Weekly TimeCycles & OptionFlows highlights

This week we have a lot of charts so let's dive just right into it.

20yr Treasury looks like a classical Double Top which means higher Interest Rates and a stronger Dollar...

OIL looks overbought and complacent which makes it prone to a correction.

...same as the SPYDER

and the Institutional Money portfolio where the hot money is playing AAPL, GOOG, XOM, CAT...

The Momentum tells the same for the Spyder..

Oil seems topping...

the Tech sector could run another week.....

and now the PREC. METALS which see positive money flows.

...and also could find support be it in EUROS...

..or in Dollars

...but expect the correction to linger on a couple of more DAYS...

...also for Gold in Euros

...and for Gold in Commodities...

whereby Gold in Dollars could bottom right here....

Muddy Waters in BREADTH-Land

The trend has turned up but we take the emerging divergences as warning signs. This rally doesn't seem to have the broad support we want to see.

(No surprise here at a time when AAPL, GOOG, C, BAC, JPM through the Options and Futures market dominate the tape.)

King Dollar is still retesting the old BREAK-OUT level of 76.60

This will be the key tell whether the Europeans overcome their challenges or whether the FED silently starts QE3 in the MBS space.

Buy the rumor ...sell the news

They're supposed to find the final solution in Europe over the next week. The Rosetta stone that does it all. Technically we have an extremely overbought market with a neg divergence emerging right into the news event.

Let's see whether it is different this time.

VIX Fair Value has reached a critical level

The last times we'd reached that level Mr. Market decided to dive for 2weeks+......

Weekly TimeCycles & OptionFlows highlights

When we look at the SPYDER Optionspicture we see not much FLOW into speculative Positions in a pretty much over-bought market. The Option chain structure indicates (RGW, bottom right) a risk of Volatiliy.

The QQQ's mirror that statement.

But when you look at the key Volume/ Trading vehicles of the BIG BOYS you see they liked to play AAPL (as always) and GOOG. No real touching of materials or banks.

You see who pushed the monster rally of the last 2 weeks, not real investment but hot AAPL and GOOG lottery tickets.

Expect the PRO's to take some money off the table.....i.a.W. expect Vola!

The also get confirmed by some of our MOMO and TimeCycles work that you will find below.

....expect all risk assets to be pulled into the cooling off period which will also include the precious metals. Mid November could become a good timing target.

Classical Retest in the DOLLAR

Now things get exciting!

If the Retest holds the break-out then we should see some correction in the Asset markets. If not........then we are back in dreamland where downgrades are interpreted as 'good news'.

Good SHORT set up in the S&P500

Wait for the break and see where it takes you ...

Wonder-Rally in the Sentiment Gage

On the bottom you see our VIX_OSC and how the gage has taken off like a rocket crossing the zeroline and becoming overbought (following our last base case scenario).

We looked at similar instances and found 4.

Characteristics of the 4:

• 1998 kicked of the final leg of the NEW ECONOMY rally
• all other recent instances where short covering events that led to at least one more re-test

Sentiment still hints at a short covering rally

The Spyder scenario turned into the base case

last weekend we were torn btw 2 scenarios and it turned out we have a clear winner.

We had expected a continuation into this week (MONDAY's drop), followed by a rally.

Now we expect the rally to continue into next week....

(Notice to the readers: There will be no posts this weekend)

Breadth in the Miners indicate a bottoming in GOLD

...chances are good for a bottoming process unless we are in 2008 kind of world.

Europe has been saved again .....by rumor ...for how long?

Dollar Strength pull the market down

It's October, it's Monday and the EURO breaks.

...and this is how our Correlation Analysis looks for last week. We notice a clear pattern with a strengthening Dollar triggering the RISK OFF trade.

Weekly TimeCycles & OptionFlows highlights

The Spyder paints a muddy picture, which seem to suggest that a bounce could arrive soon on the heels of another quick exhaustion event in early October.

The SPYDER TimeCycles show the same ambivalence with respect to the first week of October. It really is a 50:50 bet. Interestingly the Spyder just expects a bounce into the middle of October.....

....whereby the QQQ's go into the opposite direction.

The TLT still are in a topping process and is moving from one extreme to another.

Gold & Silver show the opposite in a sense that they seem to work on a bottom. (Could we see another downdraft in early Oct....sure).

Bottom line:

• Equities: high degree of uncertainty -> Vola !
• Long Bond: topping
• Prec. Metals: bottoming
• FX: no clear picture from a TimeCycles & OptionFlow perspective

Is the Gold correction over

Something changed on Wednesday when you look at last week .......

DOLLAR BULL is alive

We have been bullish on the Dollar for quite some time. Looks like we are now aiming at the next resistance and Fib50% level.

ISE and CBOE Options data confirms the bearish VIX_OSC view......cont'd

Similar structure in the ISE and CBOE Options data like in 2008.