down day,AND additional comment seems fruitful.

All previous commentaries are periodically updated at this link,on an irregular basis of 2 to 4 weeks{depending how busy we are!}.

Trend:

ADHL is still on an intermediate term buy signal. Underneath that signal is a deteriorating breadth relative strength indicator. New High strength is on the verge of dropping below the sell line also. NHNL is diverging from the index. DJI is finding resistance at the +3.5% band, SMI is now overbought. On Balance Volume has finally pushed higher, but that is only because of the extra volume associated with options expiration. OEX regression cnannel Projection oscillator at 75 is near a reversal level. The SPX and DJI are still pointing at a trading top in this time period.

Fibonacci Zones:

Weekly fib resistance provided just that. Fib zones are shifted slightly higher for next week. Ratio Oscillators are overbought.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast for next week is down to net flat.

Breadth:

NYA breadth was negative and divergent from a positive index. CODI is back near the Sell Alert band and the index is still inside its regression channel. McOsc issue and volume oscillators are overbought and diverging from the index. We need a break outside price regression channels to bring on significant selling, otherwise the computers will stay locked onto the channel and continue to issue buy signals at the lower channel line.

Volatility:

Zone Timer jumped to a higher level in the Extremely Overbought Zone. MVIs are close to their sell bands which are narrowing in prelude to a volatility expansion. With VIX closing at 16.88, this is the lowest it has been in some time. This makes premiums for longer term options much more affordable. Just think what a 50% increase in volatiltiy from 16 to 24 would do for an option. Volatility is always lowest at price tops. Friday appears to have been a day of volatility significance. If past is prologue we should see some selling next week, at least for a day.

Momentum Cycles Cone:

Cone Projection oscillator is acting overbought. Prices are trending slightly below the lower regression channel. The cone aperture will open up significantly with an increase in volatility which then will forecast larger ranges in the index.

Pivots:

OEX hit a high at R1 level just as the OEX entered the last twenty minutes of the day. S and P 500 futures closed on the keyline for Monday in a neutral posture.

RSI, SMI:

See charts.

Stocks of Interest:

ASTNlong term holders should read this page. CMRis attempting to hold the 1.00 level ,awaiting cobalt production news.

OEX Trades:

CBOE Trins were choppy and trendless early in the morning. Later on a very slight bullish trend developed as is typical for OEX settlement. Arbs short stocks and buy calls in the week prior to expiration. In the last twenty minutes on Friday ,they then cover their shorts driving stocks up, with the end result also driving the calls up. The Friday chart indicates we should see some selling next week. The leverage gained by this can enhance the performance of a portfolio. Post expiration week tends to correct the excesses of expiration week. It was advised on the update for Friday to average into the August puts at the OEX pivot R levels, OEX upper cone and the SPX 1190. No one can pick a precise level in advance where markets are going to reverse. The best that can be done is to use popular techniques that work only because they are popular. Near the money August puts are OEWTL, OEWTM, OEWTN, OEWTO, OEWTP. Just to show how July options expired here are the July calls, OEWGM, OEWGN, OEWGO. July puts below 580 expired worthless. Here is the OEWHP August 580 call.

MomentumCycles Commentary for the open of Tuesday, July 21, 1998:

Post-expiration and pre-Greenspan often brings a retracement,and we got one Monday.If Greenspan wants to talk down the market, we could get a continuation of Monday's action,and if he makes bullish noises on interest rates,or says stocks are fairly valued, we could get more rally.Often at new DJIA highs above a breakout, the breakout is tested, and then,down the road, higher highs ensue.Monday's action intraday could be considered a test of the breakout.

A failed breakout,in contrast, quickly falls below the breakout point,9259 or so, and continues down.

Cycles allow for more profit taking here.

Trend:

ADHL has a weakening ADrs and the NHstr is about to join the ADrs in the sell zone. That leaves the NLstr to rise to complete the visual sell configuration, although it is possible for the ADHL to generate a sell without the new lows rising. OEX regression channel projection oscillator has turned down. First stop for OEX should be 569 at the 04/97 channel line. NHNL is extending its divergence from the OEX as new highs decrease and new lows increase. DJI is failing at the +3.5% band. 9200 looks like an easy target and then the 21 day average. The DJI SMI is now firmly in the overbought zone.

Fibonacci Zones:

The weekly balance(red dashes) and the Triple Switch Stop Loss are under serious attack this week as the Ratio oscillators labor in the overbought zone. A trip back to the 50% line by the Ratio Oscillators is long overdue. The XAU is testing its Weekly Triple Switch Stop Loss(white stair step). TYX is also showing strength, read T bond weakness.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast appears to be following the inversion cycle which points to more down on Tuesday and Wednesday.

Breadth:

NYA breadth was decidedly negative favoring the put side today. CODI is hovering near the Sell Alert line waiting for Fed and economic news. The OEX is dropping out of its regression channel. 548 would be quite a drop and would take it back to its breakout level. Plan on at least a 50% retracement of this move from 548 to 580 or a target of 564. The McOsc of issues and volume do not lie. Their divergence will be resolved by a drop through zero. Snapshot painted a pretty bearish picture with negative TICK, rising TRIN, and a PREM that oscillated between fair value and sell programs much of the day. This represents continued distribution after the initial sucker hook on the opening that took out the weak shorts with tight stops.

Volatility:

Zone Timer is trying again to drop out of the Extremely Overbought zone. This represents a sell signal. MVI also made a sell pivot near its sell band.

Momentum Cycles Cone:

Projection oscillator has turned down. At least one more down day is in the cards to reach the 50% line. Additional selling for a third day would take it below this line. An expansion in volatility would widen the cone aperture providing support at lower levels and increasing put premiums.

Pivots:

OEX closed in a weak posture below the keyline and the hourly trendline. The Sept S and P 500 futures are not in much better shape, but are more neutral looking as they closed on the Keyline and the hourly trendline.

RSI, SMI:

XAU and TYX RSI are looking strong whereas the SPX is weak. SMI says we are in for some trend changes.

Stocks of Interest:

ASTN,along with other issues not in the "nifty fifty " big caps seem to be headed for a trip under 3$.Long term holders are waiting for trading system implementation,short term traders sold at 3 5/8. CMRtesting the base near 1.00, awaiting both cobalt news and rotation into commodity type stocks{yes, someday that will happen!buy straw hats in winter, anyone?,that's when they're cheap!}

OEX Trades:

Post expiration week tends to undo some of the uptrend of the previous week for purely "industrial" reasons. Read that "manufactured" if you wish. There also tends to be a bit of premium bashing of the pumped up calls following a rising expiration week. Note that we recommended buying August puts into resistance on Friday. Some of those gained nicely today with gains of 28% into about 2:54PM where the CBOE TRIN spread reversed. One big mistake some OEX traders make is not using multiple contracts so they can take partial profits when a one day bonus is handed them. Don't forget some people are glad to get 10% in a year. Let's go for small but consistent profits instead of the big kill. Waiting for the latter usually results in your own demise. Nearby August puts looked like this today OEWTO, OEWTP. A nearby call had this action, OEWHP. Something else needs to be pointed out about the July expiration. If you were watching an option chain spreadsheet it was quite apparent that the OEX was going to close at a level that made virtually the entire open interest in July Puts expire worthless. Great for those who sold them and dismay for those who bought them. Guess who sells them. It is a story often repeated, if only the market had reversed one day earlier.....Just keep in mind these expiration trends don't happen by accident. There are literally megabucks involved.

Wednesday late morning update:

CLose August puts or take some more off the table. MomentumCycles Commentary for the open of Wednesday, July 22, 1998:

Over 2 and 1/2 weeks ago we calculated{and posted} that a short term money flow high would occur in the OEX on July 17, with a net rally from July 7 to the 17th.Money flow cycles differ from the astrocast and are a combination of 18 different cycles.We admit some weighting was given to the possibility of another "irrational exuberance "speech from Greenspan.He sure loves to talk the market down at new highs.

35 NASDAQ points from Friday's short just today,19 S and P 500 points today, 106 DJIA points,and Friday's OEX 580 to 582 pivot R range ended Tuesday at 569 near the close.Incidently ,IBD's option premium ratio for Monday's trading{available Tuesday}was .81.Remember our discussion of OPR's in the .80's,and .70's nonconfirmation of new highs.

3 days DJIA 9400's intraday to Tuesday's 9180's,time to take some profits.

Trend:

ADHL has not dropped out of its intermediate term buy mode yet. New High strength dropped into the sell zone and New Low strength is picking up again. NHNL dropped back below the zero line as its divergence finally catches hold. DJI failed at the +3.5% band and is on its way to the 21 day moving average. DJI SMI crossed over in a sell pivot, but has not dropped below the Overbought line. OEX dropped to the channel line referred to yesterday. Its projection oscillator fell all the way to oversold. Does it bounce here, some wish, does it trend sideways here, they could be so lucky.

Fibonacci Zones:

These Fibo zones are some of the best timing tools in the trading arena. Just take a look at the price levels where reversals occur and where resistance and support is found. Note the Ratio Oscillators are just now beginning to roll over and out of the overbought zone. Also note that the Daily stop loss, the Triple Switch and the Weekly balance lines have been closed below, officially changing the trends from up to down on a daily basis. A close below the white weekly Triple Switch would change the weekly trend to down.

DJI NDX OEX SPX TYX XAU

Astrocast:

Boy, it is really hard to tell if the DOW is following the Astrocast or the Inversion. Looks like Thursday is a low of sorts where both of them coincide near zero.

Breadth:

If you watched the market today, no one needs to tell you that the NYA breadth was decidedly on the downside. There was reasonable support at 590 NYA back on 7/13 so you would think there should be a pause of some sort here. Maybe a knee jerk bounce on Wednesday with a failing rally and more down on Thursday. McOsc issue and volume have dropped below zero in true classic sell mode fashion, but wait, at least an intraday test of the zero line from below is in order. In fact these oscillators have been known to cross zero 4 times before dropping further or bouncing. This is a reasonable place to take profits for starters. CODI is making a halfhearted sell pivot. Since it is based on end of day data it does not show the extreme pressure intraday.

Volatility:

Now we finally have a clear move out of the Extremely Overbought Zone on the Z Timer with a drop to the oversold side of neutral. A true oversold condition occurs a bit lower on the chart as you can see by looking back a month. You can see why we were advising buying put options last Friday and averaging in until this break occurred. Market dynamics are such that you have to take a little risk on entry with options in order not to be left behind. It is essential that you be anticipatory, but not by too much. MVIs made beautiful sell signals too, one day in advance. Now they went so far they are near the Buy level. They could even generate a buy signal on Wednesday.

Momentum Cycles Cones:

The expansion in volatility has opened the cones a bit as the OEX dropped out of the regression channel in a change of trend. Keyline has dropped a bit too. Could be that overvaluations and an expected slowdown in earnings growth are putting in a significant trading top. Here are Cone 1 and Cone 2.

Pivots:

Today's action saw the OEX drop exactly to the S3 level where a prudent Put holder would have taken some profits. Although, no one would begrudge him to wait for some followthrough on Wed. The odds are sort of against a repeat action. Both the OEX and Sept S and P futures closed way below the hourly trendline and the keyline. Typical action would be for the pros to rally to the keyline in the morning taking out the weak shorts and then selling it again down to at least S1. Taking a look at the DSP8U fibo and the DSP8U pivot we see that 1159 on the Fibo is between S1 and S2 on the Pivots. 1173 to 1170 marks the weekly fibo support zone and is why the close is as 1172.40. 1159 is the extreme support for the week and there is a good chance that will be hit.

RSI, SMI: All that choppiness on the SPX RSI finally gave way to a sell that took the RSI below the center line. Perhaps we will get a one day reprieve with a test of the center line from below before continuing on down to the lower band. SMIs are indicating a trend change is in the works.

Stocks of Interest:

ASTN long term holders are prepared for a retest of the $2 area. The recent ASTN selloff from 3 5/8 to below 3 was signaled by weakening RSI in this issue, which accompanied the weakening RSI of the general market in the recent correction.Short term traders sold at 3 5/8. CMR basing in the 95 to $1 area.We still expect a rally to 1.60 or so some time this year on news of cobalt production.

OEX Perspective:

We finally have participation from the long silent OEX Mechanical models. Experience with them in the past has been that they are a day or two premature. So I would not jump on the August 565 call the RSI model is recommending. It is adviseable to let things calm down so the volatility component of the premium subsides and the "auction" premium bulge deflates. Don't be in a hurry to reverse course. It almost seems ludicrous and embarrassing to post here, but that is part of the game to compare an off the shelf options trading package with the "discretionary" neural net between our ears. To refresh our memories on past performance of the mechanical models we have posted the most recent Trade Listing summary from 1/2/98 to 7/21/98. Only the most recent trades are posted. Those who took the advice to average into the "discretionary" puts starting on Friday, continuing on Monday, did very well today with as much as 100% gains. We know for a fact that some subscribers took 45% gains today. Here is what the puts looked like intraday, OEWTL, OEWTM, OEWTN, OEWTO, OEWTP. A few of the calls look like this: OEWHM, OEWHP.

CBOE Trins were confused in the morning and did not make sense until the afternoon. During the morning the call and put trins were both trending below 1 even as the OEX moved up. This should have been a clue for the afternoon as the put trin was much lower, meaning more bearish. Finally in the afternoon the call buyers gave up and the Call Trin trended upward across 1.0 and the OEX tanked. All the time the Put Trin remained in a bearish mode well below 1.0.

If you are wondering whether to hold or fold on the August puts, here are some guidelines. A two standard deviation move like we had on Tuesday as evidenced by a tag of the outer Cone (above)is an exhaustion type of move. It usually does not have follow through immediately the next day. It is common to expect a bottom fishing bounce, or more likely a professionally induced rally to get the pros on board who were left out of the shorting opportunity and then it heads down. So, for Wednesday we should see some fake out gains on Globex to falsely ease fears, a tiny rally on Wednesday morning up into Tuesday's range, until lunch perhaps, then as breadth continues to deteriorate the selling should resume. A 100% move is rare and you should have already taken some profits. It is best to trade with 3 or 4 contracts so you can scale in and out of positions. You may have the chance to re enter the same put at a better price mid day Wednesday.

omentumCycles Update for the open of Thursday, July 23, 1998:

In bull trends, fast declines to the DJIA 21 day moving average usually find good support.Even in nascent bear trends,straight through from the upper 3.5% band to the lower 3.5% band without an intervening bounce is unusual.We are officially out of the discretionary put positions as of tomorrow, and put another post late morning Wednesday to take more profits on the position entered last Friday.

XAU is locked in a declining volatility channel from about 66 to 71 from mid June till today.That's between the lower 3.5% band and the upper 3.5% band.Normal XAU behavior is oscillation between the 12.5% bands.We should expect a breakout on high volatility soon, and the longer this sideways move takes, the more violent will be the eventual breakout.Note on balance volume is not confirming price weakness, but total volume is dropping.

Trend:

NHNL reflected the pullback from the DJI 3.5% band as the NHNL dropped to -4%.This is a level from which rebounds have occurred previously.Should a bigger correction ensue,then it can amd will drop further. The divergence is taking its toll. The DJI stopped at the 21 day average mentioned a few days back as a potential cycle point. The 50 day average is right below at 9000. With the On balance volume sinking like the Titanic, it looks like 9000 is fair game once a few more bottom fishers are hooked. Notice the DJI SMI is giving a sell signal. OEX likes the 4/97 channel line, at least for resistance. That channel line might not be a bad place to enter shorts or puts again given deteriorating breadth conditions. ADHL is hanging onto its intermediate term buy, but it continues to weaken. It is possible to countertrend trade and make money on the long side, but just remember with deteriorating breadth conditions rallies will be short lived.

Reviewing the trading top forecast from last week a trading high for the SPX and DJIA was picked for Friday and Monday respectively. Now the WMDJIA chart shows initial support has been reached between 9024 and 9077 using adjacent launch points. If this fails, then next support is 8730.

For theWMSPX we see a trading top was put in last Friday and we now have nearby trading support at 1144. Wednesday intraday low was 1155.2 which is pretty close. These things are not exact forecasts, there can't be x.xx precision in analysis where the psychology of masses are concerned. There has to be an error factor. Because of the slope of the initial support line, I personally would not expect it to be the final support which might be months away.

Fibonacci Zones:

Lower weekly fib zones provided support. Remains to be seen if the lowest fib support is going to be hit, maybe late Thursday or Friday. That would make a much better entry point for calls. It might just be best to stand aside until around 7/24 before considering the long side. This reasoning is based more on cyclicality and seasonality than anything technical at this point.

DJI NDX OEX SPX TYX XAU

Breadth:

To no one's surprise we had some negative NYA breadth again. The McOsc issue and volume are in a downtrend. They should be played out before considering the long side. We are looking for a break to the upside on the ten percent component of the issue oscillator. In fact V bottoms are not the norm for this oscillator. Complex bottoms are more common and they take more than a few days to develop. Big, longer term money will not flow back in until a zero crossing to the upside occurs. CODI did make a pivot at the retracement centerline, suggesting a short term buy. The longer term moving average trendline at 565 provided a technical reversal point. Will most likely be tested again.

Snapshot shows many dips into sell program territory along with a TRIN moving in the right direction for rally inclined traders. TICK was again in negative territory much of the day. This drop today was primarily a DOW drop as the futures and broader indices fared much better by the end of the day.

Volatility:

Zone Timer made an intraday penetration into the oversold zone and closed just inside. MVI made a minor buy pivot at the Static Buy line. This is volatility trading and it could get a little more panicky before it is over.

Momentum Cycles Cone:

Cone projection oscillator is oversold. Too early to tell if we get a bounce or a down trend in the OEX. If we get a downtrend then the projection oscillator will drift sideways for a few days or a week.

Pivots:

On OEX, S1 provided support which shows that the psychology favoring the downside was not strong. Money is still buy oriented and ready to jump in on dips. There is very likely a tradeable bounce in here before going to lower levels.

OEX and DSP8U both closed above their keylines and below the hourly trendline in a mixed to postive posture.

RSI, SMI:

Trend changes are in evidence.

Stocks of Interest:

ASTNhad a bounce back above the 3 level ,on light volume.Buyers still there under 3,but many more at 2. CMRtrying to reform a bottom slightly under 1.00, with cobalt production news due any day now.The last published material looked for mid-1998 as the official start date for cobalt production.

OEX Perspective:

CBOE Trins started the day off with a few misguided call buyers. At 10:30 they gave up and the bearish trend locked in for the remainder of the day. Our 50% retracement target of 565 was penetrated and a mid -morning red alert was posted on the website to exit the August puts when downside momentum ceased. At the least some profit taking was in order as the 100% gain was reached. You should not wait for anyone to tell you to take profits at 50 and 100% gains in one or two days. Gains of that magnitude offer chances for profit taking and re-entry at better levels.From last Friday, and again early Monday,to Wednesday intraday, we had over 250 DJIA points to the downside.That's fast for 2 or 3 days.Pros will often cover short positions on such a fast move,since the market often sees support at the 21 day moving average from a move starting at the upper 3.5% band,before a possible further move to below the 21 day moving average. The OEX mechanical trade, OEWHM, posted yesterday ended Wednesday with some gains from S1 level. Since these mechanical trades are listed at the end of the day they would be actually entered the next day preferably on pullbacks to a support level on the pivots or cone. The August puts moved up further before dropping when the DSP8U futures made a soft landing during the lunch hour. Lunch hours are a good time to look for trend reversals. This is what the August puts looked like intraday, OEWTL, OEWTM, OEWTN, OEWTO, OEWTP. Calls looked like this: OEWHM, OEWHP. So, where does all this leave us, too late for another advantageous put entry,as that was entered near 9400, too early for a longer term seasonality Call trade(need another week). Oversold breadth, volatility, trend indicators suggest a technical bounce for nimble call traders.

MomentumCycles commentary for the open of Friday,July 24,1998:

In selloffs in bull trends, an entry for a short term bounce often comes when the shorter term RSI readings reach a very oversold area.We are there now.When longer period RSI measures are still falling, and not that oversold, the short term bounce will be followed by more selling until both shorter term RSI and longer period RSI coincide at the oversold region.When stochastic measures follow the same path, a good rally setup is in the works.

Another valuable tool is the 5 day rate of change.Presently at -5%, it is in the region that oversold bounces start.A closing tick of -1074,seen Thursday, would normally bring a bounce within 1 or two days.

Longer term measures include investor advisory sentiment.On Thursday's issue of IBD, bulls ROSE in the present week to 54.3%.IBD terms 55% bearish.Put/call ratios Thursday were not indicative of extreme fear.

A confirmed CODI pivot well in the buy zone {not there yet!}would indicate a rally that is more than an oversold bounce.Review the CODI history seen below.

XAU suffered with other index selling, tagging the lower 3.5% band on light volume,still preparing for a volatility breakout out of the narrow channel from mid June.Which way?Just like the recent narrow DJIA trading channel break was followed by new highs,traders can wait to see which way the volatility break for XAU will go.The longer the channel narrows, the further the eventual breakout,and also more time to ride the coattails.It could be up or down,with OBV and light and erratic total volume offering conflicting signals.Normal XAU behavior is a 12.5% trading band.

Traders who exited remaining OEX puts Thursday truly had a" pick your own greed level" day, ideal to exit puts into the hands of desperate and fearful buyers.

TREND:

NHNL is at mkt reversing levels. ADHL is continuing to weaken as the spx approaches 1134. New lows jumped to 227 today as new highs dropped to 36. OEX regression is headed towards the blue 1/95 chaotic attractor(fancy name for regression channel line). Prices tend to accelerate and decelerate near these lines. DJI closed below its 50 day average which may now act as resistance on into the fall, that is the seasonal fall. The Rainbow monthly and weekly show the seasonality of market tops. DJI SMI is on the 50% line, so it is very possible we will have a trading rally into next week as this line has been known to provide support. There is no guarantee it will, it is just something we have to be aware of.

FIBONACCI ZONES:

Serious damage has occurred on these charts. The daily and weekly Triple Switch stop losses have been closed below. Now we must see if they provide resistance on rallies.

DJI NDX SPX OEX TYX XAU

ASTROCAST:

Looks like the AstroCast is back on the normal curve with a down into Thursday. Now it says rebound on Friday.

BREADTH:

Ignore the brokerage firm perennial bulls- remember just last week they were saying breadth divergences did not matter. Be alert for improving NYA breadth as the number of days it has been deteriorating are reaching the trend reversal magnitude. A four to one decliners to advancers marks a momentum low. Today we had a 3.71 ratio. CODI is still swimming in the river of denial. Even when intraday values are used it does not seem to be getting the message. The snapshot shows many late day sell programs, an increasing VIX, increasing TRIN. The McOsc issue and volume are trending in the negative area so the Volume Summation has rolled over. A buyers strike occurs by money managers when this situation exists along with a high level VIX. There is at least one manager on TV today who was saying how much he likes narrow markets because more money flows into few stocks, the ones he picked. His expectations must have been chilled as cold as Lake Tahoe water in the summer(or winter) by Thursday's close. The lake may be beautiful but it can cause hypothermia, sort of like holding an S and P 500 index fund in today's market.

VOLATILITY:

Zone Timer was driven off the bottom of the chart on Thursday. Now that is doubly extremely oversold. Gotta wait until it turns though and makes a zone crossing before the risk is actually lower as the label implies. VIX is still increasing and closed at 24.84. Last October in the wipeout it rose to 50. In the 1987 crash it was 150. This would really pump up put premiums. MVI's are quite extended into buy territory, but they too need to pivot and return inside the Buy bands. We are close, maybe in one or two trading days of getting a buy signal. Note the mechanical systems below are already picking up on this. Oscillators are the pitfall of many a new and experienced trader. When cycle turns to trend or vice versa more than a few traders are caught off guard.

MoCone:

Projection oscillator is now firmly oversold. Could bounce any day, or trend sideways for a few days before it is safe to enter the call side. Volatility should subside coincidentally with this upturn in the PO. The regression channel has clearly been broken and the super computers may be locked into a down trend that will continue until there are enough brave or foolish souls to buy this dip. The bait may not be tempting enough until lower levels are reached. The payroll money will come in next week regardless of the situation. The increase in VIX is opening the cone aperture increasing the daily range between support and resistance.Here is the cone for 07/24.

MoPivots:

OEX and DSP8U closed below their keylines and hourly trendlines reflecting the liquidation crisis in equities. The keyline and hourly trends are down.

RSI, SMI:

SPX RSI is touching the lower band. The bearish possibility here is a trend outside the band in a real bear mode. An oversold bounce could happen anyday. Or, a sideways consolidation until payday. SMI, the longer term indicator, says there is more to go on the downside. There are countertrend trades even in the direction of the stochastic momentum.

ASTN, CMR:

Both ASTN and CMR are encountering selling with the general market.633 up,2361 down ratios take few prisoners.ASTN value buyers came in at 2 before, and may find that price attractive again.We await the placement of trading systems in multiple exchanges or the spinoff of GOMEZ ADVISORS to add value to long term holders of ASTN.CMR.TO is seriously undervalued, and will become attractive to institutions once they officially start cobalt production, which could happen any day now.CMR is set to be the ONLY North american primary cobalt producer.

OEX Perspective:

CBOE Trins opened with another fake out move as the last of the call buyers died. The remainder of the day the trin configuration was a bearish one and no one in their right mind should have even considered fading their posture by going long. In a previous post a 50% retracement to 565 was an initial target. The next retracement level traders look for is a 61.8% retracement. If that holds there is a chance for a rally. If it fails then expect a 100% retracement of this last leg up. Reviewing Monday's comments..."post expiration week tends to undo the uptrend of the previous week." 50% and 100% profits have been taken this week. Even greater ones were available today to anyone trading multiple contracts(3 as a minimum)and scaling out into momentum runs. Cycle wise we are getting into the 7/24 date mentioned in a previous update. Friday might prove to be an entry point if the mkt does not fall out of bed. Timewise we would be expecting to enter a call trade sometime next week. Things are certainly getting set up for it technically. These are the intraday charts for the August puts, OEWTL, OEWTM, OEWTN, OEWTO, OEWTP. August calls looked like this, OEWHM, OEWHP. Bottomline, take any remaining profits in puts, prepare for entry into calls.

Mechanical Systems:

Not too surprising, the OEX mechanical systems picked up an August 555 call, OEWHK, trade off of the volatility bands. That is added to the August 565 call the RSI model generated yesterday. Will be interesting to see how these "hands off" trades work out over the next week. Note how these models work in a contrary fashion. The OEX trade listing shows the more recent trades on a list starting in Jan '98. The OEX signal report shows the current mechanical trades. Entry prices are calculated using a theoretical model and assumed to be entered at the close of the trigger day. The major caution with this mechanical posting is experience has shown the timing is early by a few days. So once a signal is triggered it is best not to take it on the next day. Looking at the SPX RSI chart above gives some confirmation that the mechanical RSI trade is early. The MVI chart above shows the volatilty trade may be a day early. It just depends if the mkt turns on Friday.