INTERSTATE-35 ROAD KILL TRADING SYSTEM - Update
Wednesday September 15, 1999 - Pre-Market Open
If you want to review the charts while reading this update, you can do so at:
homestead.com
I have deviated from my usual format. I have taken a look at four primary Indices. Often we look to these Indices for cause and effect on each other. Then I am going to pose questions, I hope folks will respond to on the MDA Thread.
First I want to define a couple acronyms.
SRL = Support/Resistance Line
SRP = Support/Resistance Price Action Area
OMC = My Overall Market Composite Index
For your reference I linked uploaded charts both a Semi-log Combination Chart of my OMC, the TYX, XAU and DYX. I have provided it in both a MONTHLY chart for multi-decade reference and a WEEKLY chart for multi-year reference.
Although my data is incomplete and all four charts do not go back to the early 1970s, I think you can still glean a lot from the relationships or lack of, from the combination charts.
While a member of the Foundation for the Study of Cycles, I received a monthly publication. In the mid-eighties they predicted that rates would decline through the nineties. I would say their expectation faired fairly well, as evidenced by the TYX chart. The TYX penetrated the lower band of its descending trading range (dark blue dotted line - based from the lows in mid 1986), last October 98 and put in a significant bottom. Since, the long-bond?s rates have been climbing steadily higher. Of course, one should note the rates began this rally as the Fed dropped rates three times in a row. Now just as the Fed has begun to raise rates, the TYX has begun to stumble in its climb. (Anyone care to venture a guess as to why?)
The multi-year descending resistance line, (dark green line) identifies the primary resistance to the rate climb, prior to reaching the upper band of the trading channel. The TYX has been rising in a ?rising wedge? (dark blue solid lines) which portends a retrace of the formation. Together they give a strong signal, a retrace will occur. As rates have neared the multi-year descending resistance line, the rally indeed began to stumble.
Many talk about the fall of the Dollar being cause for alarm in the equities Market. Allow me to call your attention to the decline of the DYX from its high in Feb 85 to a significant bottom in Jan 88. My OMC reveals the Overall Market made a fairly steady climb from Feb 85 until Oct 87. (Anyone care to venture a guess as to why?)
In the month of 5/95, the DXY found a trend reversal bottom at the lower band of its multi-year sideways trading channel (dark blue dotted lines), based from the 6/89 high. Finding support during this rally at the rising SRL based from the lows of 5/95. (gray line) In addition, it found primary resistance each time it has approached the upper band of its multi-year sideways trading channel. (dark blue dotted line) The last test of the upper band was in 7/99.
The XAU has been in a multi-year sideways trading channel (dotted dark blue lines) for as long as I have data. However, since finding trend-reversing resistance at the upper band of that sideways trading channel in Feb 86, the decline has been ruled by a falling resistance line (dark green), with only brief penetration in May of this year. The coming intersection of the declining resistance line and the lower band of the multi-year trading channel signals a decision is coming from precious metals. (Anyone care to venture a guess as to which line will rule?)
My OMC has been fairly well contained in a rising trading channel since 1974, (dark blue dotted lines) until a sustained rally launched from the low of Oct 98 propelled equities into a break above which began December 98. I believe this break above the upper band of the multi-decade rising trading channel was indeed the beginning of the blow off top in the equities Market.
Notice that the initial support line (gray line) based from the low in 94, became a SRL in 96, with it primarily becoming final resistance to rallies since the end of 97. The fanning out of support lines off the Oct 98 low has a common theme. First, they are support and immediate evolve after the first break to final resistance to the next rally, coupled with resistance from the SRL based from the Oct 98 low.
Click on the link to my daily OMC semi-log chart, which reveals a close up view.
All comments welcome...
Note: Several on the MDA thread that rarely offer warnings, have done so this week. I must now add my own. My OMC Index is signaling a significant top may well be forming.
Regards,
LG
Disclaimer: The above is my opinion only and I reserve the right to be wrong. Do not base any investment decision solely on anyone person's views or analysis. Do your own research and take responsibility for your investment decisions. |
