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To: The Perfect Hedge who wrote (51262)	8/31/1998 7:33:00 PM
From: dennis michael patterson	Read Replies (2) \| Respond to of 58727

Beebs!! The man speaks! Jerry Favors Analysis - Monday, August 31, 1998 8 p.m. Well today was one for the record books. After rallying 43 points this morning the Dow turned down with a vengence. At the close the Dow was down 512 points, at 7539.07. For some time now we have told you that our minimum downside target for this phase of the decline was 7390. This was based on the Three Peaks and Domed House pattern we have been discussing for sometime now. In our work Point 27 of that pattern was the August 19 high in the Dow and we are now on our way down to Points 28. For the last 150 years the decline to Point 28 has always taken the market at least back down to Point 10. In the case of the Dow this calls for a minimum decline to 7390. That is just our minimum target. A decline of that magnitude seemed impossible to most several weeks ago. Well here we are just 149 points away from that minimum target. As far as how much further down below 7390 the Dow could fall we can tell you there is only 1 critical support level from here and that is 6933 intraday. If the Dow falls below that level it will do something it has not done in the last 16 years. That is, since August of 1982 the Gann Quarterly Chart has shown a consistent pattern of higher bottoms and higher tops all the way up the the July 1998 high ,as it should during a long Bull Market. In this entire 16 year Bull Market not once has the Dow fallen below a prior Quaterly Chart bottom.If the Dow falls below 6933 intraday it will be the first time in the last 16 years that a Quarterly Chart bottom has been broken. We cannot overemphasize how important this would be. If it is broken it could lead to a decline below 6315 intraday. The 5-Day RSI closed at an extreme oversold reading of 9.40.Readings that low are very rare and most often indicate you are near some sort of at least short term low. The Trin-5 closed at 8.07,now fully reaching extreme oversold status. Readings that high are rare. The simple 10-Day Trin closed at 1.25,now in strong oversold territory. The market is in fact so severely oversold that a strong rally lasting a couple of days could begin at anytime. But until our minimum target of 7390 intraday is reached we will remain short.