MomentumCycles

MomentumCycles commentary for Friday,August 21,1998:

Strong bonds,weak pre-opening international markets,the normal Thursday downside bias,a resulting OEX selloff,XAU nascent strength...readers here were prepared days ago for these relationships and the recent oversold/politically sensitive XAU rally from the XAU pivot charts and commentary.Exits into the rally top for OEX was advised from advance notice of mvi approaches to the sell band and codi close tag of the sell zone.Put /call was also mentioned as showing excessive short term rally believers Wednesday.Resistance near 8800 was cited as well.

Remember,positions taken in the middle of the recent trading range{see "trend" paragraph below}are in danger of whipsaws.

And now, some musings on geopolitics, which of course impact the markets in ways often incompletely discounted.The "world as a peaceful place" scenario has,since the giddiness of July 17,come more and more into question.Cycles of domestic,political and international unrest are more interrelated than most people realize.From the heights of international cooperation and capitalist victory seen during the Gulf War,the U.S. and major European markets have ridden a wave of growing euphoria and invincibility.Islamic fundamentalism is a force these markets have yet to fully discount.It is growing in force in a center band that threatens to control much of the oil wealth of the earth.Saddam's previous excursion was only the precursor of what is likely in other unstable regimes in this region.We must admit we expected more of what we are presently seeing in some Islamic countries somewhat earlier.That does not make our longer term call for some kind of showdown between the forces of Western capitalism and Islamic fundamentalism any less correct.Present relationships between the asset classes may well change drastically if the "one capitalist world "scenario becomes increasingly fragile.

Now,many readers will say,"what use does this have in my present trading tactics?"Probably not much,at this point.But every day, we look at the CRB for nascent signs of oil or metals strength or a violation of the downtrend possibly signaling an end to the deflationary scenario.And we look for changes in bond function similar to the recently discussed move to the present INVERSE relationship to equity strength.And we look at changing functions between TYX,XAU,NDX,DJIA,and OEX on the fib charts.And when one of these makes a sea change,we will likely see it.

Geopolitical change is preceeded by price.

Trend:

ADHL remains on its recent intermediate term Buy even as the DJIA AD and new high strength weaken. Basic picture here is one of a trading range mkt. OEX reg support is 527 and resistance is 550 and its projection oscillator is rolling over. Super Timer has moved back into the consolidative zone. NHNL is also still tracking in the consolidative zone.

Fibonacci Zones:

Indexes dipped back into the weekly fib resistance as Ratio oscillators reach overbought.

OEX SPX NDX S and P 500 futures XAU TYX DJIA

Astrocast:

See chart.

Breadth:

NYA index and breadth extended its deterioration from Wednesday. This breadth weakness halted the advance of the McOsc and turned it back towards zero. We will watch the 10McOsc for additional developments. The INDU found resistance at the underside of the 21 day average again. OnBalanceVolume dropped back towards support. CODI is in the whipsaw zone. Snapshot shows a very indecisive mkt, one in which it is best to avoid both puts and calls.

Momentum Cycles Cones:

OEX projection oscillator reached overbought in time for expiration and is rolling over.

MoPivots:

Narrow pivot range begets wide price range. See charts.

OEX S and P 500 futures

Volatility:

OEX Zone Timer remains in neutral. Modified Volatility indexes are on sells.

RSI, STO:

5/15 RSI and Stochastics are on a sell. Five day RSI ran into midband resistance in a downward sloping channel.

Stocks of Interest:ASTN tagged 3 1/4 on 10x average volume.Some news must be about to break with the volume this high.Previous sellers came in at prices above 3 ,and earlier this year, above 4.

Support was found again at 2-2 1/4.Short term traders who again bought at previously mentioned support near 2 -2 1/4 could sell part at any spike above 3 or near to 3.

CMR attempting to rebase again prior to cobalt contract announcements.

OEX Perspective:

CBOE TRINS were very confused with no definite bias. 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. Current recommendation is to wait until expiration and the immediate international events work themselves out. The plan has been to enter puts into strength on the Friday expiration or early next week.

OEX Mechanical Trades:

Flat.

MomentumCycles Commentary for the open of Monday, August 24, 1998:

We had advised entering OEX long calls per our monthly discretionary strategy on the close of Friday of pre-ex week,and selling into strength in ex-week on either a 1.50 trailing profit stop{off the highs} or a trendline stop.All exits were advised in time to capture the rally top mid-week.Put/call and price oscillators signalled an overbought condition at that time,and strength in bonds and developing weakness in international markets led to a flight to safety selloff into an over -1000 tick intraday Friday to 520 OEX.We had counseled Thursday p.m. to only trade the extremes of support and resistance,bounded by 520 OEX and 8800 DJIA{print 8753}.That is why Friday's selloff reversed exactly at 520 OEX.

On the first approach to this level on August 4-5,5 day rate of change was -6%, a level reached that almost always precedes a fast rally,prior to the typical retest 4 and 10 days later.Short term RSI and option premium levels also called for a quick bounce.

Presently 5 day rate of change is nowhere near oversold,and neither is shorter term RSI.

Prior to the pre-ex Friday,put/call had 4 days consecutively at basing levels,with Friday making a 5th day.Midweek after the quick countertrend bounce up,call buyers came in near the top,showing short term belief in the rally.Since then,we have had 2 basing days consecutively,with expiration day showing equity put/call at 451.143 to 441.414,and index at 359.722 to 253.151,which normally would be selling climax material.This being an expiration,however,ratios may have been giving a distorted signal.

What is going on here?Smaller issues are in what seems to be a free-fall,as well as stocks without strong institutional sponsorship.Brokerage house issues and large multinational banks exposed to unknown levels of sub-prime global debt and currency risk are faltering.Russian instability caused a 6% fall in Germany Friday,and all-time highs in U.S. bonds as a refuge for frightened global capital.

We can repeat what we've said recently.

Strong bonds,weak OEX.

Weak Europe pre-opening,higher long risk that day in the U.S.

Great day trade opportunities long bonds{as the opening Friday to 12 noon when the yield downtrend ended,simultaneously with the start of the OEX rally}on any major negative geopolitical news,such as yuan or ruble devaluation,or debt default.We always can't predict ahead of time when such news will emerge,of course.

A break of 520 OEX projects much lower prices,and until that break occurs,traders will try to play it for a quick bounce, often as a daytrade{as on Friday}.

Currently,no trade is recommended.

Trend:

ADHL is close to losing its buy mode as new lows picked up and new highs dropped. Basic picture here is still one of a trading range market. OEX regression channel support is 527 and resistance is 550 and its projection oscillator is rolling over. Super Timer has moved back into the consolidative zone and stopped on the upward sloping yellow line. DJIA closed on the 200 day moving average. NHNL almost hit the crash mode level.

Fibonacci Zones:

Indexes dropped all the way to the weekly fib support and then closed near next week's balance line. The fib range has a wide spread and the ratio oscillators are weakening from the overbought level. Here is the S and P 500 futures chart.

NDX OEX SPX TYX XAU

Astrocast:

Astrocast suggests the market will be doing some convalescing next week.

Breadth:

The Friday index reversal off support had very little breadth support. This breadth weakness placed the McOsc issue and volume oscillators in neutral just below the zero line. The INDU is having a love affair with the 200 day average. The rest of the significant averages, 21 and 50 day plus the % bands are all sloping downward as the SMI is in a bear trend. On Balance Volume fell to new yearly lows. This geriatric bull needs a dose of Viagra if it is going to make it up into the end of the year. CODI is approaching the Sell Alert band again. Snapshot illustrates the strong PM price reversal, but the TRIN still was running way above 1.0 suggesting the reversal was purely expiration related.

Momentum Cycles Cones:

Friday's -2 standard deviation price swing took the OEX to support at 520. The expiration PM swing mentioned in previous commentaries reversed that drop to close near the Keyline. Such a move has little significance for next week. Here are Friday's and Monday's cone charts.

Pivots:

OEX and DSP8U pivots are shifted downward with support levels quite a ways below Friday's close. The rally back from Friday's low was capped by the hourly trendline (cyan).

Volatility:

OEX Zone Timer moved back below the boundary of neutral and oversold. Modified Volatility indexes are closer to the neutral center band than they are to oversold or overbought.From this chart, it is best to stand aside for the moment.

RSI, STO:

5/15 RSI and Stochastics are on a sell. Five day RSI ran into midband resistance.

Stocks of Interest:

ASTNshort term traders who bought at previous support{2-2 1/4 area}were advised to sell near 3 or close to 3 on Thursday's p.m. commentary. Friday saw 2 15/16 as an exit price. CMRawaiting cobalt contract news.8 bidders are in the running for this concentrate.Geopolitical instablility make CMR's supply highly desirable.

OEX Perspective:

CBOE TRINS were bearish in the AM and then the TRIN spread narrowed with the call trin dropping towards 1 after lunch. This was followed with the Put Trin making a bullish switch near 3PM. 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. No discretionary trades are currently recommended, as volatility is too high.

OEX Mechanical Trades:

Flat.

MomentumCycles Commentary for the open of Tuesday, August 25, 1998:

After the initial bottom in the first week of August,retests occurred approximately 4 and 10 days later.The formation of failing rallies and continued retests of the 520 OEX area is similar in time and shape to the May-June bottoming formation.Put/call on this last formation had only 2 basing days consecutively on the equity only ratio,with Monday's trading showing less fear.This week would normally see the interplay of pension fund reinvestment and end of month selling.So normal seasonals would have some sort of rally prior to a decline associated with September expiration of futures.The period August 21-24 looked like a money flow low,so with support from global markets,we could rally this week.

3 and 5 day cumulative breadth are marginally rising.

520 OEX is now critical and many times tested support,so a substantial break of this number would likely bring a large flurry of stop loss orders.

Trend:

ADHL is holding on to its Buy mode. OEX regression channel support is 527 and resistance is 551. Super Timer has moved back into the consolidative. DJIA closed near the 200 day moving average. NHNL is improving gradually with wide swings.

Fibonacci Zones:

Indexes are starting the week at the weekly balance line(red dashes) and Ratio Oscillators are reaching for overbought.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast is neutral for the balance of the week.

Breadth:

McOsc issue and volume have completed a complex basing pattern typically found in the major sell offs in the fourth quarter and the spring. Their breadth neutrality has placed them in neutral just below the zero line. The INDU is enamored with the 200 day average which has been known to be a launching pad in the past. CODI is near the Sell Alert but the OEX is in the center of its trading channel. We could see the OEX move to the upper side of the channel and CODI move below the Sell Alert line.

Momentum Cycles Cones:

The Cones are neutral.

Pivots:

OEX and DSP8U pivots are neutral to positive.

Volatility:

OEX Zone Timer is neutral. Modified Volatility indexes are neutral.

RSI, STO:

5/15 RSI and Stochastics are neutral.

Stocks of Interest:

ASTNshort term traders sold positions acquired at 2-2 1/4 support at the recent dropping rally top at 2 15/16. CMRawaiting the cobalt contract,the terms of which will be cash flow in U.S. dollars.

OEX Perspective and Discretionary Trades:

CBOE TRINS were mixed in the AM and bullish in the PM supportive of calls. No discretionary trades recommended at this time.

OEX Mechanical Trades:

OEX Momentum model picked up the September 535 call. Its theoretical price is 22 whereas the close on Monday was 17.5. This theoretical vs actual prices is skewed to the conservative side and the actual bottom line is much better than presented in the OEX Trade Listing. Here is the OEX Signal Report.

MomentumCycles commentary for the open of Wednesday,August 26,1998:

CRB about to break the major 12 year low at 198.Action in bonds{dropping yields on any increase in fear},XAU{breaking the 86-87 lows},and the recent inverted yield curve,prospective and current debt defaults{Russia,Malaysia,possibly some banks in Japan?},are working against the normal tendency of the U.S. equity market to rally strongly from oversold price{the lower 3.5% band},seasonal month end reinvestment,and excessively negative sentiment.Nevertheless,unless another global news bombshell such as a Chinese yuan devaluation hits{likely eventually but not immediately},a rally into fierce resistance off the last August 21-24 520 OEX low retest appears to be grinding its way up.

The action suggests this is a bear bounce,within the range 520 OEX and 8800 DJIA.

All things come to an end,even this endless bear in hard assets and commodities,just not yet.XAU has a pattern of a 5-7 year high to low cycle, and a 3-4 year low to high cycle.If this is a typical XAU cycle,we are near the end of the high to low pattern.Traders should be watching the dollar and bonds for the eventual end of their uptrends,and some of that fear capital to flee into XAU,possibly as soon as this fall.

Here is a new chart that shows some intermarket relationships.

A buy occurs when the SPX Z score(magenta line) crosses up through the zero line as it did on Tuesday. CRB(Y) and T-Bond Yields(TYX) are at a low as they were back in June when the SPX Z score crossed up through zero. In that sense you could say we have an intermarket relationship that is conducive to some up action in the SPX immediately ahead.

8 A.M. update:

Look for multiple lows in TICK between -600 and -1000 with higher lows on the TICK and lower lows on the DJIA. Don't buy the first one, take the second if the divergence is there. TICK tends to bottom before price.

Trend:

ADHL is holding on to its Buy mode. OEX reg support is 528 and resistance is 551. Super Timer is improving and could possibly turn bullish on one strong day of good breadth. DJIA closed near the 200 day moving average. NHNL is gradually improving. An SPX close above 1100 would be a positive event that could change the picture for the next five trading days.

Fibonacci Zones: Indexes are working the Triple Switch lines in an attempt to change the daily trend to up. This is very likely to happen on Wednesday setting off a push to the upper fib resistance levels. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast is neutral for the balance of the week.

Breadth:

McOsc issue and volume have completed a complex basing pattern typically found in the major sell offs in the fourth quarter and the spring. Their breadth neutrality has placed them in neutral just below the zero line. The INDU is enamored with the 200 day average which has been known to be a launching pad in the past. CODI is near the Sell Alert but the OEX is in the center of its trading channel. We could see the OEX move to the upper side of the channel and CODI move below the Sell Alert line before this payroll cycle is over next week. In the meantime it is adviseable to trade with the tide of money flow. Opening gaps like today are indicative of the first wave of moneyflow. We should see more of these the remainder of the week and early next week.

Momentum Cycles Cones:

Neutral and consolidative. Resistance at 547 and 551. Support at 535 and 520. Here are Tuesday's and Wednesday's cone charts.

Pivots:

Hourly trendline(cyan) is curving upward. Support for OEX and DSP8U was found on the keyline and the hourly trendline. Wednesday could very well see a continuation of Tuesday's impulse even though it faded in the PM. The fading should be expected as the month end buying slacks off to give prices a chance to dip back for better entry points.

Volatility:

OEX Zone Timer crossed the zero line in a bullish trend. Modified Volatility indexes are neutral.

RSI, STO:

5/15 RSI and Stochastics are in a rally trend.

Stocks of Interest:

ASTNhas support at 2 1/8 and rsistance at 2 5/8.Short term traders previously sold positions at the third rally top at 2 15/16 bought at support at 2 -2 1/4.Previous positions were sold at 3 5/8 on the second rally top. CMRis basing awaiting the cobalt contract for which there are 8 bidders.CMR has the only new primary supply for this commodity.Other suppliers are Morocco,Russia{which is unreliable due to the present collapse of economic infrastructure},the Congo and Zaire{both unreliable and unstable}.

OEX Perspective and Discretionary Trades:

CBOE TRINS went through a bullish, flat, bearish, bullish cycle. Discretionary seasonality would normally be recommending the buying of a September call at the money or one strike above support. As of Tuesday this would mean the 540, OEWIH, or 545, OEWII. Implied volatility is still running at elevated levels making the potential gains working against a declining volatility.

OEX Mechanical Trades:

OEX Momentum model is holding the September 535 call, OEWIG. OEX Signal Report, OEX Trade Listing.

MomentumCycles commentary for the open of Thursday,August 27,1998:

When we saw the global markets strongly weak across the board Wednesday 7:45 a.m.,it became obvious an early over -1000 negative tick was in the works.Accordingly we immediately advised a long entry only after that huge downtick was achieved.Traders who bought long OEX calls near the lows in the a.m. and went with the oft suggested 1.50 trailing profit stop or trendline stop were able to profitably sell near the highs.DJIA was down well over 120 near the large early a.m. negative ticks,then rallied to -25.At 12:20 -12:45 the trailing or trendline stop would have been activated.After the post-lunch highs,resistance near 8600 caused sell programs to take it down to late afternoon, whereupon short covering took it up near to the close.Entrances in the 18 area on OEWIF on the large negative ticks,for example, could have been played for a daytrade to the 21 area,and for those still long,the close was 20,still profitable.Use a 1.50 stop loss for remaining longs from the initial entry price.

Bonds still the refuge for bad news anywhere in the world,and just as good news is climactic and cyclical{July 17}, bad news items tend to cluster together.We repeat,poor Europe pre opening,strong bonds pre opening,weak start for OEX likely here.Weak bonds,strong Europe,strength likely here.Note that as of 7:30 a.m. Eastern Thursday,global markets are predicting a very weak day in the U.S. equities markets,so stops on any remaining longs should be monitored as discussed.

A third consecutive basing day in this cluster in the put/ call ratio{equity only 169.123/284.509}which would under most circumstances give us a 2-3% bounce.Option premium ratio's present inability to get out of the .40's for many days consecutively is disturbing,however.A reading in the low .50's would normally be very bullish,but no readings above the high .40's have been seen for some time.One good rally day could do it.

520 OEX still terribly important support,below which could be a waterfall.

XAU in a downtrend with no visible number to look to for support, as the 86-87 lows were broken decisively with today's 57.73.CRB nearing the 22 year low of 196.12,and possibly the 1977 monthly low of 195.60.Close Wednesday was 198.17.We are seeing selling in some commodities unrelated to long term supply and demand,but related to the present global need for liquidity to service debt.

Trend:

ADHL is holding on to its Buy mode. OEX reg support is 528 and resistance is 551. Super Timer dropped deeper into the consolidative level and the Cumulative Super T says the direction is down for the index, at least being long or holding calls would be done so for reasons other than breadth, such as seasonality for example. DJIA closed near the 200 day moving average. NHNL dropped back into crash mode as the declines dropped to a whopping 583 on Wednesday from 292 on Tuesday.

Fibonacci Zones:

Indexes closed near the weekly balance lines giving little hint of direction.

DJIA OEX SPX NDX S and P 500 futures XAU TYX

Astrocast:

Astrocast is neutral for the balance of the week.

Breadth:

McOsc issue and volume are oversold. The INDU is stuck on the 200 day average. CODI is clueless but the OEX is in the center of its trading channel.

Momentum Cycles Cones:

Neutral and consolidative. Resistance at 547 and 551. Support at 535 and 520.Cone Wednesday.Cone Thursday.

MoPivots:

Pivots not available this p.m.

Volatility:

OEX Zone Timer is neutral. Modified Volatility indexes are neutral.

RSI, STO:

5/15 RSI and Stochastics are neutral.

Stocks of Interest:

ASTNmaking lower highs but still holding support at 2 - 2 1/4.Sales for traders who bought at support were recommended at the 2nd and 3rd descending tops at 3 5/8 and again at 2 15/16.A break below 2 would be bearish and the stock would have to rebase for quite a while.Fundamentals haven't changed,but presently any smaller company stock without large institutional interest,plus not being in the S and P 500 and benefitting from buy programs is hostage to the current bear market in smaller issues.They still have the equivalent of the market cap in available cash,but remember in 1987 Drefuss sold for cash value!

CMR will announce a cobalt contract with firm numbers shortly.Until that time,it will suffer along with other mining issues.The difference here is that there is simply no other supply of cobalt of this grade available,and prices are RISING.Last big sale was 1.50 U.S. over the bid estimate.A run to 1.60 is not unreasonable if the cash flow and profit numbers come out as projected.

OEX Perspective and Discretionary Trades:

CBOE TRINS had the choppiest, most indecisive chart witnessed here since they have been tracked. They provided absolutely no clues today. Calls may suffer an implied volatility implosion if a strong rally occurs, for example, a drop in VIX from 30 to the high teens will produce small profits even if the direction is determined correctly. This is even more true if they are held for lengthy periods, but if the holding period is measured in hours or days the effect will not be as significant. This is one of those times when futures would be a better "option". Even so if the OEWIG were purchased this morning at 14 3/8 at the over -1000 tick as suggested on the 8 AM update a four point gain could have still been realized.

OEX Mechanical Trades:

OEX Momentum model is holding the September 535 call,OEWIG. OEX Signal Report, OEX Trade Listing.

To quote from the MomentumCycles commentary for the open of Thursday,August 27,1998:

"When we saw the global markets strongly weak across the board Wednesday 7:45 a.m.,it became obvious an early over -1000 negative tick was in the works.Accordingly we immediately advised a long entry only after that huge downtick was achieved.Traders who bought long OEX calls near the lows in the a.m.{Wednesday} and went with the oft suggested 1.50 trailing profit stop or trendline stop were able to profitably sell near the highs.DJIA was down well over 120 near the large early a.m. negative ticks,then rallied to -25.At 12:20 -12:45 the trailing or trendline stop would have been activated.After the post-lunch highs,resistance near 8600 caused sell programs to take it down to late afternoon, whereupon short covering took it up near to the close.Entrances in the 18 area on OEWIF on the large negative ticks,for example, could have been played for a daytrade to the 21 area,and for those still long,the close was 20,still profitable.Use a 1.50 stop loss for remaining longs from the initial entry price.

Bonds still the refuge for bad news anywhere in the world,and just as good news is climactic and cyclical{July 17}, bad news items tend to cluster together.We repeat,poor Europe pre opening,strong bonds pre opening,weak start for OEX likely here.Weak bonds,strong Europe,strength likely here.Note that as of 7:30 a.m. Eastern Thursday,global markets are predicting a very weak day in the U.S. equities markets,so stops on any remaining longs should be monitored as discussed.

A third consecutive basing day in this cluster in the put/ call ratio{equity only 169.123/284.509}which would under most circumstances give us a 2-3% bounce.Option premium ratio's present inability to get out of the .40's for many days consecutively is disturbing,however.A reading in the low .50's would normally be very bullish,but no readings above the high .40's have been seen for some time.One good rally day could do it.

520 OEX still terribly important support,below which could be a waterfall.

XAU in a downtrend with no visible number to look to for support, as the 86-87 lows were broken decisively with today's 57.73.CRB nearing the 22 year low of 196.12,and possibly the 1977 monthly low of 195.60.Close Wednesday was 198.17.We are seeing selling in some commodities unrelated to long term supply and demand,but related to the present global need for liquidity to service debt."

MomentumCycles commentary for the open of Friday, August 28, 1998:

We quoted from the Thursday commentary above to show the proper use of trailing 1.50 profit stops or trendline stops,and/or stop losses.Traders who entered Wednesday at the lows and sold at the trailing stop that same day did well even as a countertrend trade.Tight stop losses would have kept remaining long losses to a minimum.

As a respected trader has said" YOU HAVE TO DO WHAT YOUR INDICATORS TELL YOU. WHAT DO THEY TELL YOU? IF THEY ARE VALID INDICATORS THEN PLACE YOUR TRADE ALONG WITH THE STOP AND TAKE WHAT THE MKT GIVES YOU..OR TAKES FROM YOU. THEN DO IT AGAIN AND AGAIN. EVENTUALLY THEY WILL BE RIGHT AND IF YOU KEEP THE LOSSES SMALL AND LET THE PROFITS RUN YOU WILL STILL WIN."

In this recent series of put/call equity signals,we now have 4 consecutive basing days.A fifth day is highly probable Friday,due to the amount of fear now present.More basing days are probable early next week as well.Now that the horse has left the barn,people will seek to bar the door{buy crash insurance after a good deal of damage has been done}. It is also highly probable that Friday will see CODI enter the buy zone,although an actual pivot may wait till next week.More selling early Friday is also probable.

5 day rate of change is now -5%,oversold,which would normally call for a bounce within 1 or two days,as well as the closing -600 tick.However,any bounce here, especially if it was to extend into early September,would likely encounter another wave of selling pressure.

It is to be noted that traders employing our global equity switching strategy{from money market to global equities,and back} have a total loss of 2.7% from July 17 to Thursday close and are presently 100% in money market,using TIAA -CREF funds as a representative trading vehicle.

Payroll seasonality starts as late as 2 or 3 trading days before the end of the month and as early as 5 days. This time the sentiment was so negative that the start was deferred to the short end. Market orders for OEX long calls Friday could be used near the open, with attendant stops (1.50 below the entry price,1.50 trailing profit). However,if it opens on the downside,then of course wait for the tick to turn from -400 to -600.

A drop in VIX from 40 to twenty would be commensurate with a skyrocketing market. The volatility drop will work against call appreciation, so traders should be aware that this makes option purchases more risky than usual at this time.

Trend:

Well, Thursday lived up to its reputation of being a down day and VIX closing in the high end of its range. High VIX implied volatility today was 41.09, commonly found in fourth quarter corrections. October 1987 saw the VIX reach 150 intraday. ADHL is closer to a sell, but retains its buy mode. OEX regresssion channel support is 513.6 and resistance is 529. Super Timer has joined the NHNL in the Crash Mode category. Cumulative Super T trend remains down. DJIA tagged the -5% band and closed way below the 200 day average.

Fibonacci Zones:

Support was found in the vicinity of the lower weekly fib support zones. If they go any lower than this we will have to throw the monthly fib zones on the charts. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast looks worse next week than this week, if that is possible.

Breadth:

McOsc issue and volume are more oversold and reached reversal levels. The 10% McOsc is getting setup for another trendline buy signal. The INDU became unstuck from the 200 day average as the 4,5 day momentum oscillators reach for the bottom. CODI finally moved off the "dime" and registered megabuck evaporation of market capitalization as it approaches the Buy Alert level.

Momentum Cycles Cones:

Oversold...former support is now resistance at 520. Support is at anybody's guess. Cone aperture has opened widely as the implied volatility jumped from 30 to 40. Here are Thursday's and Friday's cone charts.

Pivots:

OEX S and P 500 futures

Volatility:

OEX Zone Timer dropped off the chart in crash mode. Modified Volatility indexes are closer to a buy than a sell.

RSI, STO:

5/15 RSI and Stochastics are oversold.

Stocks of Interest:

ASTN CMR ASTN has present support at 2 - 2 1/4 and resistance at 2 1/2.Short term traders sold positions bought below 3 at 3 5/8,and positions bought at 2 - 2 1/2 at 2 15/16.CMR suffering lack of support in the perception that Russia will sell cobalt,which they don't have.A rally on the cobalt contract news is highly probable,when announced.

OEX Perspective and Discretionary Trades:

CBOE TRINS were bearish right out of the gate. OEX looks like a washout with higher lows throughout the day. Obviously the moneyflow seasonality trade is not working yet. It usually kicks in within three trading days of the end of the month. Apparently there is a lot of selling into strength and is overwhelming the cycle.

OEX Mechanical Trades:

OEX Momentum model is holding the September 535 call, OEWIG. The other models picked up the September 515 calls using closing data. Of course the mechanical models are totally oblivious of the sky falling around the world. OEX Signal Report, OEX Trade Listing.

MomentumCycles Commentary for the open of Monday, August 31, 1998:

We were stopped out with the 1.50 suggested stop loss on our attempt to buy the low tick Friday.We did not expect another consecutive daily -1600 type tick.The present market is,by some measures,in one of the 2 or 3 most oversold conditions in the last 20 years,one that has confounded quite a few technicians{Barron's Aug.31 issue,page MW9}.Bernie Schaeffer tried to buy the bottom last Monday,Larry Mcmillan says its"screaming oversold",and even Don Fishback was caught holding some long positions late last week.5th consecutive basing day in the equity put/call ratio,which has in the past occurred at major bottoms{October 1987}.Remarkably, this is the second series of 5 consecutive basing days recently.Total put /call was .95 on CBOE.Normally a rally back to near 1060 SPU would occur with these readings.

The fall through the 200 day moving average has caused quite a bit of trend follower selling and margin calls. The Rainbow daily, weekly and monthly charts have turned down, and systems that use slower trend following methods that would be similar to this put out a sell signal on Friday.

Perhaps we will need to see VIX in the 100 region and a put/call of 2 to 1, breaking historical records, before this part of the down move is over. Nevertheless, we will try to enter again on the long side. Look for an over 1000 negative tick Monday for a buy alert . Wait until the ticks stops going down . Once the large negative tick reverses and price starts to turn, we will try to enter long OEX calls most likely near either 500 or 495. Use a 1.50 stop loss and a 1.50 trailing profit stop.

CRB and XAU continue their downward spiral to levels that we can only guess at, as previous support levels have been crashed through in the global search for liquidity.

Trend:

ADHL retains its buy mode. OEX regression channel projection oscillator is oversold. Super Timer has returned to the consolidative zone after a one day dip into crash mode. NHNL remains in the Crash Mode category as the new lows swamped the new highs 828 to 15. That ratio is clearly characteristic of bear markets. Cumulative Super T trend remains down. DJIA could not get near the 200 day average and instead headed for the 8000 support level.

Fibonacci Zones:

Fib zones have an extremely wide range between weekly support and resistance. Next week could be one of the wildest ones on record as the indexes ping pong between support and resistance. That is assuming, of course, that the direction isn't one way.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast looks worse next week than this week, if that is possible.

Breadth:

McOsc issue and volume are more oversold and reached reversal levels. Looks like a double bottom is being put in on the McOsc as the summer lows look like the spring lows, look like last October lows. The 10% McOsc is getting setup for another trendline buy signal. The INDU became unstuck from the 200 day average as the 4,5 day momentum oscillators reach for the bottom, onbalance volume continues to drop. CODI made an anticipatory buy signal with its pivot at the Buy Alert line. NYA breadth illustrates an improving picture in breadth after the washout on Thursday.

Momentum Cycles Cones:

Oversold. Cone aperture has opened widely as the implied volatiltiy remains at 40. Projection oscillator has reached the oversold level. The beginning of month seasonality may yet provide a bounce next week. Support is currently near 505. Below are 2 probability cone charts for the OEX for next week. The height of a cone is based on VIX implied volatility and the number of days looking forward. If VIX drops from 40 to mid twenties then the cones will narrow significantly reducing the amount of price movement as shown on the cone 41 and cone 26 charts. VIX may drop a few points a day on a rally. In October of 97 VIX hit 50 and in October 1987 it hit 150. The projection oscillator is just now reaching the oversold level in time for an up move next week and if VIX stays high, then price could move up significantly. The caveat is of course that the projection oscillator trends in oversold in bearish mode and vix increases then we would expect prices to be in the portion of the cones below the keyline. If we get the rally then prices would be in the upper parts of the cones above the keyline. The Cone41 chart assumes VIX remains at 41.6 for the entire week which is not reasonable to expect. Cone26 assumes VIX remained at 26 all of next week wich is also not reasonable. The truth should be somewhere between with vix declining each day if we get the beginning of month seasonality kicking in. Each day a new cone set is attached to the close of each day and the new probability is entered into the cone equations. Experience has shown that a one day look ahead picks the extremes pretty well since volatility does not change much from one day to the next, but over a week it could change a lot. Green cones have the probability for an average day. Red cones are the target for a strong day. The outer cone is for crash up and down type days. Only 5% of markt movement occurs outside the outer cone and 9/27 was one of those days. Truth is we mostly get a combination of green and red cones.

Pivots:

OEX and DSP8U found support at S1 on Friday. In extremely volatile times statistical pivots seem to catch the support and resistance better.

Volatility:

OEX Zone Timer is extremely oversold. Modified Volatility indexes are closer to a buy than a sell.

RSI, STO:

5/15 RSI and Stochastics are oversold and need to turn up for a legitimate buy signal.

Stocks of Interest:

ASTNchurning in the 2 1/4 to 2 1/2 area. CMRdropping with all other commodity related issues,awaiting firm cash flow numbers on the cobalt contract.

OEX Perspective:

CBOE Put TRIN dominated the trading on Friday as both trins ran in the bearish zone. OEX only dipped as far as S1 on the pivots. That is encouraging for Monday. These call option charts (OEWIC, OEWID, OEWIG) and put option charts (OEWUD and OEWUE) reflect the yo yo nature of bottoms and tops, perhaps a bottom in the current situation.

OEX Mechanical Trades:

OEX Signal Report, OEX Trade Listing.

To quote from the MomentumCycles Commentary for the open of Monday, August 31, 1998:

"Perhaps we will need to see VIX in the 100 region and a put/call of 2 to 1, breaking historical records, before this part of the down move is over. Nevertheless, we will try to enter again on the long side. Look for an over 1000 negative tick Monday for a buy alert . Wait until the ticks stops going down . Once the large negative tick reverses and price starts to turn, we will try to enter long OEX calls most likely near either 500 or 495. Use a 1.50 stop loss and a 1.50 trailing profit stop.

CRB and XAU continue their downward spiral to levels that we can only guess at, as previous support levels have been crashed through in the global search for liquidity."

MomentumCycles Commentary for the open of Tuesday, September 1, 1998:

After the opening,a large negative tick{over 1000} was recorded on the initial down move where a countertrend entry on the long side could have been made using the parameters discussed above.We were quickly stopped out with the 1.50 protective stop during the first oversold bounce,prior to the free fall that occurred when the institutions pushed the panic button and began program selling in earnest.This is one of those occasions that demonstrate the reasons why we use such a close stop.Initial target of 495 to 500 OEX was an area that found temporary support,but once broken,buyers fled the scene into bonds once again.

Even the legends of trading such as Soros,Tudor Jones,and Niederhoffer have been repeatedly caught short into a buying panic or long into a severe decline.Only a discipline requiring close stops,hedges and/or only a very small bet on any one trade can avoid an eventual total wipeout of trading capital.That includes long term holders of IRA mutual funds.Buy and hold for total retirement monies has become a national religion,likely a false god in a bear leg.It is to be noted that our global equity switching strategy{global equities to money market and back based on daily NYSE A/D oscillation}had a total loss of 2.3% since July 17,while many buy and hold global equity or domestic equity funds are down over 25%.It is also to be noted that although this time end of month/beginning of month seasonal strength did not work,in 1929 a similar strategy switching from a representative equity fund to money market and back netted 0% on the year,in a year that saw some "blue chips" down 95%.No discretionary trade is currently recommended.A bounce is due,even overdue.Look at RSI 5 and 5 day rate of change which are in historically rare oversold numbers.An attempt to find a rally top to short may come coincident with the end of delayed seasonality,according to ASTROCAST,seen below.

Trend:

ADHL lost its buy mode on Monday. OEX regression channel projection oscillator is oversold. Super Timer is back in crash mode, and CumSuperT is still saying the direction is down. NHNL remains in the Crash Mode category as the new lows swamped the new highs 1209 to 20. That ratio is clearly characteristic of bear markets. DJIA could not get near the 200 day average and instead headed for the 8000 support level which failed and now it is testing the 7500 to 7600 area.

Fibonacci Zones:

Fib zones have an extremely wide range between weekly support and resistance. Support was found at the weekly fib support levels. That is pretty magical in and of itself.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast looks like a virtual meteorite created a hole in the stock market. Here are astrocast charts for August and September.

Breadth:

McOsc issue and volume oscillators have now reached the October 1997 lows. The 10% McOsc is getting setup for another trendline buy signal. The INDU dropped further from the 200 day average as the 4,5 day momentum oscillators reached further for the bottom, onbalance volume continues to drop. CODI's Friday pivot aborted into a continued sell trend above the Buy Alert line. NYA breadth illustrates just how much of a disparity there was in the advances and declines.

Momentum Cycles Cones:

Oversold. Cone 9/01 aperture has opened widely as the implied volatility reached 50.66 and closed at 48.33 today. Projection oscillator has reached the oversold level. OEX is at support from the peaks of the fourth quarter of 1997. Note also on the Cone 8/31 chart how the low for Monday stopped at the intersection of the regression channel line and the support line from last fall.

Pivots:

OEX classical and statistical pivots are shown for a better definition of just what happened today. On the OEX Stat pivots the OEX hit a low of -2.5 standard deviations which only occurs 1.24% of the time. Anything over 2 classifies as a crash day. The stat pivots also show where prices will go if we have a repeat performance on Tuesday.Here is the S and P futures pivot.

Volatility:

OEX Zone Timer fell off the chart in crash mode. It is best to avoid buying calls or puts when it drops off the scale. Modified Volatility indexes extended their move into the Buy Alert region. Actually a move beyond the band can indicate a trend change and a move back inside is indication of a potential reversal. The buy generated on Friday lasted only a few minutes on Monday and the MVI moved back outside the band.

RSI, STO:

5/15 RSI and Stochastics are in deep oversold and need to turn up for a legitimate buy signal. Preferably they would cross above the Alert line.

Stocks of Interest:

ASTNstill cycling around 2 -2 1/2;perhaps a buy for short term traders will set up again this fall. CMRwill be one of the few survivors of the present commodity related issue wipeout,once cash flow from needed cobalt sales is factored into price.Cobalt is an essential component of war related material,such as planes.CMR is one of the few suppliers of this material not in a politically risky area of the world.Sales will be in U.S. dollars.Presently price is showing little support;longer term cash flow will support a large multiple expansion.

OEX Perspective:

CBOE Put TRINS were extremely bearish after the opening fake out. They even accelerated their bearishness right into the close. As we have seen in the past these TRINS don't have much correlation from one day to the next. OEX dipped into the statistical definition of crash days as discussed above in the pivot section. To say the seasonality play has not worked this time is an understatement. Best to wait until the VIX returns to normal levels from its crash mode levels of 40 to 50.

OEX Mechanical Trades:

OEX mechanical models are still holding the 515 and 535 calls indicated on the OEX signal report

MomentumCycles Commentary for the open of Wednesday, September 2, 1998:

At the lows Monday and Tuesday,option premium ratio was .13,astonishingly low.Put/call an amazing 7th basing day consecutively,5 day rate of change -12% and -9%,RSI 5 at levels normally at least calling for 7897,Tuesday's intraday high,now short term resistance.A retest of the downside approximately 4 and 10 days would be similar to past patterns.Bonds are in an area that seems extremely overbought,with Tuesday possibly an important reversal.With intraday multi-hundred point moves both up and down,discretionary advice is that all but the most nimble intraday traders should stand aside temporarily.Market is still extremely oversold,almost historically oversold.

Trend:

ADHL remains on a sell. OEX regression channel projection oscillator bounced off of oversold. Super Timer is now positive and needs to remain there if this market is to have standing legs. NHNL remains in Bear mode. DJIA made a lower low, lower high, but higher close and needs to make higher lows to be believed.

Fibonacci Zones:

Lower Fib shaded zones acted like resistance on chart after chart. Seasonality would normally be sufficient to take the indexes to the weekly balance(red dash line), especially with the Ratio Oscillators so oversold. In fact it would take it to the upper fib resistance if the zones were not spread so far apart. Here is the S and P 500 futures chart.

DJI NDX OEX SPX TYX XAU

Astrocast:

Astrocast is not encouraging for bulls for September.

Breadth:

McOsc issue and volume oscillators made a valiant turnup on Tuesday. Perhaps they will reach the zero line in time for another short sale. The INDU onbalance volume improved, but would need day after day after day to keep the Bull alive. CODI finally made a buy pivot from extremely oversold zone. It is positioned for a trend that could be sustained for a few days, long enough to reach the indeterminate zone.

Momentum Cycles Cones:

Oversold.

Pivots:

OEX and DSP8U closed above the keylines and on the hourly trendlines. This is a positive development.

Volatility:

OEX Zone Timer rose all the way to the border of Extremely oversold and Oversold. There is room for more rally and still retain the Bear classification. Modified Volatility indexes made Buy Band crossings.

RSI, STO:

5/15 RSI and Stochastics have turned up for a legitimate buy signal. Preferably they would cross above the Alert line and move up to the center line before turning down again.

Stocks of Interest:

ASTN near 2 to 2 1/4.Good news would spike to 3 or 4,a break of 2 would be bearish.Good prices here may come in October and/or December.CMRat .65,basing for a rally on cobalt news due soon.

OEX Perspective:

CBOE Put TRINS were extremely bullish after the amateur hour on the open. Perhaps the monthly seasonality is beginning to exert itself now. The delayed effect might just have compressed the buying power into fewer days resulting in more consecutive 100 point plus days ahead.

OEX Mechanical Trades:

No changes from Friday. These models were early again by several days and are suffering the consequences of having entered at higher premiums.

MomentumCycles Commentary for the open of Thursday, September 3, 1998:

A wide range of 7400 to 7950 within the past few days has traders taking intraday positions and quickly changing directions.The RSI 5 bounce off the zero area at 7400 met sellers determined to get out even near the previous breakdown at 8000.500 points in 2 days and the resistance of the lower 3.5% band looks similar to October 97.At that time,a retest of the lows occurred 4 and again 10 days later.Once the lower 3.5% band proved support,the 21 day moving average proved resistance.After the 21 day moving average proved support, a move to the upper 3.5% band was in the cards.The difference here is we are still below the lower 3.5% band.Only a strong move above the band into the 21 day moving average area will retain the similarities to last October.That has not happened yet,and in fact,Wednesday's rally failed where retracement patterns often fail.

The global debt implosion that was the start of last October's panic is in a much more advanced stage at this point.CRB freefall and competing currency devaluations make buy and holders in their IRA accounts beginning to question the wisdom of fully invested positions,according to fund flow information.The real panic would occur at a close below 7400,and at that point,historical levels would project at least 6800-7000.

The most bullish scenario would be a successful retest at 7600,then a strong over 1% up day on higher volume starting with Friday into next week.Astrocast,however,does not support strength much into September.

No discretionary trade is recommended presently,due to extreme intraday volatility and the current price position of OEX.

Trend:

ADHL remains on a sell although the indicators are improving. OEX regression channel projection oscillator bounced off of oversold. Super Timer is now positive and needs to remain there if the rebound is to continue. NHNL is making a dramatic improvement hinting that the worst may be over for now. DJIA ran into resistance at the -5% band.

Fibonacci Zones:

Lower Fib shaded zones acted like resistance on chart after chart again on Wednesday. Seasonality would normally be sufficient to take the indexes to the weekly balance(red dash line), especially with the Ratio Oscillators so oversold. Thursdays are not known to be generous days for longs.

OEX SPX NDX S and P 500 futures TYX XAU DJIA

Astrocast:

Astrocast is not encouraging for bulls for September.

Breadth:

McOsc issue and volume oscillators improved again. The INDU onbalance volume is working a new support level, 4 and 5 day weighted momentum oscillators are attempting to turn up. CODI finally made a buy pivot from extremely oversold zone. It is positioned for a trend that could be sustained for a few days, long enough to reach the indeterminate zone. There is technical talk of waiting for a retest of the Monday lows before a sustainable rally can be produced.

Momentum Cycles Cones:

Oversold, volatility is dropping and cones are narrowing.

Pivots:

Pivots start Thursday in a somewhat neutral posture, neither grossly oversold or overbought as far as their position in the pivot range. Here are the OEX classical, OEX statistical, and DSP8U pivots.

Volatility:

OEX Zone Timer is stuck in the Extremely oversold zone in bear mode. Modified Volatility indexes are at the neutral band (sometimes a reversal band).

RSI, STO:

5/15 RSI and Stochastics have turned up for a legitimate buy signal. Preferably they would cross above the Alert line and move up to the center line before turning down again.

Stocks of Interest:

ASTNstuck around 2 to 2 1/4.A typical pattern for small stocks is a late fall low,often a December 15 low,followed by a rally into the new year.Tax selling in these issues may have moved earlier this year.Any placement of trading systems would spark a rally to 3 or 4.CMRbasing at .75,awaiting firm numbers on cobalt contracts.

OEX Perspective:

CBOE Put TRINS were mixed and bearish with a brief bullish flirtation. These seem to have more usefulness intraday than from day to day. Excessively high volatility has prevented a suitable discretionary multiday trade. VIX really needs to drop back into the low 20's or high teens before risk is more suitable.

OEX Mechanical Trades:

Time ran out on the 535 call which is far out of the money now. The 515's are still held by the remaining models. The premature entries essentially made these losers rather quickly. Here are the OEX trade listing and the OEX signal report.

MomentumCycles Commentary for the open of Friday, September 4, 1998:

Fall 1987 or 1997? The bottoming formation present in the current position of OEX could be looked at either way. If this is a true crash scenario, it is to be noted that three eclipses in one month are coincident with crashes that occur between the 34th and 41st day after a market top. The current situation is similar to 1929 and 1987. We're entering the 34th to 41st day risk period. If this is 1997, then we are forming a complex bottom where the test of the 7400 area will succeed. Complex bottoms often require another retest about 6 days out from here.Today and Friday are the 4th day area after the initial bottom,mentioned previously as a time for a retest. Global fear, as shown by the recent XAU rally, is still high. US dollar is weakening along with political confidence. Swiss franc,countering the dollar,has an eventual upside target which may be 75. Bonds look toppy. No trade is recommended until more information about the current similarities to the 1987-1997 fall scenario is studied,perhaps early next week.

Trend:

ADHL remains on a sell. OEX reg projection oscillator lost a little momentum on a weak Thursday. Super Timer dipped back to consolidation. NHNL is in bear mode. DJIA closed right on the S4 cumulative price volume support at 7682.

Fibonacci Zones:

Lower Fibs provided support again except for the XAU which is in breakout mode. Not too surprising since the major mining conference of the year is next week.

XAU SPX OEX NDX S and P 500 futures TYX DJIA

Astrocast:

Astrocast says rally next week.

Breadth:

McOsc issue and volume oscillators are still oversold. The INDU onbalance volume is working a new support level, 4 and 5 day weighted momentum oscillators are attempting to turn up. CODI finally made a buy pivot from extremely oversold zone. AIQ DJIA says sell mode, however it has had a record of being a contrary indicator, at least on the buy side.

Momentum Cycles Cones:

See chart.

MoPivots:

See charts.OEX S and P 500 futures

Volatility:

OEX Zone Timer is stuck in the Extremely oversold zone in bear mode. Modified Volatility indexes are at the neutral band(sometimes a reversal band).

RSI, STO:

5/15 RSI and Stochastics have turned up for a legitimate buy signal. Preferably they would cross above the Alert line and move up to the center line before turning down again.

Stocks of Interest:

ASTNat 2,a break below which would be very bearish.Small stocks often rally strongly in mid-december -january.This may have to wait,and rally from a lower level.

CMRawaiting cobalt news.

OEX Perspective:

CBOE Put TRINs were mixed and bearish. These seem to have more usefulness intraday than from day to day. Volatility remains too high. VIX really needs to drop back into the low 20's or high teens before risk is more suitable.

OEX Mechanical Trades:

No changes.

MomentumCycles Commentary for Tuesday, September 8, 1998:

Due to a hard drive crash on one of the computers, there will be no charts available this evening. We hope to have charts available as soon as the problem can be rectified.

Global market rallies on Monday and late Monday pm support probability of a rally in the US in the OEX on Tuesday. Market is still very oversold. Another test of the 7400 area on Friday resulted in even more extreme negative sentiment. New trading range appears to be 7400 on the down side and 7950 to 8000 on the up side. A close below 7400 would be very bearish and project 7000 to 6800. We had commented before about the possibility of a crash between day 34 and 41 after a bull market top. We are still within those parameters. Market top was between July 17 and 21. Alan Greenspan was making noises on Friday about an eventual interest rate cut. That news sparked the global rally on Monday with probability of followthrough on Tuesday. The market is still well below the lower 3.5% band, and has been for a while now. Assuming that 7400 was retested successfully on Friday, an attempt to tag the lower 3.5% band at about 7950 looks very possible. Slower term measures of trend, such as 3 day cumulative breadth, are marginally rising.

XAU is putting in an impressive 2 day performance off of multi-year lows. In the '30's, XAU was an impressive performer. Homestake was one of the largest gainers in the Depression. XAU is short-term overbought. We could try to buy a pullback if it occurs to the moving average or the upper band. Presently, XAU is well above the upper 3.5% trading band.

WE are seeing some signs of life in the CRB, specifically in corn and beans.

ASTN is still holding in the 2 1/4 area. Positive news will be required to get this one back into the 3 or 4 area.

CMR basing in the 0.70 area. We expect news of a cobalt contract any day now. A spike higher on the news back to old resistance levels would be a normal development.

To quote from the MomentumCycles Commentary for Tuesday, September 8, 1998:

"Due to a hard drive crash on one of the computers, there will be no charts available this evening. We hope to have charts available as soon as the problem can be rectified.

Global market rallies on Monday and late Monday pm support probability of a rally in the US in the OEX on Tuesday. Market is still very oversold. Another test of the 7400 area on Friday resulted in even more extreme negative sentiment. New trading range appears to be 7400 on the down side and 7950 to 8000 on the up side. A close below 7400 would be very bearish and project 7000 to 6800. We had commented before about the possibility of a crash between day 34 and 41 after a bull market top. We are still within those parameters. Market top was between July 17 and 21. Alan Greenspan was making noises on Friday about an eventual interest rate cut. That news sparked the global rally on Monday with probability of followthrough on Tuesday. The market is still well below the lower 3.5% band, and has been for a while now. Assuming that 7400 was retested successfully on Friday, an attempt to tag the lower 3.5% band at about 7950 looks very possible. Slower term measures of trend, such as 3 day cumulative breadth, are marginally rising.

XAU is putting in an impressive 2 day performance off of multi-year lows. In the '30's, XAU was an impressive performer. Homestake was one of the largest gainers in the Depression. XAU is short-term overbought. We could try to buy a pullback if it occurs to the moving average or the upper band. Presently, XAU is well above the upper 3.5% trading band.

WE are seeing some signs of life in the CRB, specifically in corn and beans.

ASTN is still holding in the 2 1/4 area. Positive news will be required to get this one back into the 3 or 4 area.

CMR basing in the 0.70 area. We expect news of a cobalt contract any day now. A spike higher on the news back to old resistance levels would be a normal development."

MomentumCycles Commentary for the open of Wednesday, September 9, 1998:

We regret that the computer system that uses satellite feed for intraday charting has crashed, and the new drive has not yet been installed. Because of this, no charts are available until the new computer system is online. Commentary will be made using secondary computer systems that do not require intraday update. We are working on this and hope to solve the problem shortly.

The projected rally to tag the lower 3.5% band occured. We did not expect it all in one day. Our call for markets to speed up with larger and larger point moves and entire bull and bear legs to occur within one day seems to be coming true. The 7 basing equity put/call days in succession led to a 5% rally, which is within historical parameters. So far, this appears to be simply a bear bounce to the lower 3.5% trading band. Retracement theory allows for a move up to 8138. Normal 2nd week cycles would see a high Wednesday or Thursday with a fall into Friday. We might look for a put trade from Thursday into Friday. With Tuesday's move, 5 day rate of change is already overbought. 5 day rate of change is presently +6%. Closing tick was +925, which would normally see a pullback within 1 or 2 days. Tuesday's rally was sparked by large institutions front running the large interest rate drop that Alan Greenspan has been hinting at. Bonds were down on the news, and we had projected bonds were short term overbought in the 5.2% area. XAU has made 2 attempts to go through 65. A close above 65 would target 70 to 74 as a target. A trade might be made to buy any close above 65 with increasing volume above the previous day with 61.74 as a stop loss. CMR still rebasing in the .70 to .75 area. This one could spike up to previous resistance easily on any news of a cobalt contract. ASTN at 2 3/16, still holding at previous support. Positive news will be necessary to move this back up to 3 or 4, and 2 would be broken easily on any move below DOW 7400, and any lack of new news.

So in summary, we're looking for an end to the short term rally mid to end-week with a short bias Thursday into Friday. XAU close above 65 projects 70 to 74, bonds look toppy. Hope to have computer systems up and running as soon as possible.

To quote from the MomentumCycles Commentary for Tuesday, September 8, 1998:

"Due to a hard drive crash on one of the computers, there will be no charts available this evening. We hope to have charts available as soon as the problem can be rectified.

Global market rallies on Monday and late Monday pm support probability of a rally in the US in the OEX on Tuesday. Market is still very oversold. Another test of the 7400 area on Friday resulted in even more extreme negative sentiment. New trading range appears to be 7400 on the down side and 7950 to 8000 on the up side. A close below 7400 would be very bearish and project 7000 to 6800. We had commented before about the possibility of a crash between day 34 and 41 after a bull market top. We are still within those parameters. Market top was between July 17 and 21. Alan Greenspan was making noises on Friday about an eventual interest rate cut. That news sparked the global rally on Monday with probability of followthrough on Tuesday. The market is still well below the lower 3.5% band, and has been for a while now. Assuming that 7400 was retested successfully on Friday, an attempt to tag the lower 3.5% band at about 7950 looks very possible. Slower term measures of trend, such as 3 day cumulative breadth, are marginally rising.

XAU is putting in an impressive 2 day performance off of multi-year lows. In the '30's, XAU was an impressive performer. Homestake was one of the largest gainers in the Depression. XAU is short-term overbought. We could try to buy a pullback if it occurs to the moving average or the upper band. Presently, XAU is well above the upper 3.5% trading band.

WE are seeing some signs of life in the CRB, specifically in corn and beans.

ASTN is still holding in the 2 1/4 area. Positive news will be required to get this one back into the 3 or 4 area.

CMR basing in the 0.70 area. We expect news of a cobalt contract any day now. A spike higher on the news back to old resistance levels would be a normal development."

To quote from the MomentumCycles Commentary for the open of Wednesday, September 9, 1998:

"We regret that the computer system that uses satellite feed for intraday charting has crashed, and the new drive has not yet been installed. Because of this, no charts are available until the new computer system is online. Commentary will be made using secondary computer systems that do not require intraday update. We are working on this and hope to solve the problem shortly.

The projected rally to tag the lower 3.5% band occured. We did not expect it all in one day. Our call for markets to speed up with larger and larger point moves and entire bull and bear legs to occur within one day seems to be coming true. The 7 basing equity put/call days in succession led to a 5% rally, which is within historical parameters. So far, this appears to be simply a bear bounce to the lower 3.5% trading band. Retracement theory allows for a move up to 8138. Normal 2nd week cycles would see a high Wednesday or Thursday with a fall into Friday. We might look for a put trade from Thursday into Friday. With Tuesday's move, 5 day rate of change is already overbought. 5 day rate of change is presently +6%. Closing tick was +925, which would normally see a pullback within 1 or 2 days. Tuesday's rally was sparked by large institutions front running the large interest rate drop that Alan Greenspan has been hinting at. Bonds were down on the news, and we had projected bonds were short term overbought in the 5.2% area. XAU has made 2 attempts to go through 65. A close above 65 would target 70 to 74 as a target. A trade might be made to buy any close above 65 with increasing volume above the previous day with 61.74 as a stop loss. CMR still rebasing in the .70 to .75 area. This one could spike up to previous resistance easily on any news of a cobalt contract. ASTN at 2 3/16, still holding at previous support. Positive news will be necessary to move this back up to 3 or 4, and 2 would be broken easily on any move below DOW 7400, and any lack of new news.

So in summary, we're looking for an end to the short term rally mid to end-week with a short bias Thursday into Friday. XAU close above 65 projects 70 to 74, bonds look toppy. Hope to have computer systems up and running as soon as possible."

To quote from the MomentumCycles Commentary for Thursday, September 10, 1998:

"Thursday on Wednesday? We had projected a short term rally top mid-week with a pullback after a Wednesday or Thursday top. Normal Thursday weakness started at 10:30 on Wednesday. It was intensified by leaks mid-morning about Kenneth Starr's report that is headed to Congress about possible impeachment. The actual news came out at 3:30. More and more noise is being made about resignation. The high positive closing tick on Tuesday's rally projected a short-term reversal in 1 or 2 days. Wednesday's closing tick was negative, but not highly negative, which is often the precursor to a reversal. In other words, a negative 1200 or negative 1700 closing tick could be a selling climax, just as 5 days of equity put/call basing ratios could be a selling climax. WednesdAY's trading seemed to be the initial bounce back off of important resistance. Resistance at 8030.57, is in the ballpark for about a 37.5% retracement of the decline from July 17-21, and cumulative breadth smoothed by 3 days is slowing its ascent, and the 5 day rate of change of 0, which is neither overbought nor oversold, places us in the position of shorting one day late. The rally top appears to have been Wednesday at 10:30 am. Accordingly, we will look for a later trade setup other than the one originally intended for Wednesday-Thursday.

XAU failed to cross above the important 65 level. A close above this level would project 70 to 78. There were stochastic nonconfirmations of the high 64 XAU price and a failure to break through 65 means the trade we had looked for may not be in the cards. We would wait for a close above 65 to go long XAU for a move to 70 to 78.

ASTN and CMR are both basing at support, CMR awaiting the expected cobalt contract. ASTN had 4 times average daily volume, with heavy buys at the 2.15 area. It could be that important news may be coming out. The risk here is that early tax selling may impact smaller technology issues that do not have large institutional backing. Without a lot of positive news in these issues, smaller caps often decline into December 15 before staging an end-of-year rally.

Bonds are attempting to surmount resistance at 52.62 to 52.68. A close below 52.62 means further new highs in bonds are likely. However, bonds are extremely overbought, and the dollar, which has been one of its main supporters, is riskier with the prospect of the Fed lowering rates. Foreign holders of bonds have been enjoying the double whammy of a strong dollar and a strong treasury market. Foreign currencies become more attractive with the prospect of the Fed lowering rates, so T bond gains translated into foreign currencies become diminished.

Foreign currencies, particularly the Swiss franc versus the dollar, are looking more attractive.

Intraday computer systems are not yet available, so intraday charts are not yet available. We have to reinstall all of the intraday programs on a new hard drive. We are sorry for the delay."

MomentumCycles Commentary for the open of Friday, September 11, 1998:

We were taken into a long position on XAU on the move above 65. Stop is 61.74. We are targeting 70-78. The move into gold stocks and the break to new highs in the bonds show an acceleration of fear. Daytraders who bought the first tick above the previous all-time bond high at 52.62 had a 1.78% cash return with the close at 51.76.

Friday to Tuesday has the potential of being an equity crash scenario. Thursday was the 37th day after the bull market top. In 1929, after a 2 day rally of over 10%, the market resumed the decline, and day 38 was a crash. Friday is day 38. This is not to say that a crash will occur, but the psychological underpinnings for such an event are converging. First of all, the Ken Starr material is due at about 2:30 on Friday. Global markets were horrendous on Thursday, and Asia looks pretty weak Thursday pm. Bank stocks (BKX) lost 4.3% today due to exposure to Latin America, which is the latest in the dominoes to fall. FNM a high risk for longs with a close below 56.

NYSE Closing tick was not washout oversold in the negative 1000 area. Instead, closing tick was +66. 7400 is key. It must hold this time. If not, 7000 or 6800 is the first level to look for. This is only the second day in this series of equity put/call basing levels, unfortunately. Notably, also, on Thursday the dollar declined, showing international exiting of US equities, due to domestic political turmoil. In terms of the comparison to 1929 and 1987, there are about 10 more trading days where serious impulsive downside action might likely take place. Only a close above DJIA 8030 could seriously change the picture. Incidentally, our global switching strategy got hit for a 1% loss this week. That's just a flea bite. Until a rally lasting more than one day occurs, the switching strategy, which trades between money market and global equities based on the advance/decline line, is likely to take tiny hits. Once a sustainable rally occurs, it will be aboard.

However, regardless of the cyclical and historical similarities to 1987 and 1929, it would be unusual for the market to bottom on a Friday. More likely would be a weekend when people would not want to be holding long positions in US equities, with a possibility of Friday breaking the 7400 area, with the resulting run on stop losses and a Monday-Tuesday low. We normally buy the Friday close of pre-ex week and sell the first sign of strength in ex week. However, over the next week or so, equity risk is increasing due to potential impeachment actions. More and more politicians are being forced to take positions on this important issue, and the world is increasingly fearful of a hog tied United States superpower. The resulting power vacuum is adding to political and financial instability.

CMR was actually up on the day. Still basing in the 70 to 75 cent area. Commodity prices are a little stronger with oil and metals leading the charge on Thursday. ASTN in the 2 and 5/32 area on high volume.