Stock Market Highlight #2
Stock market low for the first half of 1998 is projected within 0.5 intraday point.
(COMMENT #s 1, 16)
UPDATED 19980105
COMMENT 1998-1
All 1998 "Almanacs" have been mailed for orders received through Friday, 980102.
The chart shows daily hourly prices for the Dow Jones Industrial Average since the October 8, 1997 intraday peak at 08:32.
Odds favor approaching this market from the short side for the following reasons;
1. The Dow Jones Industrial Average made an all-time intraday peak on 970807, attained a second, though lower, closing peak on 971007, and a third intraday and closing peak on 971205.
2. Most cash and futures stock market indexes peaked on or around 971007.
3. The Dow Jones Transportation Average peaked 971015.
4. The DJIA did not make a new all-time high in October and, thereby, did not CONFIRM the 971015 peak in the DJT or the 971007 peak in most stock indexes. This confirmation failure formed an important DIVERGENCE (see pages 171-184 of "The $upertrader's Reference Manual").
5. At the 971205 peak, the cash S&P 500 and NYSE indexes made new all-time highs UNCONFIRMED by the rest of the major stock indexes (see pages 171-184 of "The $upertrader's Reference Manual").
6. These latter peaks were UNCONFIRMED by such indicators as the cumulative advance/decline line, volume, momentum indicators such as RSI, slow stochastics, etc., new highs/new lows, and so on (see pages 171-184 of "The $upertrader's Reference Manual").
7. The 971007 high occurred within the "cluster" of "A Points" (see page 386 of "The 1997 $upertrader's Almanac - 2nd Half Edition"). This "cluster" occurred 971003 through 971008 with a major point occurring on 971005. As in 1987, the major peak thus, again, was marked by a "cluster" of these points. (We widely warned, both in our advertisements and at our web site - see "A&P Points", of the importance of the upcoming October "cluster" was likely to have on the markets).
8. The "up arrow" in the chart marked the last "A Point" of 1997 on 971226. It is surprising that this MAJOR point marked a MINOR low. (If you have been following the turning points in the gold and silver markets [see "A&P Points" at our web site], both turned 1 day prior to this 971226 "A Point". The peak in silver marked the highest price of the last 8 years)!
9. Is it not reasonable to expect the next MINOR point to mark a MAJOR high? That point is shown on page 398 of "The 1998 $upertrader's Almanac - 1st Half Edition". Not bad, eh?
10. Today is the 104th calendar day since the 970807 DJIA high (FIB 8 X FIB 13).
11. The peaking process required 120 calendar days from 970807 to 971205.
12. The 971007 peak for most stock indexes occurred 42 trading days (FIB 21 X 2) after the 970807 DJIA peak and 42 trading days prior to the 971205 peak (59 and 61 calendar days). Ratio = 1 : 1.
13. The 971007 peak occurred EXACTLY at the monthly "Inversion Cycle" peak projected all year long in "The $upertrader's Book of Linear Time Cycles" (see page 295).
14. The highest weekly "Inversion Cycle" projected value projected for the year "The $upertrader's Book of Linear Time Cycles" (see chart, page 297) just missed the 971028 selling panic low.
15. "Inversion Cycle" indexes are among the very best, if not THE best, of market timing tools.
16. Today is the 90th calendar day since the 971007 peak (GANN 90, FIB 89).
17. The 144th calendar day (FIB #) since the 970807 peak occurred 3 trading days ago.
18. The conditions reviewed in the "TOP TICK" report are all falling in place. Most major among these anticipated conditions has been the expected peaking and decline of other world stock market indexes prior to the peak in the "blue chip" American stock indexes.
19. This is the event the "TOP TICK" report projected would occur as globalization spread the "Dow Theory" worldwide. In accordance with this expectation, the American stock market is becoming/has become the equivalent of the Dow Jones Industrial "blue chips" with all other remaining world markets equating to "small cap" issues.
20. As stated in the "TOP TICK" report, one can observe these world stock market DIVERGENCES in "Investor's Business Daily".
21. By this theory, the ideal would actually see the DJIA make one more MINOR high just above the August highs UNCONFIRMED by ANY OTHER stock market index, either globally or domestically, cash or futures.
22. Returning to the chart, the move down from the 971007 high to the 971028 low, as shown, required 98 trading hours (SQ 10 = 100).
23. From the 970807 high, this move spanned 399 trading hours (SQ 20 = 400).
24. The "c" leg of the "A" wave (shown in the chart) formed an approximate ratio of 1 : 4 to the entirety of the "A" wave.
25. Waves a, b, and c of the "B" leg shown in the chart required 8 (FIB #), 79 (LUCAS # = 76), and 108 hours (FIB 55 X 2 = 110).
26. The entire "B" wave required 195 trading hours (LUCAS # =199) (2 X LUCAS 7 = 14, SQ 14 = 196) and formed an approximate 2 : 1 ratio with the "c" wave of the "A" leg. (Don't forget, most stocks peaked at the beginning of this "c" wave in October).
27. We are assuming that the market is moving DOWN to the box shown in the chart. This is a MINIMUM expectation. It is also quite possible that the market is about to cascade rapidly.
28. The move down is expected to complete the "c" wave of the "C" leg.
29. The "a" and "b" waves of this assumed larger "C" leg required 65 and 64 hours (SQ FIB 8 = 64), 129 total (123 = LUCAS #).
30. The "a" and "b" waves have formed a ratio of, roughly, 1 : 1.
31. The entire move from the 971028 low has required 324 hours to today's high (SQ LUCAS # 18 = 324) (LUCAS # = 322).
32. Note the second chart of hourly RSI in the DJIA. Note how, even on an hourly basis, RSI is not CONFIRMING today's move to new highs (see pages 171-184 of "The $upertrader's Reference Manual").
33. Note, further, how the opposite DIVERGENCE occurred at the 12/18 low (i.e., as PRICE moved to the "a" wave spike low below the lows of 971212, note how hourly RSI on 971218 held above its 971212 lows). Can you see how the reverse is happening now?
34. Traders should be particularly sensitive to market reversals to the downside in this market and should employ approaches that provide short entry with tight stops against recent highs in the March contract.
35. The very short term trading system presented on pages 96-101 of "The $upertrader's Almanac - Reference Manual" is such a "system" and, on the hourly basis shown in the chart, entered short at 11:30 this morning (central time).
36. A close below the open over the next few days will cause a "white" candlestick which should be sufficient to provide a short term entry signal.
37. The system presented in pages 205-209 of "The $upertrader's Almanac - Reference Manual" is particularly suitable for this market at this time as is the "ALMANAC II" trading system presented in "The 1996 $upertrader's Almanac - 2nd Half Edition). Note that the same pattern applies to the hourly chart which reduces risk and provides for tighter stops.
38. The reader should observe that trading is simply the process of identifying a number of situations such as this one that have a chance of working out quite well if the analysis is correct but which involve very little risk to capital if wrong.
UPDATED 19980109
COMMENT 1998-16
Turn to the "Progression of Prices" discussion on pages 272-280 of "The 1998 $upertrader's Almanac - 1st Half Edition".
1. TB have broken the February, 1996 high in this market but are nowheres near the October, 1992 high.
2. ED are considerably below their February, 1996 or October, 1992 highs and are DIVERGING with the TB high of this week (see pages 171-184 of "The $upertrader's Reference Manual").
3. TN have not broken their February, 1992 or September, 1993 highs and are DIVERGING with the TB high of this week (see pages 171-184 of "The $upertrader's Reference Manual").
4. TN are not CONFIRMING the new all-time highs in the BD (see pages 171-184 of "The $upertrader's Reference Manual").
5. BD, by moving higher, are DIVERGING from stocks, which are moving lower.
6. When bonds peak and begin to move lower, one of the most interesting questions of 1998 will be answered. Continuation of the present DIVERGENCE would suggest that stocks would be in position to rally. The more traditional expectation that stocks and bonds somewhat parallel each other's moves would suggest that they both move down together.
7. Each market's phase is a little different. In this phase, for instance, funds have flown to the long end of the interest rate sector during times of instability rather than to the highest quality, short end.
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