Weekly Outlook

From Between The Hedges
Economic reports for the week include:
Mon. - Consumer Credit
Tues. - None of note
Wed. - Wholesale Inventories
Thur. - Trade Balance, Import Price Index, Initial Jobless Claims, Univ. of Mich. Confidence, Monthly Budge Statement
Fri. - None of note
A few of the more noteworthy companies that release quarterly earnings this week are:
Mon. - El Paso Corp.(EP)
Tues. - Alcan(AL), Cablevision Systems(CVC), EchoStar Communications(DISH), MBIA Inc.(MBI), McKesson Corp.(MCK), Transocean Inc.(RIG)
Wed. - Cisco Systems(CSCO), DR Horton(DHI), Federated Department Store(FD), JDS Uniphase(JDSU), Whole Foods(WFMI)
Thur. - Dell Inc.(DELL), International Game Technology(IGT), Kohl’s(KSS), Pacific Sunwear(PSUN), Target Corp.(TGT), Urban Outfitters(URBN)
Fri. - None of note
Other events that have market-moving potential this week include:
Mon. - CIBC Healthcare Conference, Goldman Software & IT Services Conference, Bear Stearns Smid-Cap Conference
Tue. - Goldman Software & IT Services Conference, Bear Stearns Smid-Cap Conference, CIBC Healthcare Conference
Wed. - Morgan Stanley Global Consumer & Retail Conference, the Fed’s Santomero speaking, the Fed’s Poole speaking, Oppenheimer Restaurant Conference, Citigroup Transportation Conference, CIBC Healthcare Conference, the Fed’s Pianalto speaking
Thur. - Citigroup Transportation Conference, the Fed’s Bies speaking
Fri. - None of note

The Cycle Model

The Cycle Model

Every security may be classified into one of four cycle phase quadrants – Accumulation – Up quadrant (A), Advancing – Advancing quadrant (B), Distribution – Down quadrant (C) and Termination – Terminating quadrant (D).
The Cycle Gauge takes a time aspect into account by indicating a number after the cycle phase. For example, A7 means the stock (or index) is now seventh day (or week or month depending on the time frame) in it’s Accumulation phase. A trend’s maturity may thus be judged and the relative risk to reward ratio may be evaluated.
By examining the cycle phase of a group of securities in a market (or sector), an excessive reading of D phase (D%) may often lead to a market rally while an excessive reading of B phase (B%) may often lead to a market pullback. Such a tool enables us to often anticipate turning points in the market ahead of the actual turns.

Cycle Gauge and Market Internals for week ending Nov 4th, 2005

S&P500

Weekly Market bull/bear skew (A+B) has changed to BULLISH – 52% (prev 37%).
There has been very strong rotation from Phases C and D into A and B. The trend in Phases C and D has changed from up to down, while Phases A and B have begun to trend up strongly.
The weekly Cycle Gauge has changed to A1. This indicates that the market has rotated from the Termination Phase to the Accumulation Phase.

77.2% (57.3% prev) of stocks closed above their 4 week MA.
54.5% (48.5% prev) of stocks closed above their 30 week MA.
55.7% (51.9% prev) of stocks closed above their 52 week MA.

Comment

• CG is UP in all three time frames.
  
• Weekly CG rotated into the Accumulation Phase.
  
• Volatility seems to have stalled in the medium term time frame and the RSI of volatility is flat.
  
• Expect to see strong trending action in the next few weeks as volatility begins to pick up momentum.
  
• 77.2% of stocks are above their 4week MA => this confirms the new short term up swing – watch for this to cross back below 70 for a short-term reversal signal.
  
• 54.5% of stocks are above their 30week MAS => this indicator is now trending up => strength returning to the market.
  
• Expect the current up swing to continue.

NASDAQ100

Weekly Market bull/bear skew (A+B) has changed to BULLISH – 62% (prev 41%).
There has been very strong rotation from Phases C and D into Phases A and B. Phases A and B are now trending up strongly while Phases C and D trend down – exactly what we should as an up swing develops strongly.
The weekly Cycle Gauge is B22. This indicates that the market has rotated back into the Advancing Phase.

78% (63% prev) of stocks closed above their 4 week MA.
65% (49% prev) of stocks closed above their 30 week MA.
59% (46% prev) of stocks closed above their 52 week MA.

Comment

• CG in all three time frames is UP.
  
• Weekly CG has rotated back into the Advancing Phase (B22).
  
• MT volatility has formed a cyclical trough and is beginning to build momentum => the current up swing should continue to develop.
  
• ST volatility has begun to pick up again, suggesting that the current up swing may develop further.
  
• 78% of stocks are above their 4week MA => confirms the ST up swing – look for a cross back below 70 for a signal that the swing may terminate.
  
• The trend in the 30 and 52Wk MA bullish pct is up => suggests that the current swing has some strength behind it.
  
• The daily Cycle Phase rotations favour a continuation of the current rally.
  
• Watch close by overhead resistance.
  
• Expect the current up swing to continue.