The Chart du Jour

Last Support

June 18, 2001

By, Barclay T. Leib

Chart produced using Advanced GET End-of-Day>

Friday's continued weakness in the equity markets stopped just above a previous gap on the 60-minute chart that we have previously pointed to as being of some significance. As such, equity bulls might be able to glean some hope that this has all been a nasty A-B-C 4th wave down in an ongoing rally to the 1330-1340 region.

While certainly a valid interpretation, personally, we now doubt it. Financial stocks simply look too weak and are too early in their decline to hope for little more than a day or two reprieve.

Instead, we'd expect a bit of a bounce to the S&P, but the gap to eventually get intersected, filled, and left behind as the market continues to migrate lower into a nasty 4th Quarter where the word "recession" will become fully accepted as a fait-accomplis. Specifically, if the S&P 500 June futures were to start trading below 1183.35 -- the bull's case will be fully abrogated. This is because at that level the current interpretation by some of a potential 4th wave low on the 60-minute chart would be intersecting the 1-wave high -- something Elliott analysis disallows.

1183.35 should thus be viewed as an inflection point where efforts to pick a bottom could turn into a true thrashing of the bulls. But be cautious first: This level hasn't come close to being reached yet, and likely won't without a further short term fight.

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