The Chart du Jour

Almost There: Cisco

March 10, 2000

When we first displayed the Fibonacci rhythm of Cisco back on February 9th, we suggested that the Nasdaq parabolic run was unlikely to end until Cisco reached its natural Fibonacci rhythm target of 146 - 148. Since that time the Nasdaq has had not less than five violent "outside days down" at various occasions leading us to jump the gun on proclaiming the Nasdaq move as finished. For this we apologize. Our extrapolated high at 4390 in the Nasdaq 100 has been left in the dust for the the moment in a slightly similar fashion as the DJIA overshot our 11,541 target for a few days in January. Calling the top of any parabolic move is by definition a hazardous endeavor.

But Cisco is almost at its 146 - 148 target. We have little doubt that it will achieve this target in short order. When it does, this company that as recently as October 1998 was trading at $21 a share, will have acquired a total market capitalization of $500 billion, a P/E ratio just short of 200-1, and a price to book value of 33-1. We don't care how "well positioned" fundamental analysts deem Cisco to be in the web-infrastructure business, this company will be a trading sale. The Fibonacci rhythm is very clear that 146-148 should be mega-resistance. And when Cisco peaks so too should the Nasdaq Composite and Nasdaq 100. Who knows -- maybe we'll also achieve our long-standing target on Global Crossing of $66-$68 at the same time. If so Leonardo Fibonacci would be shouting even louder from his 13th century Italian grave -- SELL!

From a timing stand-point we spy a "panic cycle" on the cycle models of Princeton Economics due next Thursday, March 16th. When I worked at Princeton Economics, I found that their panic cycles had at least an 80% success ratio prognosticating violent and important days that they labeled "panic cyles" -- often outside reversal days.

So let the party reign for just a bit longer, but if we make it all the way through March without some sort of Nasdaq accident, I will continue to be surprised. Long term LEAP puts should be the focus of one's attention as Cisco approaches its target in the sky.

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