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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 659.00

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Nov 21 4:00 PM EST

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To: dj8000 who wrote (1959)	12/15/1998 8:12:00 PM
From: dennis michael patterson	Read Replies (1) of 99985

Jerry Favors Analysis - Tuesday, December 15, 1998 8 p.m. Last evening we stated that the cycles suggested the Dow was near at least a short term low. The fact that the 5- Day RSI closed at 17.78 yesterday increased the odds significantly that we were near a short term low. The 5-Day RSI reaches oversold below 30,and reaches extreme oversold territory below 20. Over the last 12 months the following are the dates and low readings of the 5-Day RSI: 12/24/97=24.39 1/9/98=17.87 4/28/98=21.90 6/3/98=19.49 6/15/98=19.53 7/23/98=19.92 8/04/98=14.59 8/31/98=6.86 10/1/98=24.30 If you go back and check those dates you will see that each was near at least a short term low and several were near very important market lows. The fact that the 5-Day RSI fell as low as 17.78 at the same time the cycles were calling for a low was a strong signal that we were near at least a short term low. The Dow had a downside projection calling for 8654 plus or minus 80 points intraday. The intraday low yesterday was 8610 on the Dow. We have stated that the Dow normally reaches at least a short term low when it falls down near or below the bottom of the 21-Day 3 1/2% Exponential Trading Band. The bottom of the band on Monday was 8633,and again the intraday low was 8610 Monday. The biggest problem with today's action was the breadth. For most of the afternoon the breadth was actually negative and even at the close there was only an unofficial 124 more issues up for the day than down. That is terribly poor breadth for a day when the Dow closed up 127 points. This concerns us but in and of itself does not rule out higher prices. The cycles are due to turn back up in this time frame and technically they should remain up until December 22 plus or minus 1 or 2 days. We have to watch December 18 closely since that is another Bradley turning point and could mark a short term high,but the cycles show only a brief 1 to 2 day decline from there and then another rally for a day or two next week. The Dow could easily see some sort of pullback at some point tomorrow but as long as the Dow holds above 8676 on a print basis the short term trend should be considered up. There is some resistance to any further rally tommorrow near or just above 8900. Short term traders went long at 3:15 near 8750 in the Dow. Keep your stops at 8676 on a print basis for now. If the Dow approaches 8900 tomorrow option traders may do alittle selling,just to be on the safe side. All other instructions remain unchanged.

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