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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 659.00

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Nov 21 4:00 PM EST

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To: pater tenebrarum who wrote (22548)	8/9/1999 8:03:00 PM
From: Benkea	Read Replies (1) of 99985

The Bottom Line Excerpt from the EWT ST Update for 8/09 "The most compelling message the Wave Principle allows me to deliver tonight is this: short-term charts reveal all declining waves have traced out "fives," while advancing waves have been "threes." Those of you familiar with Elliott know this tells us that the trend of the blue-chip averages is still down. Odds strongly favor that we have not seen a bottom to the current sell-off from the 11252 peak. The big story not being told by the mainstream financial press is just how weak the market's breadth continues to be. The NYSE cumulative advance/decline line has broken decisively below its October 1998 and March 1999 lows. The a/d line is now back to where it was in April 1997, when the Dow was 35% lower than now (6962 in April 1997). Market commentators are quick to dismiss this near historic divergence because the a/d line is not a good short-term timing tool. In my experience, this is a major mistake. When the divergence between the average stock (which has been in a bear market for more than a year) and the market leaders becomes this large, history shows that the leaders are the ones that run into trouble, not the other way around. For short-term timing we always turn to the Elliott Wave patterns: as I mentioned above, their message says stocks have not yet seen a low. Either a series of first and second waves have traced out from the 11252 all-time peak, or the Dow is just now finishing up a small-degree fourth wave triangle. In either case the next significant move should be down. Many technicians are watching chart support between 10409-10471, as a key support area. Our work suggests this support area will indeed be violated as the Dow slides to the next Fibonacci support near the 9780 level. Watch 10409. Once the Dow closes below it, a lot of selling should enter the market as participants start to become concerned. Strong near-term resistance is 10830. A close above this level would instead indicate that a five wave decline from 11252 ended at last Thursday's 10566 low and the index was in a bounce to correct this initial impulse wave down. At this juncture, only a very unexpected close above 11031 (July 27 high) would force us to re-examine the bearish pattern. We'll discuss this only if market action warrants."

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