FWIW:...
Analysis - Wednesday, July 24, 2002 8 p.m.
We have been looking for a market low this week. We stated that low
would be followed by the strongest rally since the May 17 highs. The Count
from the Middle Section, discussed in our July newsletter, called for some
sort of low this week. We stated in that newsletter, that given the Cycles
forecast for this week, that low was most likely near July 23, plus or
minus 1 day. The Dow reached a closing low of 7702 on Tuesday, July
23. The Dow reached a print low today, July 24, of 7532, and an intraday
low of 7489.54. The Dow then began a rally of 669 points, to a print high
for the day of 8202.02. At the highs the Dow was up almost 500 points for
the day, and closed up 488 points, which we hear is the second-largest one
day point gain in history.
The press will undoubtedly credit today's rise to such things as a possible
lowering of rates by the Fed, the arrest of such corporate executives as at
Adelphia, Congress trying to bolster investor confidence, or some other
such nonsense. The fact is that even if the Fed rumors prove true, if
lower rates from the Fed were truly the solution to the market's problems,
the Dow would be well above 11000 right now. You must train yourself to pay
no attention to the news or the rumors which are occurring coincident with
the swings up or down in the market. They are normally of little real value
when it comes to predicting what the market will do in the future.
While today was a good day, at some point tomorrow we would expect
another nasty decline, a decline that will probably scare most of the
street once again, and call today's strong rally into question. If that
decline holds above today's lows, the odds will be high that a wave 3 low
has been seen.
We have discussed the wave structure, and that we were now near the
bottom of wave 3 down, several times over the last two weeks. However, we
have received several questions about this the last few days, so it is
obvious we have not made our position clear.
The current decline began from the March highs of this year. That
decline will unfold in 5 waves down to the low we expect this year. The low
we looked for this week should be the bottom of wave 3 of that 5 wave
decline. It should be followed by the strongest rally since the May highs
of this year, which will be wave 4 of that 5 wave pattern. Once wave 4
peaks, another decline to new lows should follow, and that will be the
final 5th wave down, which will create the final bottom for this decline
from the March highs of this year. Keep in mind, we are in no way saying
that the 5th wave low, which is most likely in August, will mark a final
bottom for the entire Bear Market. Since the Gann Year Chart turned down in
March of 2001, it has been our position that no final Bear Market bottom
was likely before the year 2006, and we explain our reasoning for this
position in our July 15th newsletter. But we believe the 5th wave bottom
in August will be followed by a major rise in stock prices, in both the Dow
and the Nasdaq, into the year 2003. From the high due next year, the next,
and worst phase of the Bear Market will begin. However, we do not want you
to spend too much time worrying about what will follow the top due in 2003.
That is too far in the future, and worrying about it now will only detract
from your ability to profit during the rise into next year.
Assuming the overseas markets respond favorably overnight, which we
believe they will, there should be some spillover rally tomorrow before a
stronger correction sets in, as we discussed earlier in this update.
However, if we are correct about a wave 3 low this week, the rally should
ultimately continue higher next week.
Source: www.JerryFavors.com |
