The Chart du Jour
Amazon reached our longstanding Fibonacci target of $20 today (see Chart du Jour of April 19, 2000), and then promptly left an "outside reversal up" chart pattern. This pattern is defined as a stock making new lows for a move, followed by a closing price above the prior day's high. Now don't get us wrong: There is likely no real hurry to buy this or most other stocks, but after a period of equity devastation, perhaps this is the first leading sign that we are overdue for a pause...a bounce..a trading range -- at least in this particular security.
After all -- although few in the popular media seem to be focusing on it -- we have just experienced a crash in given equities far greater than any damage done back in 1987. Just look at the chart below of Micron Technology. Never has so much wealth been created and destroyed in so short a period of time as perhaps has been the case in Micron's price behavior. Note all the insider selling by Intel of Micron toward the highs as well. We previously detailed this in our June 2000 article "When Insiders Rule." This chart simply represents an update of the chart we showed back then.
So we have the sense that a short period of gestation (a few days perhaps) is now due, although beyond a few days, we still fear that the Dow Jones Industrials in particular will have one final slide to new lows in late October. This general view is confirmed when we look at another index -- the old Value Line Index (a favorite of ours, if few others) -- where there is a relatively clear look and feel of a wave 3 low on the sixty minute chart. A sloppy wave 4 bounce would then likely be followed by a final thrust lower in this index later this month.
So overall, is it time to buy? Not yet. Is it time to start scaling out of selected short positions? Most likely. From the $20-$22 region in Dell for example, we could see Dell eventually regaining $36 in a short term rush -- maybe to celebrate another son of Texas gaining the White House in November. Such a gain would not likely be sustainable for long, but it is lurking out there a few weeks away.
More precise detail of our specific date prognostications for a tradable market low using Fibonacci techniques can be found by subscribers in our Oct 5th. intermediate term analysis.
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