Market Breadth Data******************************

Saturday, December 23, 2006

Merry Christmas
Happy New Year

This is the last update for this year.
There are no CIT dates the first week of January 2007.

Saturday, December 16, 2006

Time for the half-monthly update.
By now it should not come as a surprise how well the CIT dates correspond to market turns.

A new target on the SPX was hit, and the picture continues to be bullish, although the negative divergence with $ flow, discussed a few days ago, still persists.

I’ve mentioned before the Zero lines which originated from the Summer 2003 down swing, and which have contained the current rally pretty well so far.
The 2003 swing lasted 58 days. 58*2.618 = 152.
7/18/2006 + 152 = 12/16/2006

Tuesday, December 12, 2006

Here’s a chart that warns of trouble ahead. It tracks the actual inflow and outflow of money from the SPX.

Also notice the high correlation with the Overbought/Oversold indicator.
Which is quite remarkable, since they measure two completely different sets of data.

Saturday, December 09, 2006

Today I would like to experiment with isolating the short-term cycles. This leaves the following CIT dates for December: 7, 13, 18, 26 & 29. I’ll leave the CIT calendar unchanged, though, for comparative reasons.

If my assumptions are correct, then the close on January 2nd should be below 1400.

Thursday, December 07, 2006

Looking at the SPX today reminded me of a chicken who's head has been chopped-off, but that keeps on running.

There will be some changes made to the CIT calendar over the week-end.

Tuesday, December 05, 2006

The SPX didn’t want to wait until Tuesday and promptly made new highs, getting overbought in the process.

Not all indices made new highs, however, so there is still room for concern about the downside.

Since today is a CIT day, I can only paraphrase my comment from last week and venture that today’s highs will provide a reasonable short swing entry point.

Sunday, December 03, 2006

Have we reached the end of the rainbow ?

The charts above and the correlation charts from last month seem to suggest so.All of the correlation charts point out to either a sizeable correction or choppy trading in December.

Judging by the high number of CIT dates I would opt for a choppy market environment.

From a classical TA point of view the trend is still intact, and there are many support lines below the current close, the most important being 1388 and 1369.
The Overbought/Oversold indicator is not of much help right now, being stuck mid-range. It is a day or two away from reaching overbought levels once again, but I think we’ll need to wait until Tuesday before the market regains its strength.

Wednesday, November 29, 2006

These are the CIT dates for December.

The key levels to watch today are 1393 and 1793 basis the futures.

There will be a more extensive update over the week-end.

Saturday, November 25, 2006

Two weeks ago I spoke about the interaction between the CIT dates and the Overbought/Oversold (OB/OS) indicator. Last week was a textbook example of how they complement each other.

The OB/OS indicator reached its peak on 11/16. However, the SPX registered its highest reading on 11/22 just as anticipated by the CIT date. Since OB/OS has been deteriorating for several days now, it has already reached oversold levels.

I took the liberty of extending the chart above by 1 day to point out where the indicator will be on Monday if the Friday sell-off continues. Considering that 11/27 is a CIT date, I would presume that the lows on Monday will provide a good swing trade entry point.

Friday, November 24, 2006

The chart above begs the question: what are the odds of the index closing exactly at a cardinal Sq9 number, on a CIT date, and squaring in time and price with the 01/14/03 high, which has contained the current rally several times already?

Sunday, November 19, 2006

There are no changes this week, neither in the daily nor weekly signals.
My major concern is that, judging by the Overbought/Oversold indicator, there doesn’t seem to be much upward potential between now and the next CIT date on Nov. 22nd.

I’ve also updated the correlation chart, and everything is still in gear.

Action in today’s markets is not out of line with the past. For the period January-November the DJIA is exhibiting better than .9 correlation with 7 of the last 126 years. For the period June-November the number more than doubles to 15. Both composite correlation charts point to a sell-off in December. Does this mean that in 2006 the markets must go up until the first week of December, and then have a sizeable correction? Not necessarily, although it’s worth keeping in mind as a potential outcome.

Tuesday, November 14, 2006

Here's an update with all the relevant dates and
suport/resistance lines.

I've also included two more calendars to follow a mechanical Buy/Sell system which tends to capture the larger swings. For the most recent weekly signal you need to scroll back to July '06

Sunday, November 12, 2006

Surprise, there were neither higher highs, nor lower lows, and instead, the SPX just tagged last week highs. So, we should give the current trend the benefit of the doubt. Therefore, keep on watching for a movement above or below the support/resistance lines and channels, as suggested before.

Considering this is opex week, I would interpret the next two CIT dates as marking the usual option player shakeout, and then a fizzle for the rest of the week.

I’ve made frequent references to my Overbought/Oversold (“OB/OS”) Indicator. It is a mixed leading/coincidental indicator. At times it enables me to predict several days in advance when the market will lose or gather steam either on the upside or the downside. It’s been very gratifying to see how well this indicator works together with the CIT dates. The chart above makes the point.

I’ve also included the results from a mechanical long/short trend-following system which I like to keep an eye on.

Wednesday, November 08, 2006

Here's another set of support/resistance levels.

Monday, November 06, 2006

This is the updated version of the correlation chart from 10.14th.

Friday, November 03, 2006

The good news is: the CIT dates are working just fine.

The problem is: I got wrapped up in my mechanical hi-lo-hi-lo sequence and ignored the possibility of 2 highs or lows in a row, which has in fact occurred once before.

In any case that changes the whole outlook. Considering that the market is currently getting oversold, November 5 – 13th the SPX should move sideways/up.
The key to watch is whether we have a higher or lower high during that period.

Thursday, October 26, 2006

These are the November CIT dates.

My working hypothesis is simple:
- we keep grinding higher until Friday, November 3rd, consolidating along the way;
- this is followed by a real correction (as opposed to a mere consolidation) November 7 – 13th,
- a dead cat bounce November 13-14th, and a new slide until the 22nd.

Sunday, October 22, 2006

The SPX started and finished the week closing at 1369.
So 1369 proved to be an important level after all.

The calendar day chart above shows interesting relationships.

The 2 trendlines in grey demonstrate that the SPX 1369 level squares perfectly with the January ’03 highs, while the July 18th low squared with the March 12th, 2003 low.
Is there some other hidden relationship between these two sets of dates?
Consider this: the 2003 swing low lasted 58 days. The current swing is 98 days old (98 = 58 * 1.618).

Any other interesting coincidences?

From 03/24/00 to 07/24/02 = 852 CD’s; 852 * 1.786 = 1522;
08/22/02 + 1522 = 10/21/06

From 03/24/00 to 08/22/02 = 881 CD’s; 881 * 1.5 = 1322;
03/13/03 + 1322 = 10/23/06

From 03/24/00 to 10/10/02 = 930 CD’s; 930 * 1.618 = 1379;
01/13/03 + 1379 = 10/22/06

From 03/24/00 to 12/02/02 = 983 CD’s; 983 * 1.5 = 1475;
10/10/02 + 1475 = 10/23/06

Where does that bring us ?
Back to 1369.
It is still the key level to watch.
The other support and resistance levels are pretty clearly defined as well.

By the way, although I expect a pull-back next week, I don’t agree with Crawford’s immediate crash scenario. My broad market overbought/oversold indicator is reaching oversold levels. At this rate the bottom should be reached around the 24th – 25th, which is also my next CIT date. In my experience with this particular indicator, you can’t expect market crashes from oversold levels, nor major break-outs from overbought readings.

Saturday, October 14, 2006

OK, time for a quick update....

We got the choppy move and a new swing high.
The question is -- where do we go next?

Without going into too much detail, I’ll just point out some key factors.
The SPX is at the top of the weekly channel published on September 23rd.
There is an important Gann Sq9 level right above at 1369, which also happens to be exactly 360 degrees up from the July 18th low (orange lines). This should roughly coincide with Dow 12000. Support is well defined by Gann Zero Lines and prior support/resistance levels.

A look back in history may provide us with a glimpse of the future. The chart below depicts a .89 correlation between the DJIA now and many years ago, when the markets were open on Saturday (it drops to .8 for the period January - October).

Saturday, September 30, 2006

Here are my CIT dates for October.

You'll notice the cluster of dates October 2nd - 4th.
If prior history is any indication, it tells me that the market will remain choppy within this time frame before a new trend reasserts itself.

Friday, September 29, 2006

What better way to mark the EOM and EOQ than with a new all-time high for the DJIA?

That's what I expect to happen on this last for September CIT date.

In the meantime, the index is getting overbought, but there is still room for one more push up.

Early October should offer some interesting opportunities....

Wednesday, September 27, 2006

Today, being a CIT date, coinciding with a EOM and EOQ period, I expect the index to move sideways/down before the next turn.

The October CIT dates will be published over the week-end.

Tuesday, September 26, 2006

Here's the CIT update.
The Zero Lines from Summer 2003 continue to contain the price action pretty well.

Saturday, September 23, 2006

Sometimes it helps to step back from day-to-day action and look at the big picture

Friday, September 22, 2006

Yesterday's rejection at resistance, accompanied with negative divergence in market internals, was a clear sign that the uptrend is in trouble.

From a classic TA point of view, the SPX is confined by the boundaries of the rising wedge and resistance from the May 8th high.

From a Gann perspective, the index is still controlled by the Zero lines from May 2001. Resistance is at 1325, while support is at 1310 and 1303. These numbers increase by 1 point per TD.

In my preferred scenario I missed again the September 20th CIT date. I guess my subconscious is unwilling to accept that date. When taken into consideration, however, it defines the action so far pretty well, and points to Sept. 22nd as a low. Wouldn't that come as a surprise to many?

Wednesday, September 20, 2006

The last three days were a perfect example of what I like to call a "stealth correction" -- the indices moving higher or sideways on deteriorating internals.

Everybody thinks they are overextended while, in fact, they are getting oversold without this being visible to the naked eye.

Tuesday, September 19, 2006

Going into the CIT date the market is right in the middle of the overbought/oversold range.

The indicator is displayed in a P&F format just because it makes it more intuitive and comprises the same elements as the overbought/oversold oscillator displayed at the beginning of this blogg.

The preferred scenario going forward is a pull-back into September 19th, a rally into the 22nd, and another turn.

I should note that a CIT doesn't have numeric characteristics; i.e. when a CIT comes it doesn't mean that the index should drop or jump a certain minimum number of percentage points. Rather, it means that if the index was moving up to that point, it should now move sideways or down, and vice versa -- if the market was flat it should move up or down. Whether the move will be strong or weak is determined by the overbought/oversold nature of the market going into the CIT date, and the time-span before the next CIT date.

Monday, September 18, 2006

Everything seems to be coming nicely together.

For the record, it seems that I missed a CIT date for September 20th.
Since it wasn't included in the original chart, I won't change that one now.
It could happen when you work with 5 years worth of CIT dates.

By the way, the system was backtested for 100+ years.

I've given myself until the end of the year to test in public how the system performs in real time. After that I'll reassess and decide what to do with it.

Friday, September 15, 2006

Waiting to exhale....

Everything is unfolding according to plan and on schedule.
The indices are in the upper third of their overbought/oversold range.

When you take the guessing game out of the picture, trading becomes a matter of patience, discipline and execution.
Cheap thrill seekers should look elsewhere for entertainment.

Thursday, September 14, 2006

So far I’ve tried to stay away from giving price targets, simply because the focus of this blog is time targets.

While waiting for the next CIT date, however, it may be interesting to look at the above trend lines which originate in the period May-September 2001.

Wednesday, September 13, 2006

Oversold markets + CIT Date = Strong Move

At this rate the indices will get overbought in 2 days.
This being option expiration week, however, things are expected to cool off a little bit.

Tuesday, September 12, 2006

Year-end Forecast

Since everybody seems to have a favorite year-end model, it may be a good time now, while waiting for the next CIT date on Oct.19th, to publish my own year-end forecast.

While I'm more in agreement with Nenner's forecast rather than with Neely's or the NAHB comparison, mine seems to call for a strong rebound a little earlier than Nenner does.

We'll see....

Sunday, September 10, 2006


The purpose of this blog is to use cycle analysis to identify future Change in Trend (CIT) or swing dates for the US indices.

Most of the technical analysis work will be done using proprietary tools and methods developed during the last 10+ years.

The SPX will be used as a proxy, although the original work is done on a different set of data.
The analysis should be of best use for futures, options or ETF traders.

Comments for the week of September 11th.

There is one CIT date for this period, and it actually falls on Sept. 10th.
This, right from the beginning, illustrates one of the problems that inevitably will be encountered with this type of analysis -- some of the CIT dates will fall on weekends or public holidays. However, it shouldn't be of much concern, since once we know that a change in trend is imminent, the problem boils down to whether to act before or after the CIT date, or even both.

In solving this problem, I use a particular type of oscillator, which tells me whether the market is oversold or overbought going into the CIT date.

The screencapture shows this indicator in action.

Going into Friday, it was heading into oversold readings but had not turned up yet.
Therefore, I think that this is one of those cases when it's best to take half a position before the CIT date, and half a position on any weakness after the CIT date.

The next CIT date is September 19th.

Good luck.

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