Favors sees 9000, perhaps!
Jerry Favors Analysis Wednesday November 4 8 pm
The action in the Dow this morning surprised us,to say
the least. We allowed for some further rally today but we
frankly did not expect that rally to carry the Dow up nearly
150 points at the highs.The Dow in fact reached a print high
od 8854.45 near 11:15 EST,at which we were up 148 points.
The Dow then pulled all the way back to 8714.39 near 3:00
EST,at which we were up just 8 points. We closed up 76.99.
Today's action indicates the rally is probably not over
quite yet.In our last newsletter of October 19 we stated that
we expected higher prices into November and that that rally
could see the Dow retrace as much as 80 to 82% of the 2,032
point intraday decline from the July 17 all time intraday
high to the September 1 intraday low.If the rally retraces 80
to 82% of the prior decline it could carry the Dow up into
the 9006 area intraday. If it retraced 82 % it could carry
the Dow up near 9046 intraday,or on a theoretical basis.Given
today's action we cannot rule out a rally of that magnitude.
There are indeed signs that the market is near extreme
overbought territory and any rally will not last more that a
few days. The 5-Day RSI closed at 87.91,well into extreme
overbought territory.That is the sort of reading that
normally occurs near important market highs. The 10-Day Rate
of Change is still showing negative divergence,which is
typical near market highs.Our Gann Cycles still indicate some
sort of market high is now well overdue.In fact those cycles
are being stretched near the breaking point,and it is
unlikely any further rally will last for more than a couple
of days before prices begin to turn down strongly.
Several indicies have given upside projections that you
should be aware of. The Dow for instance has given a
projection calling for 9001 plus or minus 160 points
intraday. That projection calls for a minimum of 8841
intraday,which was satisfied today. The NYSE cash index has a
projection calling for 567.31 plus or minus 10.46 . The high
today in the NYSE cash was 559.21.
The 3-Day Chart is still pointing up and could not turn
down before Friday November 6 at the earliest. If it does
turn down this Friday it will be a signal that some sort of
high has probably been seen. We will give you the parameters
necessary for a downturn in the 3-day Chart after we see
tomorrow's trading.Any decline below Thursday's intraday low
in the Dow on Friday will turn the 3-Day Chart down.
Any decline below 8714 on a print basis in the Dow
Thursday morning will give a short term Sell Signal off the
hourly charts.That signal would remain valid as long as the
Dow did not rise above 8855. A rise above 8855 on a print
basis would cancel any sell signal and give a repeat Buy
Signal short term off the hourly charts.
Short term traders we were stopped of our shorts on the
rally above 8745. Option traders by the time you were able to
cover shorts at 9:45 the Dow was already at 8792,so we assume
you covered there. Stock traders and mutual fund
switchers,while we still believe we are very near a short
term high we will not take the risk of the Dow rising up near
9000 before topping .You shorted at 8744 and we closed at
8783.14 today. We will cover shorts for you too here until we
are convinced the rally is over.WE are probably covering too
soon but risk management is part of our job,and until we are
convinced a high is in the safest course of action is to
cover here and reshort once we are convinced a top is in.
That could be any day now. |
