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

To: Gersh Avery who wrote (705)	12/7/1998 12:04:00 AM
From: dennis michael patterson	Read Replies (1) \| Respond to of 99985

Jerry Favors Analysis - Sunday, December 6, 1998 7 p.m. Our work called for the Dow to see a high near November 25 plus or minus 2 days and then a decline into December 2 plus or minus 2 days. The Dow in fact reached a high of 9380.20 on a print basis on November 24 and has since declined 508 points to a low of 8871.45 on a print basis on 12/3/98. The Bradley Indicator called for a high near Nov. 24 and then a decline into December 2, plus or minus 2 days in each case. So far this year the Bradley turning point dates have been quite good. Technically the Bradley now calls for a rally into December 11 plus or minus 2 days. Before we can really trust that forecast there must be other indicators suggesting we have seen or are near a low. While the Dow closed up strongly Friday the 3-Day Chart did not turn up. We would have alot more confidence that the low for the current decline was in if the 3-Day Chart had turned up Friday. Now the fact that the 3-Day Chart on the Dow did not turn up Friday does not necessarily mean that a low has not been seen. We still could well have seen a low last week. But we need more evidence. The Lindsay A-D Indicator gave a buy signal last week. Now buy signals from this indicator do not occur that often,and when they do occur they tend to be reliable. The Dow would have to close below 8879 with more than 941 net declines for the day to invalidate the buy signal from the Lindsay A-D Indicator. The 5-Day RSI fell to 22.57 last week,the most oversold reading since Aug. 31,the exact day of the closing low. We look for lows in the Dow when the RSI falls below 30,as long as the main trend is still up. The Trin-5 rose over 6.08 last week,which as we have stated tends to occur near market lows. This is a positive sign ,suggesting we may well have seen a low. We have discussed trading bands in the past and the fact that the Dow tends to be near a bottom when it falls down near or just under one of these bands. Several years ago a Dr. Mel Widner discovered what he term Projection Bands. They are similar to regular bands with a few notable differences. The Dow is normally near some sort of top when you reach the top of this band and near a low when you reach the bottom of the band. The Dow was near the bottom of the Band last week and on Friday,the Projection Oscillator turned up. The Projection Oscillator is related to the Projection Bands. We won't go into a lengthy explanation here but the following are a list of dates when this Projection Oscillator turned up:11/16/98, 10/29/98, 10/2/98, 9/01/98, 7/24/98, 7/13/98, 6/17/98, 5/27/98, 5/19/98, 4/29/98, 4/01/98, 2/25/98, 1/12/98. If you go back and check the Dow near those dates you will see most were near at least a short term low, and some, like 9/1/98, near a major low. So Friday's upturn is an encouraging sign. The Forecast Oscillator, discovered several years ago by Tushar Chande, is a type of linear regression indicator. We won't go into a lengthy explanation on how this works either,but we have it has often given some good signals. It gave a potentially positive signal Friday. Tom Demark discovered a market indicator he called the Range Expansion Index. That indicator reached extreme oversold territory last week and turned up Friday. This is often a signal of higher prices,at least short term. So while the 3-Day Chart did not turn up Friday there are still some signs that the Bradley forecast may be correct. The wild card for Monday is of course the action in the Asian Markets tonight and the European Markets tomorrow morning. Any decline below 8954 on a print basis tomorrow morning would be a short term negative signal suggesting a sharper decline at least intraday tomorrow. But if this occurs and the Dow later rallies back above 9026,or the prior high for the day,whichever of the two is higher,a bullish signal would be given short term. Listed below are our stops for current positions. These stops apply only to very short term stock traders. If they are broken it will not necessarily mean we have turned bearish on the stock. As long as the Bull Market is still intact we would expect each to bounce back to much higher levels. But if you are a very short term trader here is where our stops would be: Delta Airlines - 49 1/2 GE - 86 1/8 Abbott Labs - 45 1/2 Bristol Myers - 114 The Limited Stores - 26 1/4 Motorola - 54 7/8 Best Buy - 48 1/4 Merke - 144 1/2 Microsoft - 107 1/2 Adobe - 41 3/8 Any rally above 49 3/4 in Abbott this week would be a short term bullish sign there. A decline below 60 1/2 in Motorola will signal some further pullback this week but if Motorola falls below 60 1/2 then later in the week rises back above 64 1/4 a short term bullish signal will be given. Any rally above 46 1/2 in Adobe this week will signal higher prices and a test of the short term breakout level at 48 1/2. Option traders if the Dow closes below 8875.31 and there are more than 941 net declines for the day we would sell long positions and wait for new instructions. On a more intermediate basis if the Dow is still reaching new highs after December 24 then the odds will strongly favor higher prices into 1999. This is because the Lindsay Top-to- Top Counts have always caught every major top in stock prices for the last 100 years. If the Dow is still reaching new highs after December 24 it will be outside of the last possible Top-to -Top count and suggest no major high in stock prices is likely until at least March or April of next year.