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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Bonnie Bear who wrote (22294)	7/25/1998 11:39:00 AM
From: Kip518	Read Replies (3) \| Respond to of 94695

Time for the BK? from Peter Eliades' latest Newsletter: In a truly remarkable display of its sense of history and the significance of repetitive patterns, the market today showed another "Sign of the Bear." For those of you who failed to read my May 4, 1998 article in Barron's (shame on you), let me try and quickly describe the "sign of the bear." First of all, be aware that between 1928 and early 1998, there were only 5 such patterns in that 70+ year time span. Let me give you the dates. 1) July 19, 1929 2) December 8, 1961 3) January 25, 1966 4) October 17, 1968 5) December 6, 1972 The pattern begins with what I call a "churning" pattern. A churning pattern consists of 21 or more consecutive days (the number of market days in the average month) where the highest daily advance/decline ratio is below 1.95 and the lowest ratio is above .65. In other words, there are no big up days nor are there any big down days. So long as the number of consecutive churning days remains between 21 and 27, the next important factor is how the streak ends. The streak ends when a day has a ratio higher than 1.95 to 1 or lower than .65 to 1. Take an average of the 2 days following the streak and 3 days following the streak. If either average is below .75, you have the "sign of the bear." The dates mentioned above are the dates of the 21st consecutive day of churning. When we wrote the article in late April prior to its early May publication, we included some cyclic analysis that looked for a twin peaks formation on the Dow, with the first high focussed on May 19 plus or minus 2-3 weeks and the second and final top focussed on July 29, 1998 plus or minus a few weeks. The mid-May projection was almost perfect with the Dow making its first closing high on May 13. Richard Rescigno, the managing editor of Barron's asked me to cut down the size of the article, so I removed the cycle analysis. I finished the article by writing, "Because our cycles allow for a final top as late as August 1998, we have to allow for that possibility. If the market is making new highs beyond the end of May, then the power of the April signal will have dissipated. In that case we would look for the possibility of another "sign of the bear" prior to a July or early August top....." Mind you, the market in the past has gone more than two decades without even one sign of the bear being seen. It blows us away that we have just seen another sign of the bear within less than four months of the last one and just at or before the time period when we looked for the second and last of the twin peaks. Be aware that the sign of the bear usually occurs before the final top, but not by long. There is a lot more to write about this truly amazing technical coincidence and how we had to fudge on one number only slightly this time around, but for us, this truly startling occurrence makes a major market top a very high confidence item in this time period. These are truly exciting times.