To: BigBull who wrote (53469 ) 10/24/1999 3:29:00 PM From: Gary Burton Respond to
BB--I also expect another new high on the major averages and have said this for awhile now--and I too expect oil to ultimately take out 25ish---where we differ is simply one of timing---On oil for eg, I don't think we have enough of a coiled spring, strong bottom yet from which to launch past 25ish just yet. Instead, I think the 'odds' favour a failure somewhere below 25 and then another spike down very near and likely somewhat below the low of the first spike down (as in A-B-C where we are now near the top of B)---If we get that, it would be very healthy as it would build more of a base from which to launch a sustainable new upleg past 25ish--if in contrast we simply keep going past 25ish on this current move, I suspect the stocks will still start to rollover anyway and refuse to confirm, just as they did last time, because the oil price surge will be viewed as 'unsustainable' and happening too fast..Recall that when we first got up near 25, the stocks peaked out before that and refused to follow (no one wants to get left holding the bag)---So the BEST thing that could happen now from a bull's perspective would actually be another shot down below the bottom of the first spike down in order to clean out the weak holders ("oh my god, it broke 20-get me out on a stop loss")--THEN, when it started up again, mainly strong hands would be left and the next move up would probably have more legs----As for the general market, I still think the 'odds' favour one more spike down below the recent 9976 low before the next new high move gets underway--quite apart from elliott, there is another reason why I think this and that is that on the day of the 9976 print low, total new lows on the NYSE hit a new high for the Correction at over 500 and the daily breadth also hit a new low for the Correction (number of advancing/number of decliners)and as of Friday's close we are now VERY overbought on the basis of a 5 day average of TRIN-- To me, that suggests we therefore need another new low in order to establish a positive divergence (ie fewer new lows and better breadth on the next new spike below 9976). At the moment, we have no such positive divergence to work from (again a one legged stool)... When I then look at the EW count,on the move up from the 9976 low print, I see a 3 wave sequence and not part of a 5, which is a sign to me that we are probably still in a bear market rally (a 5 wave would imply otherwise). So, this jives with the "no positive divergence yet" warning flag. Bottom line, still a high risk point for stocks in general as I see it where the 'odds' favour another failure soon and another new low-but likely the last new low in contrast to what the Bears think----I'm really a closet bull at this jucnture who is waiting for the right signal to go long. At the moment, I have no such signal so I will wait . I am only prepared to go substantially long (only 24% in stocks at the moment), when my reading of the tea leaves tells me the odds are significantly on my side. I find that I stay out of trouble that way. If I am wrong and stocks continue to power ahead, I can always find individual stocks to buy to make a good gain anyway as the a/d line is so far down that there will be laggards galore to jump on when the right signals are flashed. Either way, as I see it, I will 'win' without risking all that much. Now isn't that a good deal!----ps for tech fans check out IFMX on a weekly chart-Looks like a completed reverse head and shoulders at 6.38 and they beat the Q3 estimate by 20% and there are still a lot of non-believers in order to climb the wall of worry. I went long at 6.88 last week, a few hours before the eps release, largely on the basis of the chart and held my breath (vbg).
