A confused or just stubbornly bearish analyst?

The S&P broke through our 1421 resistence over the past two days, but have we turned bullish? No. While we admit to being concerned about the recent frothiness, and ready to change our opinion, at the end of the day, when we examine the plethora of individual stock charts we do each day, almost all still seem to point to further lows. The next major low in stocks like Cisco toward $40 a share and other already beaten-up telecoms such as Global Crossing will likely result in a sharp counter-trend bounce, but first we have to go down once more. These stocks are not ready to launch any sustainable rally from here.

And of course, as we forecast to subscribers back on October 15th., the financial stocks are just starting their descent. Jack Welch of GE was featured on 60 Minutes last week like some sort of God. Undoubtably some neophyte investors may have gone out and bought GE as a result. But how fitting a contrarian signal it is to have such a television feature appear just now.

Although GE never put in that one last isolated high we had been looking for a few weeks ago, if the Fibonacci rhythm of the chart below holds any portent, this stock is now headed to around $45-$46.

Chart produced using Advanced GET End-of-Day

And what fundamental might cause such a stumble in a stock that has been so invulnerable so many times in the past? While we would love to see subsidiary CNBC start to get embroiled in lawsuits from investors deceived and lightened of their life savings, the more likely culprit will be higher interest rates post the U.S. Presidential election. Here's our thinking: If Bush wins, tax-cut fever will be spinning all through the media, ergo Greenspan will have to be even more vigilent in his tightening tendencies as a counter-weight; if Gore wins, the market will perceive that big government spending is on its way back, so ergo once again sell those Treasuries. Basically, the election is a no-win situation for Treasuries either way. And the chart below generally bears out the vulnerable technical position at which the U.S. 30-year futures market continues to find itself. If the Advanced GET system's computer-generated wave count is correct, a Wave 5 decline still lies in front of us.

Chart produced using Advanced GET End-of-Day

Of course, there could be other causes as well. Through GE's merger with Honeywell, you have a 45 P/E stock with a big financial-orientation merging into a 30 P/E stock with an industrial-orientation. If GE becomes a more industrial stock once again (or just perceived that way), will it really be able to maintain its same financial-gimmick-filled growth rate as recent years? Will it deserve its current lofty P/E? Or will it migrate toward Honeywell's much lower one? Vis a vis long term historical norms, GE is, after all, already trading at a P/E approximately twice its long-term historical norm.

Lastly, don't forget how many portfolios already own this stock. Most mutual funds, faced in recent years with pressures to keep their performance robust, must be over-weight this stock. And likely almost every GE short has long since been destroyed. We see GE of today about where Microsoft was not that long ago, or where Dell was back in 1998 -- ready to severely disappoint.

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