Stock Market Highlight #7
"ALMANAC V" trading system sells short exact all-time Dow Jones Industrial Average May 4, 1998 high which is not exceeded the first half of 1998.
(COMMENT #s 356, 357)
UPDATED 19980504
COMMENT 1998-356
1. The stock market advance/decline line failed to CONFIRM the recent highs in the DJIA.
2. This line peaked in early April.
3. The line can be seen in the pages of "Investor's Business Daily" about 6 pages from the end of the first section.
4. Remember, this major DIVERGENCE between price and the advance/decline line was one of the MAJOR events the "TOP TICK REPORT" projected would occur at the next major peak.
5. The advance/decline RATIO, however, moved to a new 6 month high on Thursday.
6. Also, on last Monday's bottom, bullish enthusiasm moved to a new 12 month high.
7. We're again due a gap-up opening in the stock indexes this morning.
8. Let's use the "ALMANAC V" adjusted intraday entry technique (see page 256 of "The $upertrader's Almanac - 1st Half Edition") and the algorithm listed on page 236 of "The $upertrader's Reference Manual" to enter shorts.
UPDATED 19980504
COMMENT 1998-357
Mid-morning.
1. Let's focus on an hourly in the SPM.
2. As previously discussed, it's possible that the 980406 to 980428 decline was an Elliott Wave "a-b-c" downside correction which is over.
3. Since we know that 3 waves are corrective, this evidence alone would suggest higher prices.
4. The move to new highs in the DJIA this morning supports such a conclusion.
5. The new DJIA highs, however, are being CONFIRMED by very few other indexes thereby again forming several DIVERGENCES (see pages 171-184 of "The $upertrader's Reference Manual).
6. The DJTA is still nowhere near its mid-April highs, for instance, and has not even broken Thursday's high.
7. And the NYM and SPM have also not CONFIRMED.
8. But it's also possible that a "smaller degree" "wave C" is forming and completing an upside "a-b-c" correction.
9. This is the "C wave" anticipated in COMMENT # 344 of 980429.
10. If this interpretation is correct and the market completed an "A" and "B" wave on 980428, then this upside movement since the 980428 lows has about expended its energy.
11. Remember, the fuel to drive prices higher as measured by mutual fund cash and other such statistics is at historic lows.
12. Mutual fund cash levels is at the lowest levels since the market peaked in 1976.
13. These highs were not exceeded for another 5 years.
14. Hence, let's look at some price projections.
15. As an example, PHI X the assumed "A" wave and added to the high of the "A" wave projects to 1134.54 in the SPM.
16. The assumed "C" wave discussed in COMMENT # 344 breaks down into 5 waves with the 3rd larger than the 1st and 5th or "extending".
17. PHI X the assumed 1st wave of the "C" wave and added to the high of the "1 of C" wave which ended Wednesday projects to 1128.78.
18. Wave equality of the 1st and 5th waves projects to 1133.60.
19. The early high (so far) is 1136.20.
20. This is an excellent level to be entering short positions with tight stops.
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