MomentumCycles

MomentumCycles update for Friday,August 14,1998:

We again yesterday suggested a 1.50 trailing profit stop for longs, or alternately, a 1.50 stop loss for long call positions taken near recent lows, as the lead paragraph.Yesterday we mentioned some short term negatives for Thursday,such as the unusually large collection of Wednesday's high plus ticks,which usually bring a correction within one or two days,and the tendency of Europe,and especially London,to lead our market recently to both the upside and the downside.Global markets were uniformly weak very early Thursday,and we posted a special 8.30 a.m. update before the open to apprise readers of the likely consequence for U.S. trading Thursday.After an early pop to 8603 DJIA,and a secondary pop to 8570 about 10:15,prices fell to close near the lows of the day.

Global markets are presently well correlated,so a watchful eye on Europe intraday is warranted.

On the positive side,Thursday's action has generated the 3rd day in a row of equity put/call basing levels.The more consecutive days these levels occur, historically ,the stronger the rally is that results.In 1987,at the end of the crash,5 basing level days consecutively led to a fine rally.In 1994,a similar situation led to an excellent end of year rally.The recent lows are holding so far,and the more negative sentiment that builds,the better platform for the eventual rally.Countertrend and oversold rallies can be explosive.

If the recent lows do break,and the rally starts from more hugely oversold price and sentiment levels,and CODI falls back deep inside the buy zone,and bullish advisors fall into the low 20's %,from whatever low does develop, it could be a huge number of points up.

Trend:

Revised ADHL generated a sell back on 7/27/98. This requires some explanation.We have purchased and modified numerous timing and software packages. The software vendor for this particular system recently sent some revised code that improves the timing. OEX reg continues to work the '96 - '97 channel lines with 547 a nearby upside target and support at 524.7. Super Timer closed back into consolidation. NHNL stalled for a day but new highs did increase over Wednesday.

Here is the snapshot chart.

Fibonacci Zones:

Indexes failed a test of the weekly balance and Daily Triple Switch lines again as the Ratio oscillators work the oversold level.But note the higher highs and higher lows. Call it price probing and trade facilitation. We might still get a move above the weekly balance before the Friday close. There are plenty of reasons to expect the "buy the Friday of pre E week trade" not to work this time, but mechanically speaking that is what the purest futures traders do. The XAU fibo chart might be worth watching a little closer. To quote a newsletter promo(Real Asset Investor), "When gold is expensive, only 1-2 ounces can buy a unit of the DJIA. But when the DOW is expensive, you need as much as 30 ounces." Let's see, 30 oz times $288.8/oz{December gold} = 8664.

DJIA OEX NDX TYX SPX S and P 500 futures XAU

Astrocast:

AstroCast has an upward bias until 8/20. A related cycle timing system(not shown) has a very significant energy point on 8/18.

Breadth:

NYA breadth turned negative but did not change the bottoming formation of the McOsc. The 10% McOsc is still on a buy options and futures signal with its trendline crossing and higher low. The DJIA is working the -3.5% and -5% bands that sandwich the 200 day average. The DJI SMI is trying to turn up. A bear trend would keep it at this level in a sideways trend. CODI did its little jig at the center white line in the indeterminate zone. OEX ran into resistance at that yellow trendline again after a push above it. A completion of a "W" bottom would then put resistance at 545 -548.

Momentum Cycles Cones:

OEX close was outside the upper channel line indicating price momentum is changing direction from down to sideways. The projection oscillator has paused in its upward climb and has not reached overbought.

Here is the cone chart for Friday.

Pivots:

OEX and DSP8U

Volatility:

OEX Zone Timeris oversold with a slight upward bias. Bullish action would be evidenced by zone migration up towards the neutral line and above. Whereas bearish action would be more of the same sideways migration in zones 1 and 2. MVI's are neutral looking. Thursday was weak as indicated yesterday and VIX did close at the high end of its range. Friday should be a better day unless the weight of the world falls on Wall Street.

RSI, STO{not shown today}:

RSI and Stochastics oversold and on a buy.

Stocks of Interest:

ASTN finally fell victim to the bearish action in techs.A long period of selling at 3 1/4 to 3 5/8{where we took short term traders out,near the secondary rally top} and buying under 3 {2 3/4 was previous support},has now been resolved to the lower end of the range near 2 3/4.At previous lows, good support came in at 2.New small speculative long positions might well be initiated from that level{2},for long term traders.

CMR.TO will be one of the few survivors of the small mining companies in this hard asset bear market.They presently have 8 bidders for their cobalt concentrate product,and are finalizing the details of the contract.Sales will be in U.S. dollars,and revenues will be, in the next year after production begins,an absurdly low multiple of the present share price.Go to http://www.canmine.com to see the latest news release.Impatient investors are saying"yes, but show me the money".Earnings will be there within one year after production that will support a large multiple expansion.

OEX Perspective:

CBOE TRINS flipped to bearish for Thursday. Near the money August calls looked like this, OEWHE,OEWHF, OEWHG. September calls looked like this OEWIE, OEWIF. August puts behaved this way, OEWTF, OEWTG, OEWTH. Note the difference between the August and Sept 525 calls, OEWHE AND OEWIE. As with June and July it just illustrates that front month options take you for a wild ride this close to expiration. There is an up and down mechanism at play that tends to shake the front month contracts out of public hands...quite the opposite of the effect of a steady trend.

OEX Mechanical Trades:

No changes. OEX Trade Listing, OEX Signal Report.

MomentumCycles Commentary for the open of Monday, August 17, 1998:

A 4th consecutive basing day on the equity put/call volume ratio,showing a good deal of fear,although total put/call has not reached the 1 to 1 ratio seen at total wipeout bottoms similar to the end of the 1987 crash. A 1 to 1 ratio is not seen that often.IBD put/call has made 3 tags of the .70 area.The complex bottom in June required one tag of the .80 region at lower prices on the NASDAQ before selling was finished,although the S and P 500 held the 1074 region on the second test.DJIA has broken the 200 day moving average,but S and P 500 and NASDAQ has held it,with NASDAQ making a slightly higher low than the initial early August low.

Domestic political turmoil and related international instability and vulnerability has made the crosscurrents between now and the end of August particularly hard to trade.Global markets,with the exception of last Friday,seem well correlated presently,so a European spark may be needed to start the looked for countertrend rally.

A rally into the expiration and post expiration period could very well provide an opportunity for bearish traders to liquidate stock or put on shorts.If we were to rally into as early as August 18-21,or as late as August 24-27,the end of the retracement rally,accompanied by 3 day and 5 day cumulative breadth declining from a peak,could very well signal an opportune time to attempt some shorts.So far,the expected and awaited countertrend rally to the typical secondary lower peak a la 1987 has eluded traders.Most rallies have been snuffed out by about 10:30 a.m.

Astrocast also projects post expiration weakness, if the expiration is indeed up.

Premium in the calls,as shown by the IBD option premium ratio of .34,reveals almost NO ONE expects a rally into the expiration period.Food for thought?

For longer term traders,or fund switchers unwilling to use the global equity switching strategy,a measure that proves a rally has "legs" is the smoothed 3 and 5 day cumulative breadth turning up.By that slower measure of trend,we haven't turned the corner yet.This slower measure of trend gets you in a little late,but once it turns decisively,the rally will have good "legs".

Traders who made a small bet on the "buy the Friday close of pre-ex week,sell into the first signs of strength in ex-week" should read the comments in the next to last paragraph.

Trend:

ADHL, Momentum Rainbow daily, weekly, and monthly are all still on a sell. Note how close the ADHL New Low Strength is to generating a buy signal as two of three components have exceeded their buy thresholds. OEX regression channel closed below the 4/97 trendline. Next support is 510 on the 1/95 trendline. Super Timer and NHNL remain in consolidation.

Fibonacci Zones:

Indexes failed a test of the weekly balance and Daily Triple Switch lines and closed near the lower support as the Ratio oscillators stay in a bearish trend. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Astrocast: Astrocast has an upward bias until 8/20. A related cycle timing system (not shown) has a very significant energy point on 8/18.

Breadth:

NYA breadth was negative yet improving. The 10% McOsc is still on a buy options and futures signal with its trendline crossing and higher low. Of course no one buys breadth, they buy/sell price. So what this is saying is that the factors underlying price are conducive or creating an environment for supporting the indicated price move. A common tactic is to look for an entry on price trading above the previous day's high by 0.1 for a buy or below the previous day's low for a sell after breath has generated the appropriate bias. The DJIA is working the -3.5% and -5% bands and closed below the 200 day average. The DJI SMI is trending in bear mode. CODI did its little jig with a bearish upward crossing of the center white line in the indeterminate zone. OEX closed right on the 522 longterm support line. Snapshot trin had an upward bearish trend the entire day. Here is the Mcosc chart.

Momentum Cycles Cones:

OEX close (with a triple low) was outside the upper channel line indicating price momentum is changing direction from down to sideways. The projection oscillator is rolling over. Here are Cone 1 and Cone 2.

Pivots:

OEX and DSP8U shifted lower and below the hourly trendline in a weak mode.

Volatility:

OEX Zone Timer continues its bearish trend. MVI is nearing the static buy band, and MVI adaptive is neutral.

RSI, STO:

RSI and Stochastics are oversold.

Stocks of Interest:

ASTNhas new resistance at 2 3/4 and present support at 2 1/2.Each succeeding peak,at 4 1/2, then 4 ,then 3 5/8,then 3 1/4 has met selling pressure.Good support was seen previously at 2.The payoff on this issue longer term, once trading systems are placed in numerous major exchanges,is large.Short term traders exited at 3 5/8.Long term buy and holders should be prepared for further price weakness along with other tech related issues in this market environment. CMR.TO recently revealed that 8 major bidders are competing for Canmine's cobalt concentrate product.Political instability in the Congo and elsewhere in Africa means that CMR is the only new source available worldwide of this vital and irreplaceable material.The U.S. military cannot do without an assured source of supply.Meanwhile,delays in announcing a firm contract,starting date for delivery of material, and clear numbers concerning the exact effect on CMR's bottom line has spooked impatient investors,who are saying"show me the money".The expected cash flow should be an absurdly low multiple of CMR's present price.Long term contrarians should be prepared for further near term price weakness, and a much longer term payoff.

OEX Perspective:

CBOE TRINS remained bearish for Friday. Near the money August calls looked like this: OEWHE, OEWHF, OEWHG. September calls looked like this: OEWIE, OEWIF. August puts behaved this way: OEWTF, OEWTG, OEWTH. Last hour did see the low for the day and provided the best entry of the day for the buy the Friday close concept discussed here yesterday and at previous expirations. Obviously this is a countertrend trade with attendant high risk. Speculative trades such as this should only have a small percentage of capital applied to them. If you trade the front month with one week left, then probability of success is better if you pick a strike within the green cone on the above Cone chart. Pre-expiration weeks tend to have down trends, we had that. Expiration weeks tend to have up trends; we will see.

OEX Mechanical Trades:

Volatility band model has picked up the September 520 calls. OEX Trade Listing, OEX Signal Report.

MomentumCycles commentary for the open of Tuesday,August 18,1998:

Another basing day on the equity put/call ratio,with total CBOE put /call at .97.That makes 5 consecutive basing days on the equity only put/call ratio,which is unusual in itself.A large rally normally results from that many consecutive basing days.

In slower measures of trend,for intermediate term traders,3 day and 5 day cumulative smoothed breadth has not yet turned to up.Rally "legs" off the lower 3.5% band area are often confirmed with this slower measure of trend rising.

One of the standard MomentumCycles trades is to "buy the close of pre-ex week, sell into the first signs of strength in ex-week".Long term readers here have heard that one so often it has become quite familiar.When bearish sentiment becomes extreme at the close of Friday of pre-ex week,a small bet into the normal up bias of {at minimum} the start of ex week very often returns very good results, even as a one day daytrade{see below for details,next to last paragraph}.A trailing 1.50 profit stop should be considered for those who still have pre-ex long positions,or a trendline stop.Many pre-ex traders took the quick profit{see next to last paragraph}.

Similarly,we may try to trade the money flow low near the end of month prior to pension fund reinvestment,by attempting to front run the cash infusion as a discretionary trade.It doesn't always work,but long time readers know it has worked well quite a few times in the past.

Trend:

ADHL needs improvement in the New Lows to generate a buy signal. OEX reg support is 526 and resistance is 548. Super Timer closed above zero and is therefore bullish{please note r2 at 8616.10 should read r1}. NHNL still is in corrective mode as it needs improvement in new highs vs new lows. If we get higher index prices and the NHNL does not improve or the ADHL does not go on a buy, then the rally will fail. Since we expect some positive action this week, the failure is expected at some later date, possibly in post expiration week. However, the big short players are lining up to short this current rally bigtime. This might just provide the opportunity for the short squeeze of the century that delays a major selloff.

Fibonacci Zones:

Indexes closed above the weekly balance(red dashes)and near the daily Triple Switch (green stair steps). A close above the Triple Switch will then target the upper weekly fib resistance levels the remainder of the week, maybe by Wednesday. That would be 546 to 550 for the OEX.

OEX SPX NDX XAU S and P 500 futures TYX DJIA

Astrocast:

AstroCast has an upward bias until 8/20. A related cycle timing system(not shown) has a very significant energy point on 8/18.

Breadth:

NYA breadth continues to improve. A difference of +460 NYSE advances minus declines tomorrow would put the McOsc at the zero line. This might bring in the institutional players that wait for a zero crossing and we could see some sizeable gains on very strong volume for a few days. The 10% McOsc is still on a buy options and futures signal with its trendline crossing and higher low. The INDU closed above the -3.5% and the 200 day average with 8616 nearby resistance and then 8800. The DJI SMI is still trending in oversold. CODI did its little jig with a bullish motion near the center white line in the indeterminate zone. OEX closed above the short term trendline. Next cycle resistance is at 548 or 580 if the trading range has been extended. Snapshot trin had an upward bullish trend the entire day.

Momentum Cycles Cones:

OEX projection oscillator is reaching for the overbought line. A strong trend into Friday would put the projection oscillator in extreme over bought and the OEX near 550 if it can get through the nearby resistance.

Pivots:

OEX and DSP8U closed above the keyline and the hourly trendline.

Volatility:

OEX Zone Timer made an upward zone crossing which is constructive for call holders. MVI made a buy pivot near the static buy band. MVI adaptive is nearing the sell band but it could take a few more days.

RSI, STO:

RSI and Stochastics are on buy trends.

Here is the chart.

Stocks of Interest:

CMR.TOawaiting news on the cobalt contract.Volume buying will probably not appear until firm numbers are announced,but they should be an absurdly low multiple of the present share price.ASTN awaiting placement of trading systems.Previous support was found near 2$.Will it hold again?In a mega bear,they take no prisoners.Any bullish news announcement on ASTN system placements will enable buyers who bought near 2$ before to exit on the news.Resistance now is 2 3/4-2 1/2.This one will spike up strongly on any bullish news announcements,possibly to 3 or 4$,but closes under 2$ mean that support is gone for this cycle.Next support 1$.Long term players should see a good eventual return from both issues,but the payoff may be a while.

OEX Perspective:

CBOE TRINS were extremely bullish for Monday. Near the money August calls looked like this, OEWHD,OEWHE,OEWHF. September calls looked like this OEWID, OEWIE, OEWIF. August puts behaved this way, OEWTF, OEWTG, OEWTH. Last hour trade on Friday proved to be quite lucrative. August calls advanced nearly 100%. September calls made 40% and more. The discretionary profit taking rule is to take quick gains of 50% when handed to you. Gains of a 100% often provide another entry the next day on a pullback. Even though expiration week tends to have an upward bias, it also has an up and down motion that erodes the expiring options rapidly.

OEX Mechanical Trades:

The OEX RSI and TRIN models are looking to exit the OEWIE Sept 525 call just above 29. They closed at 23 3/4 on Monday. All the models are expected to exit longs this week. OEX Trade Listing, OEX Signal Report.

MomentumCycles commentary for the open of Wednesday,August 19,1998:

A 6th consecutive basing day on the equity put/call volume ratio,unusual in that it is the second day of the rally.That's disbelief!Equity put/call 211.228/359.252,index put/call 236.522/172.370,total CBOE .84 after Monday's intraday 2 index puts to 1 index call{guaranteed rally material}.Wall Street Journal Tuesday headline at the start of section"C"-"some investors turning to defensive puts".Where were they on July 17?Wouldn't touch them then.

Admittedly,the put/call ratio this close to expiration might be a bit distorted due to pre-positioning.

A run close to the DJIA 21 day moving average.And remember,8800 was the breakdown,so 2 consecutive daily higher closes above it on rising volume would be significant.{The likely war between the bears and bulls near this level is discussed below}.Similarly ,520 OEX by now has been tested so many times,that another successful retest would likely give a good rally into a trading range market,and a breakdown below it would almost guarantee a panic.

For followthrough,at least into tomorrow morning,Europe should ideally continue the rally{as it helped pre-opening sentiment here Tuesday early a.m.},on a "Fed keeps rates the same" excuse.

5 consecutive basing days normally gives a rally of over 4%.

3 day and 5 day cumulative breadth have marginally turned up,which means a bear countertrend rally is present,if not another bull leg.

1.50 trailing profit stop was activated on some OEX call charts that we show below,trendline stop close to being activated on some others.

Trend:

ADHL got the improvement it needed in the New Lows to generate a buy signal. OEX reg support is 526 and resistance is 549 and its projection oscillator is in overbought. It would be fair to get a day or two of pullback and consolidation. Super Timer closed above zero and is therefore bullish. NHNL still is still in the consolidative zone and improving.

Fibonacci Zones:

Indexes closed above the weekly fib zones and above the daily Triple Switch (green stair steps) a day earlier than expected. The usual expectation would be for some pullback within this weekly fib zone rather than zooming on up to the extended fib zone, but it is entirely possible since the Ratio oscillators are coming off such an oversold level.

SPX OEX NDX DJIA S and P 500 futures TYX XAU

Astrocast:

AstroCast has an upward bias until 8/20. A related cycle timing system(not shown) had a very significant energy point on 8/18. It is going to take Wednesday to clarify just what we saw on Tuesday, a high, a change in trend, a low.

Breadth:

NYA breadth improve to the "Sell" level as the index hits previous resistance. This breadth improvement did place the McOsc issue and volume above the zero line on the close. Conservative bulls were waiting for this as a signal the bull was still alive and the bears were waiting for a tag of the zeroline to re-establish shorts. We should have a tug of war here manifested by a play of the oscillators about the zero line before one side wins. The 10% McOsc is the shortterm bottom picker and did a nice job this time and we now need to begin looking for the end of this move. The INDU closed very near the downtrending 21 day average. The DJI SMI is beginning to curve upward but is still well below the oversold band. OnBalanceVolume is still not rising fast enough to confirm this price rise. CODI has moved closer to the Sell Alert Band and the OEX closed very near to the longer term trendline on the CODI chart which is also near the longterm resistance at 548. Next cycle resistance is at 548 and would be a good place to consider some call liquidation. Snapshot TRIN and TICK were much more supportive in the AM than the PM and perhaps are cause for concern on Wednesday.

Momentum Cycles Cones:

OEX projection oscillator is above the overbought line. A day of consolidation and retracement should be expected after a day like Tuesday. But this being expiration week who knows what will happen. Profits in August calls should be taken on Wednesday if they were not taken on Tuesday.

Pivots:

OEX and DSP8U closed above the keyline and the hourly trendline again. Some retracement should be expected perhaps after a test of the next resistance level.

Volatility:

OEX Zone Timer made another bullish zone crossing and is now in the neutral zone near the centerline. In previous commentaries we talked about a cycling between the neutral zones and the lower zone being an indication of a true bear mode. We are about to find out just what this market smells like. MVI in top plot is near the static neutral band and near the dynamic sell band . MVI adaptive in the center plot is above the sell band and only needs to pivot downward to generate a sell. Note these two plots have inverse logic. One of these days they will be modified to read in the same direction.

RSI, STO: RSI and Stochastics are on buy trends. The shorter term RSI may run into some resistance at the center band on Wednesday.

Stocks of Interest:

ASTNfound support between 2 and 2 1/4 where numerous price hits have occurred after the breakout above 13/16.Resistance at 2 1/2.It will take announced trading systems placements to push this one back above old resistance at 3 and 4 1/2.

CMR awaiting cobalt contract news,which is due{overdue} during mid-1998.8 bidders are in the running for their product.

OEX Perspective:

CBOE TRINS were bullish but the put trin had a step function discontinuity in it that must reflect some massive put activity below a rising mkt. Near the money August calls looked like this, OEWHD,OEWHE,OEWHF,OEWHG, OEWHH. September calls looked like this OEWID, OEWIE, OEWIF, OEWIG. August puts behaved this way, OEWTF, OEWTG, OEWTH. Again, 100% profits in August calls for the last two days should not be left on the table.

OEX Mechanical Trades:

Exit all Sept positions on Wednesday.

OEWID 520 CALL

OEWIE 525 CALL

OEWIF 530 CALL

OEWIG 535 CALL

OEX trade listing,and OEX signal report not shown today due to a data error problem.

MomentumCycles commentary for the open of Thursday,August 20,1998:

Early predicted pre-opening European strength gave a good cover for an exit early a.m. into OEX and NDX strength before the short term overbought conditions described here yesterday took over.No longer a basing day on the equity put/call ratio,so rally believers exist at this point.3 and 5 day breadth still marginally rising off the oversold bottom.As the market was sucked into support at 520 OEX,an area that has seen over 20 price hits from above and below, the tendency to be pulled up into resistance at the area of 8800 {we've gotten 8753} also means multiple position placement{therefore additional time near this number}.Pre-ex longs from late last week could exit for a double in some series Monday, or Tuesday for more gains at the trendline or trailing profit stop{1.50 below the high price intraday},or Wednesday as suggested near the open on global strength and weakness in bonds.

Trend:

ADHL remains on its recent intermediate term Buy even as the DJIA AD strength weakens. It is possible to get a sell if the top indicator drops precipitously even with the new high and new low indicators beyond their buy thresholds. Basic picture here is one of a trading range mkt. OEX reg support is 526 and resistance is 549 and its projection oscillator is rolling over. A weak Thursday AM should drop it further but expiration forces could easily pull it up in the PM. Super Timer is still positive looking but the DJIA has resistance at 8796 which leaves enough room for a happy expiration. NHNL is still tracking in the consolidative zone. So far the damage is not bad and breadth is constructive, however there is a cycle mentality that wants to preserve profits and heads for the exits on any weakness. Floor specialists are increasing their short positions and at least one major influential brokerage firm is forecasting a 20% drop in the fourth quarter in the major averages. Such a posture limits their buy recommendations and encourages a sell the rally strategy.

Fibonacci Zones:

Indexes held their lows above the weekly fib resistance zones as the oversold Ratio Oscillators reach for overbought. Highs were contained under the extended fib level. Note should be made of the XAU as it finally closes above the green Triple Switch line turning the daily trend to up. The largest mining conference of the year is being held in Las Vegas Sept 9th and 10th. It is quite common for the XAU and the Canadian precious metals indexes, primarily the Vancouver mining index, to make tradeable gains in the weeks preceding this quarterly event.

S and P 500 futures OEX SPX XAU TYX DJIA NDX

Astrocast:

AstroCast has an upward bias until 8/20.

Breadth:

NYA index and breadth hit resistance on Wednesday and turned down due to a lack of buyers. This breadth weakness halted the advance of the McOsc. The 10% McOsc has advanced off the lows leaving the lower entries behind us in this cycle. The INDU found resistance at the underside of the 21 day average again. The DJI SMI is beginning to curve upward but is still well below the oversold band as it would be in a true bear trend. OnBalanceVolume dropped back again and precipitated selling in the last hour as buyers did not step up to the ticker. CODI made a sell pivot near the Sell Alert Band and as the OEX closed very near to the longer term trendline on the CODI chart which is also near the longterm resistance at 548. This was a decent place to liquidate some calls into strength. Snapshot TRIN and TICK lacked the steady trends of a bull mkt. They looked more like that of a distributive one. Last hour selling may have been playing the odds for the down Thursday syndrome.

Momentum Cycles Cones:

OEX projection oscillator reached overbought on schedule. OEX is working some stiff resistance. Even if it breaks above resistance on Thursday and or Friday, it is expected to make put entries all the less risky.

MoPivots:

Failing price probing at R1 on the OEX and DSP8U leaves these two opening below the Keyline and near the hourly trendline on Thursday. Thursdays tend to be weak but expiration Fridays are net positive. Since the NDX and SPX options settle Friday on the opening there tends to be some increased activity in the last hour on Thursday and the first few minutes on Friday. Then the mkt meanders until the afternoon, sometimes as late as the last hour, before a distinct trend sets in. Most of the time this trend is up, but you can never be sure. The most sensitive measure of this expiration direction intraday are the at the money and nearby puts and calls. You need a realtime feed to see the activity in the out of the money options suddenly jump before the OEX budges. The naked sellers are scrambling(as well as the other speculators to buy) to cover before the index brings the strikes into the money.

Volatility:

OEX Zone Timer remains in neutral as the stocks and indexes have been "lined" up for Friday's expiration. MVIRSI in top plot is near the dynamic sell band. MVI adaptive in the center plot did generate a sell signal. MVIama tends to be anticipatory.

RSI, STO:

5/15 RSI and Stochastics give a mixed picture. Five day RSI ran into midband resistance in a downward sloping channel.

Stocks of Interest:

ASTNis making a fierce battle between buyers at previous support near 2 and 2 1/4 and sellers near 2 3/4 on 5x average volume.Long term,with trading system placements and 20 million in the treasury{close to the market cap!} for purchases of other companies,this issue will likely do well.Near term, the appetite for smaller high techs sans earnings seems waning.A spike to 3 5/8 or above 4 is doable on any trading system placement news.

CMR bands pinching as they did prior to a previous rally.

OEX Perspective:

CBOE TRINS were mixed until the last hour when bear tracks appeared. Near the money August calls looked like this, OEWHD,OEWHE,OEWHF,OEWHG, OEWHH. September calls looked like this OEWIE, OEWIF, OEWIG. August puts behaved this way, OEWTF, OEWTG, OEWTH. Discretionary calls were exited Tuesday and Wednesday. Current recommendation is to wait until expiration works itself out before taking September put positions into strength on Friday or next week.

OEX Mechanical Trades:

Flat, all September calls were exited today per yesterday's commentary. It was a question of retaining significant profits vs risking losing them to a volatile downside expiration.