December 10, 1999 Favors
So far the Dow has continued to follow our forecasts this year
quite well. In fact, we have recently been rated among the top
10Stock Market Timers in the country for the year 1999 by
Timer
Digest. We remain bullish on stock prices here, even though we
must allow for some further brief correction for a few days next
week. Any decline in the Dow below 10957 intraday will turn
the Gann Weekly Chart down and confirm that a correction is
underway. However, if that occurs we would look for a low near
December 14, plus or minus 1 day. From there we would look
for a rally into December 27, plus or minus 1 day.
One of the reasons we believe higher prices are coming is the
action in the Daily Advance/Decline Line. Most technicians are
looking at the action in the Dow versus the action in the Daily
A/D Line, and taking a very bearish position for the Dow Jones.
That is because while the Dow has been rallying since the
October lows, the Advance/Decline line has just kept falling
lower and lower, and is now below where it closed at the
October lows. However, just like the Dow, when the A/D Line
falls into extreme oversold territory it indicates the market is near
a low and should soon begin a strong rally. The 5-Day RSI on
the A/D Line closed at 8.44 on 12/9/99. When this indicator falls
down near or below 10.00 you are normally near some sort of at
least short-term low. Over the last 12 months the extreme lows
in this indicator near or below 10 have been as follows:
Date RSI Low Subsequent Rally
12/14/98 12.61 Up 948 points on a closing basis -
1/8/99 high
2/10/99 7.15 Up 367 points on a closing basis
in 8 days
3/23/99 11.49 Up 1436 points to 5/13/99 high
8/10/99 1.75 Up 671 points to 8/25/99
9/24/99 6.17 Fell to 10214 on 9/29 and then
rose 436 points to 10/8 high
10/18/99 4.91 Up 1170 points to 12/3/99 high of
11286
The RSI on the A/D Line is once again into the extreme oversold
zone which has tended to occur near market lows in the past.
This suggests we should be fairly close to some sort of bottom in
the Dow.
Our short-term Gann Cycles also suggest the Dow should see
another short-term low near December 14, plus or minus 1 day
and then a rally into December 27, plus or minus 1 day.
The real key for this month will be whether or not the Dow can
exceed 11429 intraday. If it does it will confirm much higher
prices are coming over the next few weeks and months. If
11429 intraday is exceeded, it would call for a minimum rally up
near or above 12000 next year. Believe it our not, if the Dow
exceeds 11429 intraday and just matches the average rally from
the Gann Quarterly Chart of the last 17 years, it could reach the
15,000 area before any truly important top in the first quarter of
2000. We will discuss our reasons for this position, as well as
our current forecasts for the next few weeks in our next
commentary.
We announced last week that beginning on December 31,
1999 this commentary will be available by ID/Passcode.
There will be a brief delay before this change takes place.
Please monitor future commentaries for further
information. |
