Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Madarasz who wrote (26345)	9/20/1999 10:42:00 AM
From: Les H	Read Replies (2) \| Respond to of 99985

Sept 17, 1999 Jerry Favors Analysis In our September 13 newsletter we stated the following: "Our primary wave count labels the 11,365.90 print high of August 24 as the peak of Minute V of Minor 3. The decline from that high represents Minor Wave 4, which so far has reached a low of 10,732.70 on September 2. The Dow has rallied off that low but not enough to prove Minor 4 has bottomed quite yet. If the Dow falls below 10,967 on a print basis next week, it will suggest a test of 10,732.70 on a print basis. This would of course mean Minor 4 has not yet seen its Elliott low. If 10,732.70 on a print basis is broken the Dow could test the 10,549.10 print low of August 10". On our subscriber hotline of September 16 we stated: "Last evening we stated that the 5-Day RSI on the Dow should probably fall below 30 at any true low in this time frame. The 5-Day RSI today closed at 24.54, now well into oversold territory. At least, according to this indicator, we are now into oversold territory suggesting we should be near at least a short-term low. Now this does not mean the Dow cannot close a little lower before bottom, but at least according to several of the momentum indicators the Dow is already into oversold territory, suggesting we should be near at least a short-term low. Now if worse comes to worse, that decline could carry the Dow down near key support near 10,600 on an intraday basis. The Dow broke 10,967 on September 14 and has since continued down to a low of 10,626.60 on a print basis and 10,593 intraday on September 16. There are several good reasons to suspect we have either seen, or we are at least very close to, a short-term low. The 5-Day RSI on the Dow closed at 20.48 on 9/16/99. Remember the RSI reaches oversold territory when it falls below 30, suggesting you should be near some sort of low. For instance on 12/14/98 the 5-Day RSI closed at 17.99. This was an important bottom and the Dow proceeded to rally 947 points on a closing basis to the 1/8/99 high. On 1/22/99 the 5-Day RSI closed at 28.86. The Dow then rose 248 points on a closing basis to the 2/3/99 high. On 2/9/99 the 5-Day RSI closed at 26.77. That day marked the start of a major move upward in stock prices. On 5/25 the 5-Day RSI reached 13.96. This was within two days of the May 27 closing low. The Dow then rose 442 points on a closing basis in six trading days. On 6/24 the 5-Day RSI fell to 27.29. The Dow then rose 674 points on a closing basis to the 7/16 high. On 7/26 the 5-Day RSI reached 15.59. This was the only reading in this time frame that did not occur very near a bottom. The Dow in fact rose 116 points the next day and then continued down to the August 2 closing low. In this case, the final low came within five days of the low reading in the RSI. Finally, on August 2 the RSI closed at 16.33. That day marked a closing low and the Dow rose 680 points on a closing basis to the 11,326 high of 8/25. Yesterday's 20.48 reading in the 5-Day RSI is well within the same area as the above extreme low readings. We have stated that the market is normally near a low when it falls down near or below the bottom of its 21-Day 3 1/2% Exponential Trading Band. If you check prior records for just the last 10 months you will find the Dow fell down near or just under the bottom of this band at the 8/10/99 low, the 6/1 intraday low, the 1/25/99 intraday low and the 12/14/98 intraday low. Each of these dates was near the start of strong rallies in the Dow. The bottom of the band on 9/26/99 was 10,577. The Dow reached a low of 10,593.09 intraday on 9/16/99, within just 16.09 points of the bottom of that band. Other indicators which suggest we should be near a low are Stix, the 5-Day RSI on the Advance/Decline Line, and the Cycles. We could test Thursday's lows early next week but we believe we have either seen or are very close to a bottom. The Cycles suggest the next important high should occur near 9/28/99 plus or minus 1 day.