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To: Stoctrash who wrote (49757)	8/13/1998 8:16:00 AM
From: donald sew	Read Replies (2) \| Respond to of 58727

INDEX UPDATE ----------------------- From the time the DOW dropped to 9000 from the highs, the market has been extremely hard to read. Lots of broken/incomplete pattern, volitility, etc. Last night I was looking at the DOW and OEX charts carefully and noticed something very unique, which is hinting that the market could selloff several hundred points very quickly, say over the next 3 days, and that the starting point of this decline should be around yesterday's highs (8575-8600). Here is my reasoning, and it more subjective than my other projections so the risk level is much higher - dont jump on me if I'm wrong on this call: Go back to the end of JULY , just before we dropped from the 9000 range. For 6 days in a row there was strong volitility, but what was unique is that for each of those 6 days the highs were within 50 DOW points of each other(8998,9028,9019,9000,9041,9030). The individual swings from the highs to the lows for these days were as much as 200 DOW points, but the highs still remained within 50 points untill it cracked on the 7th day. Such implied that 9000 was the starting point of a decline. Now take a look at the last 6 trading days. It is not as uniform as it was at 9000 but similar. 5 of the last 6 trading days have the intraday highs within 75 DOW points of each other, even in light of extreme volitility (8575,8593,8710,8635,8575,8564). Last Friday's high of 8710 was the only day that did not fall into that pattern, and I dont think anyone would argue that the volitility was extremely strong with intraday swings of as much as 250 DOW points. I am concluding that such pattern is pointing to 8600 range as the base. If one uses a bit of imagination this patterns appears to take the form of a DOWNWARD STAIR-STEP, with a a 400 DOW point drop to the next step. Now the question is which direction does the market go after this 8600 base and when will it move? The reasons I feel the direction is DOWN: 1) On TUE, when we tested the the 8362 (AUG 5 lows) support line we actually broke it intraday when it got as low as 8317. I can understand breaking a previous support line by 10-20 points, but 45 points is a bit much. Many will just look at this as insignificant since we rebounded nicely and closed significantly above the lows; nevertheless on a technical/for mathematical calculations the DOW did set a lower low on a intraday basis. I realise that many will argue that what matters is the closing basis, and I would agree that a closing basis is more significant but the intraday action still should not be discounted. 2) Market internals not improving enough. For example within 6 days after the OCT dump the NEW HIGHs rebounded to the 140 range. we are nowhere close 3) The market right now is highly effected by news coming out of ASIA,RUSSIA. The situation there is not going to improve over the next few days. This holding/basing pattern at 8600 will not last much longer and could even break today. 4) This is the weekend before CLINTONS interview next MONDAY. On a subjective basis, how many really want to hold over this weekend, and especially in light of all the other technical and fundamental negativity. 5) As for a selloff to start either today or tomorrow - my short-term technicals are in the middle again and that is when the market is the most susceptible to news/fundamental changes. The last question is - why a drop of several hundred points?. Since we did break the 8362 on a intraday basis I believe that there will be another retest of 8362 and this time it may not hold and proceed to the next support line at 8238-8166. Basic principle of LOWER LOWS & LOWER HIGHS. Originally, I was hoping to see the DOW retest last Fridays highs at 8710 forming a TWEEZER TOP, per candlestick talk, and I would initiate PUTS then. For the time being am now suspecting we wont see that before heading down. Right now the futures are down and the European markets look bad. Now heres the good news - if we drop quickly to 8200 range the strong rebound, which many of the BULLs were looking for, should occur then. Such rebound, on a statistical basis, could regain 60% of the pullback. If we use 9300 as the starting point of this decline, that would bring the DOW back to the 8900 range. If we use 9041 as the starting point of this decline that that would bring the DOW back to the 8700 range. I wont argue that issue now - thats down the road. Again, this analysis is much more subjective than my others. I am not very comfortable with this analysis only since the thought process has not been tested before. This type of pattern - a downward stair-step pattern is rare, and I have not seen it before. If I get this one right I want an EGGROLL.gggggggggggggggggg seeya