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

To: Judy who wrote (17802)	11/16/1998 7:03:00 PM
From: dennis michael patterson	Read Replies (1) \| Respond to of 42787

Favors Jerry Favors Analysis - Monday, November 16, 1998 8 p.m. At the highs this morning the Dow was up as much as 91 points, reaching a high of 9010.99. The Dow then began to pullback and near 2:24 EST the Dow was up only 14 points. The Dow then rallied to close at 9011.25,up 91.66. Despite the fact that the Dow was up 91 points today the breadth showed an unofficial 1616 advances to 1410 declines. That is terrible breadth for a 91 points closing rally in the Dow.The Dow closed up 89 points on Friday but the breadth showed only 1494 advances to 1487 declines. No advance can continue if the breadth refuses to confirm. We need to see very strong breadth if any rally is to survive. The last 2 days the breadth has been terrible considering the amount of the Dow rise. Something is terribly wrong despite the fact that the Dow has been rallying the last 2 days. Now we know the Fed meets tomorrow, and if they decide to ease an even stronger rally is likely, at least short term. But do not assume that an easing by the Fed will have the effect you might normally expect. The best source of sentiment indicators we have found over the years are the numbers reported by the newsletter, Investors Intelligence. The most recent issue of Investors Intelligence states,"The Bulls are back! The current reading 53.1% Bulls ,up from 26.4% 1200 pts lower,is almost up to the 54% we had at 9330 on 7/24." Now this does not mean we have seen a high,but it does suggest we are in the danger zone.Almost every Bear we know of has reversed his position and now turned bullish. This does not necessarily mean the rally cannot go higher. But it does mean we must proceed with caution. When the Bulls reach an extreme, it is time to look for a reversal in the market back to the downside. We are not at an extreme yet, but we are getting close. We are showing serious negative divergences here at today's new recovery high.This does not mean we cannot go somewhat higher but the risk on the long side is significantly higher. Any decline below 8934 on a print basis tomorrow will be at least a short term negative signal.As long as we hold above that level tomorrrow morning we would look for somewhat higher prices. We told short term traders to sell longs at 9031 today. The Dow reached a high of 9030.30 today on a print basis.We will not speculate on the Fed's decision. We will sell longs on any rally above 9011 tomorrow and give you new instructions tomorrow evening. We will now use a stop of 8934.