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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: donald sew who wrote (221)	12/3/1998 8:26:00 PM
From: dennis michael patterson	Read Replies (2) \| Respond to of 99985

Jerry Favors Analysis - Thursday, December 3, 1998 8 p.m. At the lows today the Dow was down as much as 193 points. We closed down 189.23. We allowed for a further decline today but we frankly did not expect it to be this large. We stated last evening that we allowed for a further decline today but that unless the net declines were more than 941 at the close the Buy Signal from the Lindsay A-D Indicator would remain valid. Despite today's sharp closing decline the net declines for the day were an unofficial 734,failing to exceed 941. So unless the net declines tomorrow are above 941 the signal from the Lindsay A-D Indicator remains valid, despite today's closing decline. Now if the net declines for the day Friday are more than 941 at the close the signal would be invalidated. There have been times in the past like this when a signal was given a day or two early, but unless there are more than 941 net declines at the close tomorrow the signal remains valid and suggests we are near at least a short term low. The low due in this time frame is due near December 2 plus or minus 2 days,so we are still in that time frame. We had hoped the 3-Day Chart would turn up Friday,which would confirm that some sort of low had been seen this week. But for the 3-Day Chart to turn up tomorrow the Dow would have to hold above today's lows and exceed today's highs. That would be asking alot from any rally tomorrow. If today's lows are broken tomorrow,especially today's intraday low,the 3-Day Chart could not turn up Friday. If it does not turn up Friday it would not necessarily preclude the probability of some sort of low Friday and a rally next week. We would just have more confidence in a rally next week if the 3-Day Chart turned up. But the probability of an upturn in the 3-Day Chart tomorrow is not great given today's close. The Dow has a downside projection calling for 8825 plus or minus 63 points intraday. There is also some support to any further decline near 560 plus or minus 2.00 in the NYSE cash index. If a sharper decline than expected comes in there is support near 8673 plus or minus 40 points in the Dow. The Trin-5 closed at 6.01 today, now exceeding 6.00. As we have stated at least short term market lows tend to occur when the Trin-5 rises above 6.00. We stated last evening that the 5-Day RSI normally falls below 30 at short term market lows. Today the 5-Day RSI closed at 22.57, the most oversold reading since 8/31/98,when the latest super rally began. The Bradley forecast has so far proven very accurate this year.It now calls for a low near December 2 plus or minus 2 days, and we are still in that time frame. Today was the first day the Dow closed below our original 8992 level, at which we went long this week. Unless we close down Friday with more than 941 net declines we still believe we are near some sort of market low. The Bradley targets for highs or lows have been fairly remarkable all year. We see no reason to doubt them here,despite the fact that the Dow has fallen below our original purchase price of 8992. However the hourly charts have not given a new Buy Signal yet.If they do so tomorrow we will tell you on our 12:30 update. In the interim we will keep all stops in place. Stops for current positions are as follows: Abbott Labs-45 1/2 Best Buy-41 1 /2 Bristol Myers-106 3/4 Delta Airlines-49 1/2 GE-86 1/8 The Limited Stores-26 1/4 Motorola-51 1/4 Merck- 134 1/2 Microsoft-104 3/4 Adobe-37 5/8 If our stops are broken it will not necessarily mean the rally in these stocks is over,but we must keep our risk on the long side reasonable just in case we are wrong about some further rally and a top is already in. All other stops remain in place.

To: donald sew who wrote (221)	12/4/1998 1:33:00 AM
From: Stephen	Read Replies (1) \| Respond to of 99985

Don, I respect you opinion, but I believe that with the internets, and some other high-flyers, their success has a lot to do with the nature of the people who participate in the market place. I have not been involved with trading in the US for very long, however, I have noticed that there is a greater disregard for basic fundamentals here than in other equity markets. The main reasons for the internuts success are numerous. I should add that the only related stock I have occassionally owned is AOL, simply because I am too old a dog to change my tricks. Firstly, the internets always exceed their 'earnings' estimates and revenue growth. Secondly, because they are so overvalued, they draw in shorts. Thirdly, the successful stocks manage their price by regularly releasing news (on this one, 2 years ago I was consulting for a major bank here in San Fran, working on internet banking and advertising. AOL was chosen as the medium and there were problems which required a senior systems engineer to be on site. I talked about the stock price not doing very much and he told me that management had every intention of dealing with that very quickly - if only I'd listened !). There is a high level of retail investment that fuels the high performing stocks when fund managers decide that valuations are too high. LU is another non-internut example - even though rumours continue to abound about them having to stretch to meet earnings projections. In short, I regard the the internuts as a microcosm of the market - a self fulfilling prophecy if you like ..... if things get tough, they issue news that makes shorts cover and causes a price spike. This is crazy, I know .... but then I think the US financial markets are totally unreasonable ... Good luck all Stephen