The Chart du Jour

S&P Hourly

February 5, 2001

By, Barclay T. Leib

Chart constructed using Advanced GET End-of-Day

We have been away for a few days, but are back just in time to note an important support line give way on the hourly March S&P futures contract depicted above.

Next, we would expect minor trendline support at 1345 to quickly yield to the more significant trendline support near 1290, and finally in a flush, to eventually reach our target zone between 1209-1241. It is only within this latter range that we see mutiple Fibonacci layers of potential objectives that should temporarily halt what appears to have begun last Friday.

And yet, as we drove back from the airport this evening, the suburban mall parking lots we passed were absolutely packed! Clearly, the consumer hasn't really stopped spending, government stats about a massive slowdown notwithstanding. The problem is not really the consumer. It's more the bloated P/E ratios and debt burdens of corporate America that are causing the problems together with higher factor prices primarily from the energy sector. Put another way, we see the recent "slowdown" more as a Wall Street valuation problem than it is a Main Street spending problem.

The Fed and the federal government may lower interest rates and cut tax rates in the hopes of spurring the consumer on, and thereby avoiding a recession. But by following this path, they remain very much at risk of getting a different result. Stagflation anyone?

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