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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: StockOperator who wrote (2518)	3/11/2001 1:05:04 PM
From: Trading Machine	Read Replies (1) \| Respond to of 52237

StockOperator, I very much agree. The DOW has formed a diamond pattern, and it is very visible on a weekly chart interval. Fortunately my charting tools allow me to draw the lines for the formation on a weekly chart then change the scaling to look at it on a daily chart. Another nice feature is that the trendlines stay there until I remove them. When you say a resolution is "close" at hand, maybe, but I have the apex of the diamond July 4, 01. Happy fourth of July! ggg I feel that it will resolve itself well before then. My reference is "The Encyclopedia of Chart Patterns" by Bulkowski, and it describes the diamond top as a reversal pattern. Guidelines for identification are a continuing decline in minor highs and a continuing increase in minor lows coupled with a reduction in volume. When/if the breakout occurs the volume increases although this is not a prerequisite for the pattern. I measure the top at 11,750 on 1/14/00, and the bottom at 9,730 3/8/00. Bulkowskis' measurement rule is to subtract the bottom from the top and measure the amount of decline from the point of break out. In this case the break out could be between 10,500 and 10,700 (the upsloping trend line from here to the apex), resulting in a decline to DOW 8,500-8,700. His statistics show the most likely decline is 20%. The average time to decline is short, about 7 weeks. He also says that 79% of the time diamond tops break to the down side and only 9% break out and don't go down. He further states "For best results, wait for the price to close outside the diamond trendline before placing a trade." This last statement is noteworthy because the DOW closed below the lower trend line in mid-October 2000 and did not continue lower as one would expect. Having said that, the close below the trend line occurred less than 50% of the way through the right side of the diamond, the most reliable break is after 69% of the patten has developed. I am not saying the DOW IS going to go to 8,500, but probabiltiy-wise it could occur between now and July because of this pattern. Some indications that would negate this is for the DOW to close above 11,000 or the upper trend line. I will be trading long, but at every resistance-line-type opportunity I will be in cash, a defensive position against further drops by da BEAR. ggg BTW, being in cash is a position, and sometimes a very nice one! Paul Kellam

To: StockOperator who wrote (2518)	3/11/2001 1:25:54 PM
From: JRI	Read Replies (2) \| Respond to of 52237

SO- I posed this question to Paul Shread earlier this week: Could dot.bomb's relationship to "solid, big-name, cap" gorilla-tech (last year) be the same as the current Naz relationship to the Dow? Clarification: When dot.bombs started falling apart last spring (and never recovered), a good amount of people assumed that "gorilla-tech" (EMC, CSCO, QCOM, NTAP, etc) would be spared...since dot.bomb only made up a small% of their sales....I see a (somewhat analogous) situation with many Dow stocks....it is assumed that they have little exposure to the troubles effecting tech, but I keep thinking about that 3 trillion (and growing) figure of market wealth loss....how can such happen (especially, the velocity of such- within a year), and there NOT be a profound impact on EVERYTHING...I am thinking abpit the potential chain-reaction for banks to "mark-to-market" credit lines to their best "old industry" customers (to make up for lost business in other divisions, some defaults)...I think about the average stock holder, who opens up his February statement, and says, "Yikes, we're keeping our 4 year old car another year"....I think about solid, American manufacturers/exporter/consumer goods companies...with a significant/large % of overseas sales....who sales are likely to take a hit once recession spread to Europe, and other parts of world in the coming months....(the coming weakness in the dollar to help later/much later)....etc... How can the absolute implosion in tech be "walled" off from the old economy? Additionally, after dot.com's blew up....last summer, I think we saw some "safety flight" (new and old money) from the dot.com's....and going into the STALWART techs.....now that NO TECH is considered STALWART anymore (maybe MSFT be the one which will suffer the least?)...the Dow has taken on the function that STALWART tech had last summer/early fall....and that means, by analogy, it is overvalued for 2 reasons: (1) Stock prices don't reflect the slowdown to come and (2) even if these companies maintain current sales/growth, some of the money parked there will leave once other alternatives become more attractive/recover...and like STALWART tech, we'll see these puppies fall at some point.. Of course, breakdown in GEs chart (look at a 10 year chart..wow!) gives one courage <G> to make such an argument Thoughts??