The code above is wrong... here:
$().keydown(function(e) {
var $item = $(".selected").removeClass("selected");
if (e.keyCode === 40) { // bottom
if ($item.next().is("li")) {
$item.next().addClass("selected");
alert($item.get(0).innerHTML);
}
}
});
});
Also consider using a plug-in...
http://jquery.bassistance.de/autocomplete/demo/

