Don, Favors has a similar take on the market. I posted the full report on Stock Attack, but will add it at the end of this note. I see a lot of hot money in the market right now, ready to abandon it in a heartbeat. Dell's performance of late is a good example. It was falling out of bed for a week and all of a sudden we are at 66+ today. MSFT is another. 130, then 120 (next day!) then 126, tomorrow it will open weak. I realise these are just 2 stocks, but they represent what I see going on in the market. I've taken a lot of the retirement money out now, having made 3 percent recently and being content with the year's gains. I really wonder-- in fact, I am sceptical -- that we can hit even Favors 9500 or so by month's end. But it has been an astonishing market of late. We'll see. I look forward to this thread developing.
Jerry Favors Analysis -Wednesday, December 2, 1998 8 p.m.
Last evening we stated that even after yesterday's
reversal from down over 128 points to up 16 at the close, we
thought there would be another pullback today and that
decline could carry the Dow below Monday's lows. The Dow was
down over 178 points at the lows today but closed down 69, at
9064.54. The Bradley calls for a short term low near December
2 plus or minus 2 days. Today was December 2. There are some
potentially positive signs beginning to show up.
In the past we have discussed the Lindsay A-D
Indicator. This indicator is concerned with the differance
between closing advances and closing declines each day. When
giving a Buy Signal the following pattern must occur: the Dow
must first decline from a high and reach a short term low. We
will then note the net declines,or the difference between
declines minus advances,for that same day. The Dow will then
rally. That rally can last as little as 1 day to several
days. The Dow will then decline below the prior closing low
but on this decline to a new closing low the net declines for
the day are less than they were at the first low. This
generates the Buy Signal. This might seem more confusing than
it really is. On Nov. 30 the Dow closed at 9116.55 and on
that day there were 941 more declines for the day versus
advances. The Dow the next day closed up 16 points. Today the
Dow closed down 69 points but if we examine the breadth we
find there were an unofficial 436 more declines for the day
than advances. So here we show the pattern of the Dow closing
at a new low for this leg down but the net declines today are
above the 941 net declines seen on Nov. 30. This generates
the Lindsay A-D Indicator Buy Signal. Now we should mention
that whenever the net declines exceed 1000 we do not count
that day as one of the days for generating a Buy Signal. The
941 net declines of Nov. 30 was close but just got in under
the wire. We really need to see tomorrow's closing action to
be sure of the signal. If we close down tomorrow with more
than 941 net declines for the day the signal would be
invalidated.
The Gann 3-Day Chart turned down today and could not
turn back up before Friday. If it does turn up Friday it will
go a long ways towards confirming a low this week.
The Trin-5,which is our 5-Day Moving Sum of the daily
Trading Index closes, closed at 5.54 yesterday. The Trin-5
normally indicates you near some sort of at least short term
low when it rises up near or above 6.00. The best and most
reliable signals occur above 6.00,but there have been
numerous lows over the years with the Trin -5 near
yesterday's 5.54 reading. That is pretty close to 6.00.
The 5 Day RSI closed at 36.66 today and it will
normally fall below 30 at short term lows,so we still cannot
rule out some further decline Thursday.
We believe Thursday will be a whippy day,with fairly
wide swings in both directions. However the pivotal day this
week will still be Friday,which is the earliest the 3-Day
Chart could turn up.
Most of our stocks are still doing well but Avnet
did take a hit of 4 points today. We don't like negative
surprises so we will sell Avnet tomorrow. We will give you
specific stops on each stock Thursday evening,since we still
want to keep our risk reasonable.
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