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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: d. alexander who wrote (23248)	8/30/1999 3:58:00 PM
From: Johnny Canuck	Respond to of 68277

To: IntelligentSpeculator.com (3307 ) From: IntelligentSpeculator.com Monday, Aug 30 1999 6:40AM ET Reply # of 3433 Here we are, an unequivocal sell signal setting up - A Time to Sow; A Time to Reap Morning Market SnapShot for Monday, August 30, 1999 In our August 5th column, as the market approached the June low, we said the following: "Selling must be done when the market looks its best, right after a big reversal day when others are still confident. This takes experience and skill. Long-term investors tend to rely on signals such as the break of an important low or support level to sell, but so does everybody else. Selling when things look bad is instinctive to humans. It takes no skill or experience. It is a gut reaction to puke at the low when the market looks its worst. And if everybody sells on the break and there is no follow through, the market makes the bottom right there. This phenomenon is why so many investors, who wish to time the market on a long-term basis, find themselves selling at the panic low and then the market miraculously recovers and they find themselves out of a position. So far, this has proven to be the case every time as the market moves ever higher in the greatest bull market on Earth. However, there will come a day where the market begins to make lower lows and not recover but unless we time each transaction, no bell will miraculously ring to tell us that "This is It!" on the final high, will there? There is no point in being a market timer out to catch that elusive thing named "The Top". We either follow the market at all times or resort to faith in fundamentals. This is why we cannot say the word sell at this juncture because selling on the break of an important low is an absolutely last resort technique best left to others. This is why we call it the quagmire. When it was the right time to sell, right after the trap, it was too soon for most since there was no evidence of weakness, no bad news to form a firm conviction unless one is a seasoned chartist. But when it feels compelling on a break, with the financial media blasting out bad news, it is too late, and what if it makes a panic low right there?" As few days later, the market tested the June lows successfully to form a double bottom and it has been on the bounce to test the old highs ever since. With the Dow Jones Industrials the only major market index to make a new high to date, we recall Justin Mamis' words of July 31, 1987: "The notion that there will be some perfect top formation - Dow up, nothing else confirming - so that the sell bell will ring for thee alone, is nostalgia for the past." We look at the daily charts of the major market indices to find nice neat uptrend lines from early August until now. They are a little too neat and tidy to hold and we note that each of the four indices are finding resistance right here. The marginal new high in the Dow Industrials may be another trap. The S&P 500 formed a Japanese candlestick pattern named Three Inside Down over the last three days. The NASDAQ 100 is testing the all time high. The CBOE Internet index is finding some sellers in the 50-day moving average. If last week's low is broken on the S&P 500 index, we will sell all remaining stock positions and go to 100% cash. As traders, we will initiate short positions in anticipation of a much more serious turn to the downside. Tomorrow we will examine the targets. The market has fulfilled all of our upside targets and at this time, preservation of capital takes precedence over any performance issues. Charts specific to these comments have been posted to intelligentspeculator.com.