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

To: Les H who wrote (460)	12/5/1998 7:18:00 AM
From: donald sew	Read Replies (1) \| Respond to of 99985

Les, Thanks for your post. Since I think that was such an important article about the double top, I wanted to paste the whole article here. It is important to note that this article is from one who is BULLISH on the market, but is taking caution and gives an objective view from a technical standpoint. Personally, I give more credibility to a BULL becoming a little bearish/expressing caution, or on the other hand, a BEAR becoming bullish, than to continually hear bearish comments from a BEAR or bullish comments from a BULL. It just simply shows more objectivity, whether right or wrong. Les, thanks for bringing this article to our attention >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 12/05/98 Decision Point Alert DJIA: 9016.14 S&P 500: 1176.46 (This is an excerpt for Top Advisor's Corner) ********************** CYCLE CONTEXT People are still concerned that we may still be in a bear market, and there is certainly plenty of bearish evidence to go around -- a stalling Advance- Decline Line, extreme bullish sentiment (which is bearish), and now we have to face a double top on some major market indexes. The double top is a bearish formation and the fact that the most recent market top on the Dow and the S&P 500 was about equal to the July top is cause for concern on a strictly technical basis. If standard double top expectations were to result from the current configuration, we would see the market decline once more to the October lows, but this time the retest would fail. At that point the minimum downside expectation would be a decline to about 5500 on the Dow. The problem is that every time the market challenges a previous high, a double top is formed unless the market simply blasts through the resistance without hesitation, and in the case of a consolidation move a triple top is also possible. Considering that most bearish formations do not execute to the downside as expected, how can we tell which ones are dangerous and which are not? It is my observation that the likelihood of a given outcome depends almost entirely on context within market cycles, the most important of which is the 9-Month Cycle. I periodically do a market forecast chart and post it to the Chart Spotlite area of the web site. On each of these charts I highlight the 9-Month Cycle, and you can clearly see that it has been a reliable market forecasting tool since 1994. In fact, all the 9-Month Cycles since 1994 have been bull cycles, meaning that they top late in the cycle, perhaps in month six, seven, or eight. In a bear market, the reverse occurs and the cycle can possibly top in month two, three, or four. The last 9-Month Cycle bottomed on October 8, and now eight weeks later we have retraced the entire decline on the S&P 500 and have hit new, all-time highs -- quite an unusual situation. It is also a situation that has us double topping only two months into the current 9-Month Cycle, and we have to wonder if maybe the bears are right this time. I continue to operate under the assumption that we have just begun a new bull market and that this current 9-Month Cycle will be another bull cycle that will top out about the first week in April 1999. My assumption is reinforced by my belief that the Four, Eight and Twelve year cycles also bottomed in October, and by the reliability of the Presidential Cycle, which can normally be expected to rise into the last two years of a presidential term. My overall bullishness does not keep me from standing aside occasionally, such as now, when I think that a shorter term cycle may give us more trouble than usual, but we'll take it one step at a time, rather than throwing in the towel on a secular bull market that still seems to have all its power intact. <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<