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To: Nemer who wrote (49733)	8/12/1998 12:44:00 PM
From: Saulamanca	Read Replies (1) \| Respond to of 58727

Jerry Favors Analysis - Tuesday August 11 8 pm Phone-614-868-1053 At the lows today the Dow was down over 257 points. We closed down 112 points. The breadth today showed almost 2000 more declines for the day versus advances. That is terribly weak action. While the Dow closed at a new low for this decline,at this point there are some signs of potentially positive divergence. For instance the 5 Day RSI on August 4 closed at 14.43,with the Dow closing at 8487.31. Today the Dow closed at a new low of 8462.85,but the 5-Day RSI only reached 21.09. There are in fact numerous momentum indicators that did not confirm today's new closing low. This suggests we could be near some sort of short term low. An up close tomorrow would be a big plus short term. We still believe that at some point there will be a strong secondary rally. The question is from where? Despite the potential positive divergences at today's new closing low the Trin-5 closed at 4.86. That is in fact closer to an overbought reading than oversold.That is a potential problem as it still suggests too much complacency. The Trin-5 suggests a low is near when it reaches near 6.00 or higher. If the Trin-5 was near 6.00 or higher today we would have more confidence that we are near some sort of short term low,since it would be in strong oversold territory. The fact that the Trin-5 is not even close to oversold territory leaves the Dow vulnerable to an even larger decline. The big picture remains unchanged. We still look for much lower prices with our minimum target still 7390. Our problem is we are not yet officially short. Our goal was to wait for the normal secondary rally which almost always occurs after any major top and then go 100% short. So far however there has been no secondary rally to speak of. The best we have seen since the highs have been weak rallies lasting no more than 1 or 2 days. To this point it has been a mistake on our part to wait for a stronger rally before going short. We still believe that secondary rally will occur. The question is whether it will begin from here or will the Dow plunge even further over the next few days before that rally begins? We discussed the fact that the Gann Weekly Chart normally turns up during the secondary rally following every major high.The time frames between the top at the secondary rallies has not be uniform. Sometimes it occurs within just a few weeks after the high and other times within a month or more after the highs. But the odds are over 90% that there will be a strong secondary rally before any real crash in stock prices and that rally will be a superb shorting opportunity. The average retracement has been near 62 % of the initial decline on an intraday basis.Even if the Dow fell down to 8061 intraday before that secondary rally began a 62% retracement would carry the Dow back up near 8898 intraday, well above today's close. There is no question in our mind that there will be a secondary rally. The only real question is how much lower the Dow might fall before that rally begins. At this point we cannot be sure of the next few days. Our downside projection still allows for 8184 plus or minus 123 points intraday.That projection calls for a minimum of 8307 intraday to a maximum of 8061 intraday. We have moved into that projection already,but it does still allow for lower prices. Any decline below 8316.87 on a print basis tomorrow will be short term bearish and signal lower prices before any bottom. There is still support near 8200. We still think it best to wait for some sort of rally before going short. Keep in mind that the decline we are in will not just prove a short term phenomenom. This decline has much further to go in both time and price and 7390 is just our minimum target. The odds are high that the Dow will fall much lower than 7390. But just as the market did not move straight up without brief pullbacks,the Dow will not move straight down without intervening rallies. We must do our shorting during those rallies. We were asked to repeat the specific stocks on or shorting list. We are updating that list tonight and we will give it to you tommorow evening. e-mail info@jerryfavors.com marketweb.com