The Chart du Jour

Dow Jones Transports

September 18, 2001

By, Barclay T. Leib

It is tempting to be patriotic and say that Monday's equity decline should be about it. After all, how much worse can it get when major airline stocks such as UAL and Continental get cut in half in one day. Surely one might think: This must be an over-reaction, and the U.S. Government will come to the airline companies' aid.

Yet when we eye the Dow Jones Transportation Average below, we unfortunately see a Fibonacci rhythm that still points toward further intermediate-term declines. On the Dow Jones Transports 1788.0 is the specific target in our mind, still some 21% lower than Monday's close.

Chart produced using Advanced GET End-of-Day

Similarly on other fronts, while a few financial stocks have now reached downside Fibonacci targets, many still appear to have similar distances as the DJTA to yet travel -- Bank of America and Bear Stearns among them.

All that we can say at the current time is that when the airlines finally stabilize for good (as opposed to just getting a knee-jerk bounce today), we'd look at Continental as the most attractive long-term play to the upside. We say this partly because Newark Airport -- an important home base for Continental -- is finally building a direct rail connection that will allow passengers to reach it swiftly from New York City and other parts of New Jersey. This should be a long-term major boost to Continental over other major carriers that primarily service JFK and Laguardia.

Just keep this in the back of one's mind for now. There is certainly no need to rush into the market and be foolish or impetuous with your investment dollars right away.

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