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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Judy who wrote (16804)	10/20/1998 7:59:00 PM
From: dennis michael patterson	Read Replies (2) \| Respond to of 42787

Aw Judy, just having a little fun!! Here's our fav guru: Jerry Favors Analysis - Tuesday, October 20, 1998 8 p.m. Since Sunday we have been saying that we expected higher prices this week and that that rally could carry the Dow up near 8700 this week. We stated that the cycles suggested a high was likely near October 22 plus or minus 1 or 2 days. At the highs today, October 20, the Dow was up as much as 186 points,reaching a high of 8652.86 on a print basis. As exected the Dow then began to decline and we closed up just 39.91 points at 8506.36. The Nasdaq was up as much as 39.43,the equivalent of a 202 point Dow advance. The Nasdaq closed down 9.54 for the day. The Transports were up as much as 79 points today,but closed down 17.49. If you were an option trader the OEX was up as much as 10.36,the equivalent of a 167 point Dow rise. But the OEX closed down 0.13. We stated last evening that while this week's rally should last a few more days it was not the best time to buy because most and probably all of those profits would be totally given back by the decline we expect into next week. That remains our position tonight. Now even after today's sharp pullback we are not convinced the rally is quite over. Cycles still call for a high near October 22 plus or minus a day or so. Now that cycle could have come in a day early and peaked today but even if the Dow sells off strongly during the day tomorrow the cycles still have a few more days to produce a high short term. It is also still true that certain indicators,like the 5 Day Advancing Volume should peak before the Dow,as it is doing now. There should then be a Dow decline and then another rally which takes the Dow above the prior closing high but the 5-Day Advancing Volume fails to see a new high.This creates at least a short term top and this pattern does not appear complete yet. Also the Dow is still above its 21-Day 3 1/2 % Exponential Trading Band. When this occurs you will normally see the Dow move back down to within the band and then 1 more rally which peaks near the top of the band. The Dow still needs to see a strong decline which carries prices back within the band and then another rally peaking near the top of the band.The top of the band tomorrow should be near 8405,and Thursday near 8450. The Dow must move well below the top of the band to move back within the band boundaries. That is what we expect for next week.How much below the top of the band the Dow will fall next week is debatable,but to work off this extreme overbought condition the decline will have to be be very large. Because of the Dow's record of reaching some sort of high or low within 2 days of each options expiration,and the last expiration was Friday,we are somewhat concerned that a more important high was seen today. But for now we still favor a brief 1 day decline and another rally until we see reason to believe otherwise. We know many of you, especially our newer subscribers, are eager to get in and make a trade as soon as possible. But our near 20 years of study into market behavior has taught us that you must not try to make a great trade everyday. You must wait until the time is right and then take your position, no matter how impatient you might be.We have stated that if the cycles were right a high would be likely near October 22 plus or minus a day or two. If you had shorted on Thursday,Friday,or even Monday you would have regreted it today when the Dow was up another 186 points. We are not far from the next shorting opportunity short term.Let's continue to exercise due patience until the time is right. We have been asked how we would feel if the rally went above 8700 before peaking.Our answer is it would not alter our position. The top of the strongest trading band is near 8791 intraday this week,and we were not too far from that on an intraday or theoretical basis today. If this rally off the October 8 lows is to trace out 5 waves up there should still be one more rally up near 8700 even if we sell off fairly strongly for a day or so first. There is one other question we were asked today which deserves an answer. That question was what if the rally sells of for a day or two and the final high comes in Monday or Tuesday of next week. The next Bradley turning point is October 28 plus or minus 2 days and if the rally lasts into that time frame it would mean the Bradley is inverting,and we are seeing an important high in that time frame instead of a low. If this occurred it would be very bearish since it would suggest a top is occurring near October 28 plus or minus 2 days instead of a bottom,and a a much larger plunge would follow into November than we expect at this point. If we are wrong about a high near October 22 plus or minus a day or so and the high comes in closer to October 28 plus or minus 2 days the decline which follows would be far more bearish than we expect at this point,and a break of 7400 would not be out of the realm of possibility. For now though we will assume the high is most likely near Oct. 22 plus or minus a day or so and then a sharp decline into late October. All other instructions we have given you over the last 2 days remain intact. We will have specific instructions for you tomorrow. Finally we have discovered over the last few days than several subcribers decided to take put option positions on our shorting recommendation early this month for stock traders and mutual fund switchers. This is totally against our policy. You cannot trade options lke you trade stocks or mutual funds. The risk in options is too great and stops for option traders cannot be placed at the same levels as for stock traders and mutual fund switchers. We give specific instructions for option traders when we advise short term traders to go long or short. We in no uncertain terms told short term traders not to go short, or long puts when we gave our recommendation to stock traders and mutual fund switchers. But we have heard recently that some option traders went short anyway. When the time comes to trade options,which are short term vehicles,we specifically state what we want you to do. Short term traders were told not to take any short positions at that time. In fact on our Short term Traders 900 Hotline last week option traders were long calls into Thursday. We will always state when opton traders should take positions long or short. Unless we do, option traders should not be trying to take positions we recommend only for stock traders and mutual fund switchers. The principles underlying successful options trading are totally different that stock or mutual fund trading,and stops must be placed differently. We will always state when short term traders,by which we mean option traders and very short term stock traders, should take positions. We are almost there now.