The Chart du Jour

November Salvation? Don't Bet on It

October 29, 2000

By, Barclay T. Leib

By now almost everyone knows that cyclically September and October -- for whatever reasons -- can historically be tough months for equity bulls. We know as well of course that the year 2000 proved no exception. But now, many cycle neophytes likely believe that November and December will bring redemption. Everyone believes that the market almost always rallies into year end, and even our own cycle work at Sand Spring was originally looking toward a tradeable low toward the end of October.

The primary problem with this view of course, is that the Dow Jones has already been rallying in recent days, while the broader indices have not -- complicating any call for a broader market turn. The second problem is that a November rally would just seem awfully pat. Will the market really be that cooperative? A final problem is that certain equities such as Micron Technologies have been so decimated in October, that they now fall into the category of truly "broken" stocks. If I have learned anything from such chart patterns in the past, it is that they do not tend to bounce back. Instead, they tend to meander lower -- quieting down in the overall pace of their decline, but never recovering. Take a look for example at the current Micron chart below, and compare it to another "look-alike" chart we propose resembles it a bit -- the 1991 collapse in the Swiss franc. There is never any large recovery, never any opportunity to get out -- but instead, just a gradual chop lower.

Chart produced using Advanced GET End-of-Day

Chart produced using Advanced GET End-of-Day

With this type of pattern in mind, we invite susbcribers to click here to view more detailed technical work on the major stock indices, updating our October 5th and October 15th articles. In it we also take a look at two recently wild equities -- JDS Uniphase and Corning Glass Works. Have these two stocks bottomed now or not? Both have Fibonacci rhythms that point in just one direction. Become a subscriber for immediate access to this analysis.

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