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Strategies & Market Trends : Tech Stock Options

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To: donald sew who wrote (54651)	10/3/1998 1:32:00 PM
From: Lee Lichterman III	Read Replies (2) of 58727

Don, great calls so far but on my first look last night I have to say I don't think we are going down hard immediatally unless a spark from Asia triggers us Monday and here is why. Yesterday's action showed some fear for the first time since this down turn started. Notice the high volume on most of the tech stocks in the late morning as all the supports gave way. This was followed by a strong bounce off the lows. My charts are showing multiple hammer bottom and tweezer bottoms today. I think selected stocks could rally short term from here before resuming this fall. I refer to your stair step pattern and almost posted this 2 nights ago but wanted to see yesterday's confirmation first. I think as you pointed out that each step down is larger than the last then we go into the rising wedge, break down and repeat. I believe some stocks have found their bottoms while others a waiting their turn to do the same. There should be a short term rally again to form another rising wedge, shorter in duration than the last one then another step down hard that will take out the last of the survivors such as DELL, YHOO, INTC etc. Many of the smaller issues hit bottom on the first drop, the larger but small issues found bottom on the second drop and most of the mid caps hit bottom this past week. The next drop should be the fiercest and take out the larger tech stocks however a small bear rally will happen IMHO first. Candle patterns indicate that IBM, CSCO and COF could take part in this short rally. The S&P 500 and OEX bounced off a trendline drawn from the low points of July 96 and April 97. Therefore I expect a short term rally before the next leg down though I agree whole heartily in your targets. To paraphrase, I think we are making a series of lower bearish wedges each in short duration than the last and ending in larger drops to make room for the next wedge. I am probably way off base since I put in 16 hours at work yesterday but I think if stocks are selectively picked a short gain on longs will give more powder for flipping to the shorts for the next leg down in 2 weeks or so. Good Luck, Lee

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