MomentumCycles

MomentumCycles commentary for the open of Tuesday,August 3,1999:

Rallies are designed to be sold. The market is performing very weakly in the part of the monthly cycle that should normally have more strength.Normally 3 day breadth would start to turn up by now,with price at the lower 3.5% trading band.It hasn't yet. Monday was another good example of the expression, "selling into rallies". As long as new lows continue to increase the fund liquidation on the Volatility chart is still in effect. Debacle seasonality also continues. Granted, many indicators are oversold and can go lower as they do in the third and fourth quarters of every year. This should be no surprise except to those who are new to equities,such as recently turned "professional" retail daytraders,habituated to buying all dips. Even if interest rates remain flat stocks will go down. Now is the time to make your shopping list for October and November. Reviewing a few of the charts we see that the INDU is almost down to the next support level at 10566 on the SuperT. There is quite a distance below it to the next support if this one does not hold. NYA breadth and INDU OBV are in sync with the price decline.

EquityCP and Sentiment are confirming the bear trend in the OEX with their relentless trek to lower levels. They are at levels that have been good call entries as long as the OEX trend was still up and was just experiencing a minor retracement. At this point the 3XIND and SMI are working on a low but it is premature to enter into calls.

We are still long QWST from 29-it closed at 29.1875.Stop loss at 27.5.It is oversold,like most of the techs,with STOCHASTIC 20 at 15.It has been recently upgraded to "buy" by major analysts,which may not help it if this decline continues.

We are long HL from near 2$-it is 2 1/8.XAU momentum is falling again.HL is a perpetual call on the sector and the metals,which are oversold in sentiment and price.

Here are the other charts:

AMOSS CODI CONE803 INDUFIB INDUWEEKFIB MOCYCLES MOONTIDE 15 OEXDAILYFIB OEXWEEKLYFIB XAU 30 MINUTE MCOSC

MomentumCycles commentary for the open of Wednesday,August 4,1999:

Did anything of significance occur on Tuesday? Breadth is trying to make a stand and hold prices at support levels such as 10567.36 on the SuperT chart or 10624.73 on the INDU chart. Its rather interesting that the OBV bands are horizontal and the INDU bands are curving over. It must be because the OBV bands are based on historical volatility and the INDU bands are based on the percent above or below a moving average. It might have been Joe Granville who said that bull markets do not close below the 200 day moving average. Right now the INDU is below the 21 and 50 day averages and above the 200 day. Seasonality may hold the INDU up a few more days but between now and tax time in the fourth quarter we should see the INDU kiss the 200 day average. The only thing being generated since the high a few weeks ago are tax losses and realized capital gains for the US Treasury. You get the idea now how the budget is being balanced, by humongous capital gains revenue. One needn't be a conspiracy theorist to see that late summer/early fall selling swells the coffers. The market is destined to drop into the fourth quarter per the Volatility and Debacle charts, regardless of planetary alignments.

Now CODI is fast approaching the Buy Alert line, which can also be an acceleration point for lower prices. The trick here is to wait until CODI gets close to the BA line or moves above it and then turns down in order for the Buy Alert to turn into a Buy Signal. If we get a significant selloff then CODI could rise as high as 16 to 20 as it did in the fall of 98. It would be encouraging if everything else fell into place coincidentally with this hoped for buy signal. When elephants like MerrilLynchum are calling for a total of 10 percent then rallies will fade because of a buyer's strike. In the meantime the market is so oversold that CODI might generate a short term buy signal by dipping back into the WhipSaw zone before heading above the BA line. This is a dangerous time to be long anything except patience{or HL and ABX !}.

EquityCP and Sentiment are still in Oversold to Neutral. The 3INDX actually has a divergent low with a higher low and preliminary crossover. CP Ratio is entering the Buy Calls zone but we really need some price confirmation and a turn up in this indicator. OEX is working on the trendline terminating around 675. HRBBVS Sentiment indicator is as neutral as the AMOSS indicator. Ideally this HRBVS would be a much safer buy if it were at minus 0.4. You would think that if the elephant chart busters wanted to create a sizeable downdraft they could do it right here at this trendline.

Since this trendline coincides with the IBD mutual funds 50 day moving average,we are going to nibble at this trendline.After reviewing a lot of charts tonight and consulting with some infrequently used software, OEX1,2,3, the conclusion is that a very small position in the August 680 calls between 14 and 15 could be bought for a quickie trade.

We picked up HL,an XAU component,near $2 a while back.ABX could have been picked also.HL today was 2 7/16,up 15%;ABX was near 20,from the lows below 17 a while back.XAU is now above the upper 3.5% band of price.STOCHASTIC 5 is 60;STOCHASTIC 20 is 70.This is approaching short term overbought,as well as previous XAU resistance above 68.Nevertheless,we will hold HL as a perpetual call on the metals-or until the short term % profit is too good for us not to take some off the table.Hecla has given a strong buy on a daily basis last week as well as on a weekly basis. The leverage of silver and gold in the ground is quite high for a produce such as Hecla. Being able to buy it at the MoCycles recommended price of $2.00 was a most fortuitous event. It could prove to be rather advantageous to hold onto this for some sizeable gains,as this sector has been oversold in both price and sentiment for quite some time.A national magazine recently came out with a "death of gold" type article,which is bullish.

Our one attempted bottom "feeding" in the techwrecks,QWST,was acquired at 29.Today saw 28 5/16 at the close;stop loss at 27.5.We are at the well tested February QWST lows,with STOCHASTIC 20 at 10,extremely oversold.Neverless,in hopes of an oversold tech bounce,we will hold with a stop loss at 27.5,unwilling to take more than a 1.5$ loss.

Here are more charts:

XAU daily OEX daily fib OEX weekly fib Pitchfork TYX VIX XAU 30 minute NYA CONE080499 Indufib Induweeklyfib McOsc MoCycles Moontide15 5 day advancing/declining volume

MomentumCycles commentary for the open of Thursday,August 5,1999:

To quote from yesterday's commentary, "After reviewing a lot of charts tonight and consulting with some infrequently used software, OEX1,2,3, the conclusion is that a very small position in the August 680 calls between 14 and 15 could be bought for a quickie trade.".....

If EquityCP and Sentiment have any message at all it is that trends continue until acted upon by a stronger opposing force. If the Bull was still snorting then we would have a great setup for a call trade that lasts more than a few minutes. As it is, the indicators are acting more and more like the Bear is getting active and putting on fat before winter time. Bears manifest themselves by the MOSS and AMOSS cycling in zones below zero as well as the McOsc not rebounding above zero. New Lows are another very sensitive barometer. They increased again to 187 from 170 the day before, but below the 194 on Monday. SuperT is still working on support near 10569. The market has the feel that owners of stock are willing to sell into rallies but refrain from selling when price comes back to support. At least so far that is true. There are only two days left to salvage the trend for this week. The PitchFork chart has an ominous feel, but there might be some temporary support at 666.8. If none is found there, then the 650 level will be tested. Thursday has yellow dot resistance at 681.95; the BRDot for today is the PLDot for tomorrow . Weekly resistance is all the way up at the white square dots at 710 and that is beyond any stretch of the imagination in the next two days.

So.. what a ride! Hope anyone following this column makes use of the Cones and Fibs for price targets. Entry on the OEYHP,as suggested for the Wednesday open, was easily available between 14 and 15 with a run to 18 1/2, at which point the Green Cone would have prompted you to scale back and move stops up or exit entirely.This was reinforced by an e mail to subscribers at 11.25 a.m. as follows:www..."Well, now, if you bought into the 680 call recommendation on the commentary for today, you bought with a limit order near 14. High so far has been 18 1/2 when the OEX hit the upper Green Cone set. That is a good profit taking level in this risk adverse market. End of trade. MoCycles, BobR".

The OEX ran up to 688 which was dead center in the upper Green Cone and right in the Daily Fib Zone. An even better trade than the OEYHP would have been the OEYTP on a stop and reverse. I was personally fooling around with the w.PreferredTrade.com software and a new ISP when the OEYTP was at 11.I was thinking "should I or shouldn't I post a www put trade?" None was posted unfortunately.We'll have to live with the 4.5 points on the long side trade Wednesday.

We've been saying for some time now that rallies are to be sold. Conditions yesterday rightly saw a pop today and lately the Green cones have defined the range. The market had very very poor price and breadth performance for a Wednesday in the beginning of month seasonality.3 day cumulative breadth continues to sink lower,for those who are slower to reverse direction in looking for trends. This further confirms that the notion of selling into rallies is overwhelming "new" money. It also further validates the Volatility and Debacle chart patterns. They can't blame the selling on thin volume this time, nor can they blame it on a real interest rate change, nor poor earnings. The market is a discounting mechanism, so now its discounting the discounting, if you know what I mean. It also discounts six months in advance...happy Thanksgiving and Merry Christmas! No,current action can only be blamed on the fear of such things. Once investors get through the denial stage and recognize that there is a larger influence at play here, they may accept the fact that markets do get derailed on occasion for other reasons. Anyone who has owned a mutual fund for more than a year knows full well that buying before the distribution date in a few months is akin to buying an immediate tax liability {and what a tax liability that will be in a few months!} Gains are being forced to be taken in what can become an hysterical attempt at profit preservation.

We should take note of CODI's closing action with its move above the Buy Alert level and the drop of the OEX below the trendline at 680. Trading options visually would suggest trendline target of 660 on the CODI chart. Also note that the OEX RSI is deeply oversold and the BR MOM (momentum) oscillator has a divergent bottom. Also the CODI Mkt Thrust oscillator is working on a double bottom. I don't know about you, but it just makes me want to try the call side again on Thursday for another quickie trade. Quickie means{well you know what that means after today!} trading between the upper and lower green cones. Let's assume for a minute that buyers have been on strike all week creating this cycle inversion. Seasonality officially lasts two more days and if buyers come in enmass, then we could see an explosion of pent up buying. If it happens then maybe we could have a redcone target on the upside the next two days. The advice would be to watch the NYA advances and declines for neutral to net positive for the first half hour with a stabilization of price, maybe then some giveback to the end of the first hour.Then if things are stable then go for an at the money call with an OEX target of upper fib zone on the dailies or upper cones, green first, then move stop, red cone total exit.

Well,we got nicked trying to buy an extremely oversold QWST a while back at 29.QWST stop loss at 27.5 was activated today for a loss of 5%.Stochastic 20 is near zero.Saturated stochastic readings at the zero level for protracted periods are unusual and bearish.

HL and ABX/XAU has worked out better.ABX 19 3/4;HL 2 3/8;XAU 65.25,approaching the recent 68+ high.Stochastic 20 at 81;last rally high saw 96.Room for a little more pop in the short term,in perhaps an approach to the 68+ highs or above.

Long HL from 2.No stop loss.

Here are the charts:

NYA AMOSS BOX CODI CONE 080599 INDU INDU FIB DAILY INDU FIB WEEKLY McOsc MoCycles Moontide 15 5 day advancing/declining volume XAU daily OEX daily fib OEX weekly fib PITCHFORK SUPERTIMER VIX XAU 30 minute

MomentumCycles commentary for the open of Friday, August 6,1999:

To quote from Thursday's commentary:

"SuperT is still working on support near 10569. ....The PitchFork chart has an ominous feel, but there might be some temporary support at 666.8....Thursday has yellow dot resistance at 681.95....Hope anyone following this column makes use of the Cones and Fibs for price targets....We should take note of CODI's closing action with its move above the Buy Alert level ...OEX RSI is deeply oversold and the BR MOM (momentum) oscillator has a divergent bottom. Also the CODI Mkt Thrust oscillator is working on a double bottom. I don't know about you, but it just makes me want to try the call side again on Thursday for another quickie trade. Quickie means{well you know what that means after today!} ....The advice would be to watch the NYA advances and declines for neutral to net positive for the first half hour with a stabilization of price, maybe then some giveback to the end of the first hour.Then if things are stable then go for an at the money call with an OEX target of upper fib zone on the dailies or upper cones, green first, then move stop, red cone total exit."

Now then, how close did we come? INDU low was 10566.18. OEX low was 665.72. One hour into the day the NYA price made a pivot low and NYA net breadth spread reversed its trend and ramped up the remainer of the day. We should have said that the net breadth trend is more important than the net breadth. INDU daily fib made a perfect tag of the lower fib level. CODIdid turn down in buy mode and RSI turned up.The Cone projection oscillator has crossed above zero on Thursday, and the candle is hammer- like, signifying attempt at bottoming. So, were you mechanical enough to buy an at the money call? Or maybe you waited until the at the money was 670 like me? Notice you didn't get nudged on the www*. Well I was still fooling around learning how to use the w.preferredtrade.com order entry system and mistakenly place a limit order for the OEYHN at 13 3/4(I almost always use market orders because I want to buy on a specific tick). After five minutes when it hadn't gotten filled I got on the phone to the desk jockey and complained," Hey, this is a RAES order and its under ten contracts, so what gives?" She said, "Hey cowboy, you put in a limit order not a market order!" So I cleared it out and got filled at 15 1/4, a point and a half higher. Well, when the OEX ran up to the daily pivot at 678.72 I cashed out at 19 3/8 for another quickie trade.

What does Friday hold? Heck, don't ask such tough questions. The 218 new lows bug the daylights out of me.The negative advance/decline ratio is worrisome. End of seasonality is a problem. I don't really buy this cycle inversion being talked about in other camps. We must think for ourselves here.Selling is simply overwhelming the normal positive bias this week. So what do you think? Did some brokerage firm engineer an internet panic stop run knowing full well that a major announcement after the close was going to goose the nets back to life? Stocks are trading like commodities and thin markets leave them vulnerable to devious intentions.It reminds me of the time years ago when I owned some Rowan Drilling and heard on CNBC before the market opened that a deep water RDC drilling rig had sunk in the north sea. Gave me a good reason to sell for tax losses. Well, it turned out to be the low of the year and never looked back. Dream on if you think that will be the same situation with the nets.

How about this one? I had owned a thousand shares of Lyphomed and wrote ten covered calls with the stock at ten. Two minutes before the market opened FNN or CNBC announced a takeover by Chugai(sp?) pharmaceuticals at 20. No trades and the stock was at 20 on the open. Thus the love/hate relationship with that tube. Well, I got 1K for the calls, but it would have been better to have $10K more in stock valuation. Such is the life of an option trader. Enough rambling. Oh, one more thing, did you see it in writing on the left of the screen when Yardeni was speaking? It is confirmed the market is 40% overvalued;so it rallies 100 points in advance of his appearance. Trendlines, support lines will be defended by the elephants until they are ready to rampage.

*www means "wealth with worry"

While we are doing a summary of today's talk shows, you might like to know that Michael Murphy of the Technology Stock Letter believes the nets are in such bad shape they can't catch themselves(paraphrased). Believe me, this man knows technology, as he lives a stone's throw from Silicon Valley and has lunches with management. Also,he said that today's rebound in the NDX is a knee jerk bounce that could last a couple of weeks, but that there is more to come on the downside.

XAU STOCHASTIC 5 is 90;the 20 is 94.We are now short term overbought on components ABX and HL.HL seems to have long term trendline resistance at 2 1/2.We will, however,hold HL as a long term play on this hated sector,from the long entry at 2.Today saw 2 7/16.ABX is 19.625.Although we are not at the upper 14% trading band,we would advise taking short term profits in ABX for those that entered at the buy under 17,preferably above 19.5.

Here are the charts:

XAU 30 minute OEX daily fib OEX weekly fib Pitchfork Sentiment Supertimer Tyx VIX Volatility Moontide3 Amoss Debacle Equity call/put INDU weekly fib MomentumCycles Moontide15 5 day adv/dec