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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Patrick Slevin who wrote (44034)	5/29/1998 8:51:00 AM
From: SE	Read Replies (1) \| Respond to of 58727

I just sent this via PMail to you, but think it is worth the thread's reading time. I have added some other thoughts to it as well. I was just reading from Edwards & Magee and I think we are seeing a rounding top in this market. A break of 8750 to 8800 will be necessary to indicate the downward momentum has started and it may take a couple more months to complete the formation. In the meantime, range bound trading. I would not get to entrenched in a solid direction one way or the other at this point. An alternative read, ala the Ewavers, is that we just completed either a consolidation triangle or a reversal angle. Right now my bet is on the reversal triangle. We broke it to the downside, are pulling back to the lower part of the triangle and if it is not breached we will head lower. In any event, both reads could be as one as a reversal triangle can be part of a rounding top. Further, it seems that the market action indicates this as well. We see fairly solid down days for some time now. Lower lows are being set indicating the bulls are running out of strength. When we are down substantially, we get a solid run higher that plateaus and may run higher, but very slowly. THe solid run I believe is set up by short covering and those dipsters. The play is an oversold condition play, not so much a "let's buy this market it is undervalued play." This is evident from the action the last two months. The bulls are running out of steam. The drop, when it occurs, will be fast and hard as all capitulate and sell. To pick the time it will happen will be difficult as rounding tops take a long time to develop and this could continue for a few months yet. It is possible that we are also forming an extended head and shoulders pattern on the weekly charts with this being the left shoulder. This would play in nicely with those calling for a run to DOW 10,000 yet this year. This would not negate a rounded top, but would extend it out quite a few months. In any event I am less inclined to think this market is going to correct hard very soon. I see a test of 8,800 coming before expiration, probably next week, but then after that the analysis will have to be made at that time. If we break 8,800 hard, we are going down now. If we bounce off of it, we could do either. -Scott