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

To: Chris who wrote (18069)	11/29/1998 10:25:00 PM
From: dennis michael patterson	Respond to of 42787

Jerry Favors Analysis - Sunday, November 29, 1998 7 p.m. The Dow on Friday closed at 9333.08, up 18 points for the day. The Dow reached a print high of 9380.20 on November 24 and an intraday high of 9458 the same day. Our cycles called for a strong rally from October 28 into November 25 plus or minus 2 trading days. The Dow has so far rallied 1051 points from the October 28 print low to the high of 9380.20 on 11/24. There are serious warning signs showing up here from a sentiment standpoint. We have discussed the Investors Intelligence sentiment readings over the last few days. Once again, if you are unfamiliar with these kinds of indicators you must keep in mind that sentiment readings like this are contrary indicators. When the percentage of bullish advisors reaches an extreme you are normally near some sort of important top in the Dow. According to the most recent numbers from Investors Intelligence the percentage of bullish advisors is up to 57.9%, the highest reading in almost 7 years. On July 24,1998 the percentage of bullish advisors was 54.3%. That was 5 days after the 9337.97 all-time high and was followed by a decline of 1798 points to the 8/31/98 low. On April 21,1998 the Bullish Advisory sentiment hit 54.6%. The Dow did not move more than 1.66% higher on a closing basis over the next 3 months before the 1998 mini-crash. According to the most recent issue of Investors Intelligence the Bulls are now up 9 weeks in a row and the Bears down 10 weeks,both records. The 3-Day Put/Call Ratio on the CBOE closed at 47.79 Friday. Put/Call ratioes are also sentiment indicators. Extreme low readings in the Put/Call ratioes indicates excessive optimism on the part of option traders and frequently indicates the market is near some sort top,at least short term. Friday's 47.79 reading in the 3 Day Put/Call Ratio is the lowest reading in at least 4 years,which is as far back as we went for this update. The lower the Put/Call ratio the more bearish it normally is for the Dow, again, at least short term. For instance on 7/20/98 the 3-Day Put/Call Ratio hit 51.61. That was 1 day after the 9337.97 closing high and was followed by a decline of almost 1800 points in the Dow. On 4/21/98 the 3-Day Put/Call Ratio reached 51.03. Once again this was near a high and even over the next 3 months the Dow did not close more than 1.66% higher before beginning a decline of almost 1800 points. On 12/30/97 the 3-Day Put/Call Ratio hit 47.95,very close to last Friday's reading.This was 3 days before the 8072 intraday high of 1/5/98 and was followed by a decline of 681 points,or 8.4% intraday to the low of 1/12/98. On 10/3/97 the 3 Day Put/Call Ratio reached 49.65. This was 2 days before the 8218 intraday high of 10/7/97 and was followed by a decline of 1,285 points intraday to a low of 6933 on 10/28/97. On 8/6/97 the 3-Day Put/Call Raio reached 50.29. This was 1 day before the 8340 intraday high of 8/7/97 in the Dow and was followed by a decline of 784 points intraday to the 9/18/97 low. Last Friday's 47.79 reading was again the lowest reading of at least the last 4 years,which is as far back as we went for this update. As you can see some of the largest declines of the last few years followed extreme low readings in this indicator. The 10-Day Open Trading Index closed at 0.789,the lowest most overbought reading in 17 months. The simple 10-Day Trading Index closed at 0.79,the lowest,most overbought reading in 18 months. The Trin-5 closed at 3.94, still below the 4.00 level that tends to occur near market tops. The 23-Week Cycle, which has caught some of the most important market highs for many years,is due to peak in this time frame. The current Top to Top Count calls for some sort of a high between November 24 and December 4. While the Dow should be near some sort of high there are reasons to believe higher prices will either occur this week first or we will see higher prices after some sharp but probably short term decline. The Gann Quarterly Chart on the Dow has turned back up,as has the Quarterly Chart on the the S&P 500 cash index. Normally the Quarterly Charts on the major indicies will turn up and down together although not necessarily on the same day. This suggests the Quarterly Chart will eventually turn up on the NYSE cash index, and to do so the NYSE cash will have to rise above 601.76. This would require a rise of over 3.2% in the NYSE cash index. If this is to occur and the Dow rises a similar percentage the Dow would rise up near or above 9631. The Weekly Charts have given a projection for the Dow up to 9631 plus or minus 225 points intraday. So the dilemma we have short term is that while there are strong reasons to look for some sort of at least short term high soon we do still believe there will be higher prices before any top of real importance. The question is whether we get a sharp decline in here first and then rally higher,or we rally further first short term and then turn down. If we get the sharp decline first we will ultimately want subscribers to go long afterwards in early December. We will give you a list of the stocks we want you to buy. If we get the rally first we will want you to go short. We will give you a list of the stocks we want to short. Mutual Fund switchers will be going long the Rydex Ursa Fund when we believe the high is in. Short term we want to see Monday's action before taking our next position long or short. Technically the period of seasonal strength near Thanksgiving that we talked about last week normally lasts another day or two.