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Strategies & Market Trends : Tech Stock Options
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To: Joel Brussell who wrote (5708)3/3/1997 12:15:00 AM
From: Tom Trader   of 58727
 
Good evening Joel,

I have been through your postings on ADX as well as that by others. As I mentioned, I don't use the ADX indicator on its own but more in combination with other indicators.

As you may be aware, Welles Wilder was the originator of the ADX indicator and he advocated its use in conjunction with the ADXR and the CSI. He intended that the ADXR be utilized as an indicator of the trending characteristics of a market. Wilder essentially suggested that one should use a trend following system when the ADXR indicated that the market was trending strongly and otherwise one should use anti-trend systems. Also, his comments were predicated on the price-action in the commodity markets--not sure as to how applicable his comments would be to individual equities, though on an intellectual level, it would appear that it should be just as valid.

I just looked at the chart of the S&P 500--what is apparent is that this sell-off though sharp, comes nowhere close to the sell-off that we experienced last July. The market is somewhat oversold on the daily charts but is nowhere near as over-sold as it became on the weekly charts last July. This would argue for possible additional downside for the market without breaking major support. I can see the S&P 500 get down to 757 without any real support and possibly down to the 740-745 level where it should find good support. I remain short the S&P and the bonds and long the gold futures. Looking for gold to start retracing its recent gains--but I doubt that we'll see it get below $340 again as it retraces. I will add to my gold stocks in the event of any pull-back.

All conjecture of course, but the bonds seem like they want to go lower and that should be the catalyst for lower stock prices.

I hope the market is treating you kindly.
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