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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: The Perfect Hedge who wrote (15935)	9/27/1998 8:40:00 PM
From: dennis michael patterson	Read Replies (1) of 42787

Here you go Beebs: Jerry Favors Analysis - Sunday, September 27, 1998 8 p.m. At the lows Friday the Dow was down as much as 112 points. The Dow then turned and at the highs the Dow was up as much as 84 points. The Dow closed up 26.78 points at 8028.77. The Dow gave back a large part of Friday's rally into the close. The breadth at the close showed 1573 declines to 1446 advances,mildly negative. From here as long as the Dow holds above 7653 intraday and 7711 on a print basis we would continue to give the upside the benefit of the doubt,at least very short term. If the Dow falls below 7653 intraday and 7711 on a print basis all bets are off,and a much larger decline should follow. That decline could test the critical 7400 level in the Dow. If 7400 is broken the odds will be high that the next major leg down of the Bear Market is underway. We still have a downside projection for the Dow calling for 6703 plus or minus 271 points intraday. Very short term we still have an upside projection calling for 8345 plus or minus 96 points intraday. However a decline below 7653 intraday would cancell all upside projections and signal a test of 7400. The Trin-5 closed at 5.64,now out of extreme oversold territory. That is still close to an oversold reading but not quite above 6.00. A sharp closing decline on Monday along with a high closing Trading Index reading will push the Trin - 5 well above 6.00 again,suggesting we are near some sort of closing low. If we do see a rally next week we would still look for resistance near the top of the 21-Day 3 1/2% Exponential Trading Band. The Top of that band on Monday should be near 8330 intraday. If the Dow continues to rally this week the top of the band could rise 15 to 20 points per day.So the top of the band on Tuesday or Wednesday will be somewhat higher than it will be on Monday if we continue to rally. Ordinarily the downturn in the Gann 3-Day Chart Friday would cause us to conclude the high was already in,but the next Top-to-Top Count calls for a high in the stock market between Setember 25 and October 6. After that high the Dow should fall below 7400,confirming that the next major wave down is underway. For now we must give the upside the benefit of the doubt until the Dow does something wrong. A decline this week below 7653 intraday would be the first serious negative signal. As long as the Dow holds above that level we must give the upside the benefit of any doubt a little longer. Our work suggests that even if the Dow holds up another week or so a decline below 7400 is still coming over the next few weeks. When 7400 is broken a crash or a mini-crash is probable. Stock traders and Mutual Fund switchers we still want to be short in this time frame. We are just not convinced the high for this rally attempt has been seen quite yet. The Fed meets on Tuesday and it is at least possible they will lower rates. If so that alone could spark a rally, at least temporarily. However if the Dow falls below 7653 intraday,or 7673 on a print basis and we are not yet short we want you to go 50% short with a stop of 7953. Otherwise we will try to get short as close to the top of this rally as we can get.

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