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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 672.04-1.7%Nov 13 4:00 PM EST
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To: Daflye who wrote (6363)2/15/1999 8:16:00 PM
From: Smooth Drive  Read Replies (3) of 99985
 
Hello All,

The DOW INDUSTRIALS closed down Friday -88.57 points or -.95% and down -29.35 points or -.32% for the week. TRANSPORTS had a bad week closing down Friday at -64.87 points or -2.05% and down -150.77 points or -4.64% for the week. UTILITIES have continued to be awful and closed down -5.03 points or -1.73% for the day and down -7.16 points or -2.44% for the week. Most other averages are starting to feel the pull as well. The S&P 500 closed down -23.91 points or -1.91% and down -9.27 points or -.75% for the week. The NAZ closed down -83.66 points or -3.48% and down -51.73 points or -2.18% for the week.

TONIGHT'S P&F CHARTS

Here's a dab of the Dow Jones Utility Average using a 2 point box:

322 X
320 X O
318 X O
316 X O X           *
314 X O X O         X *
312 X O X O     X   X O *
310 X O X O     X O C O   * < Official Bearish Res Line
308 A O X O     X O X 1 X
306 X O X O     X O X O X O
304 X O X O X   B O   O X O
302 X O X O X O X *   O   O
300 X O   O X O X   *     O < Double Bottom Sell Signal
298 X *   O   O       *   2
296 X   *               * O
294 X     *               O 
292 X       *             O * < Bearish Support Line
290 X         *         + O
288 X           *     +   O
286 X             * +  
284 X             + *
282 X           +     *
280 X         +         *
278 X       +             * < Bearish Support Line
276 X     +  
274 X   +  
272 X + < Bullish Support Line  
270 +

The DJUA is one of my favorites. I have found it to be a very good leading indicator of the DJIA. Its tops and bottoms always lead the DJIA.

On 2/11/99 - there was a major P&F event on my hand chart. That's when a new O was placed at 290 and the Bullish Support Line was officially penetrated and the Bearish Resistance Line became the Official major trend line. The Bullish Support Line had been in charge of this chart for years and the fact that is was taken out speaks volumes.

The first vertical price objective is 314-((6*2)*2)=290, and the second vertical price objective is 314-((6*3)*2)=278. You can see the second Bearish Support Line is waiting at 278. There is strong horizontal support down at 270 where three previous columns of O's came to rest. Also of note is this chart topped out at 322 on 10/07/98.

Next, a small portion of the Dow Jones Industrial Average using a 50 box:

                                            
9600                           X * < Unofficial Bearish
9550                           X O *   Resistance Line
9500                           X O   *
9450                           X O X   *
9400                           X O X O 2 *  
9350               X       1   X O X O X O X   X
9300               X O     X O X O X O X O X O X
9250               X O     X O X O X O X O X O X
9200               X O     X O   O X O X O   O X
9150               X O     X *   O X O X     O X
9100               X O     X   * O   O       O
9050               X O X   X     *
9000               X C X O X       * < Bearish Support Line
8950           X   X O X O X         *
8900           X O X O   O X           *
8850           X O X     O X             *
8800           X O       O X               *
8750           X         O X
8700           B         O
8650       X   X
8600       X O X
8550       X O X
8500       X O X
8450       X O X
8400       X O X                             +
8350       X O                             +
8300       X                             +
8250       X                           +
8200       X                         +
8150       X                       +
8100       X                     +
8050   X   X                   +
8000   X O X                 +
7950   X O X               +               
7900   X O               +
7850   X               +
7800 O X             +        
7750 O X           +
7700 O X         +
7650 O X       +
7600 O X     +
7550 O X   + < Official Bullish Support Line
7500 O X +
7450 O +
     +

Long term bullish (trading above the Bullish Support Line) and short term bearish (on a sell signal). It's first vertical bearish price objective is 9600-((10*2)*50)= 8600. The "Unoffical" Bearish Resistance Line is in control at this time. The chart turned up on 2/11/99 and found horizontal resistance at 9350. (Please note it topped out at 9600 on 1/08/99.)

I really don't consider the DJIA P&F chart to be much of a leading indicator. It reminds me of the old line about "I'm always the last to know!". The Bullish Percent charts and DJUA provide the lead, and the DJIA eventually follows along in the weeks or months that follow.

Big Picture

With permission from CHARTCRAFT/INVESTOR'S INTELLIGENCE, here's a dash of highlights from last Wednesday:

SENTIMENT INDEX         2/12/99            2/05/99
% of Advisors Bullish     61.2               60.0
% of Advisors Bearish     25.9               26.7
% of Advisors Correction  12.9               13.3
Bulls 10 Week MA          66.5               65.9

A few of our favorite indicators as follows:

                         02/09/99     02/02/99
% NYSE > 10wk MA            33.26        39.81 Bear Confirmed
% OPTs > 10wk MA            36.3         43.10 Bear Confirmed
% NYSE > 30wk MA            40.61        43.33 Bear Confirmed
% OPTs > 30wk MA            46.90        48.70 Bull Correction
NYSE Bullish %              45.10        50.00 Bear Confirmed
OTC Bullish %               40.30        41.20 Bear Confirmed
DJIA Bullish %              43.30        53.30 Bear Confirmed
OPT stks Bullish %          47.70        56.00 Bear Confirmed
NYSE High Low               36.80        46.10
OTC High Low                59.9         74.20

One of the great beauties of a 3 box reversal point and figure chart is the fact that it is either on a buy signal, or sell signal. So, approximately 55% of all the equity stocks on the NYSE are on sell signals. Last week it was 50%.

Fact is -- sooooo many bullish newsletters but yet the overall market is very weak, with just a very few big guy's holding it up. Add to that the fact that the Dow Jones 20 Bond Average chart just gave a sell signal (which signals lower bond prices and higher interest)- and I'm long term bearish, and short term bearish, and invest/trade accordingly.

Take care,

Eric
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