The Chart du Jour

Flat and Happy

September 22, 2001

By, Barclay T. Leib

Chart produced using Advanced GET End-of-Day

It's been quite a run. From our February 26, 2000 missive "Nasdaq Crash: First Downside Stopping Point" to today. Only on three ocassions on the way down did we abandon our overall bearish stance to turn short term neutral: first in late May 2000 (only to advise getting short again into early September, 2000); next in early December 2000; and then again on January 4, 2001 (only to advise getting short again January 22, 2001). Today is the fourth such time.

Although still a few weeks from our idealized October 11th cycle low, Friday saw two price objective met that we had set for subscribers: 1357-1409 target support in the Nasdaq Composite and 931-942 target support in the December S&P futures. As such, we took profits on our personal short positions, and now consider ourselves flat and happy.

We are still very suspect of financial stocks longer term, but short term, readers should note that MWD has now met our first support region near 38, and GE at 28 and change earlier today was getting pretty close to our previously espoused downside target of 25 1/2. Perhaps GE still grinds down to 25 1/2 by October 11, but in terms of the overall market, we will be watching that move from the sidelines. The risk-reward of staying short the major indices from here is mixed at best. And yet it is still clearly too early to advise going long with any conviction and safety. Flat is now best.

We are often a bit early getting out, but we did feel fear and capitulation today, and we did meet our price objectives. A few weeks ago, we thought 1409 on the Nasdaq still looked a long way off, and yet the Fibonacci rhythm of the market told us that was our likely target for a bottom. Now there, we see no absolutely no need to be greedy.

Did the World Trade Center news fit what the market would have done anyway, perhaps just accelerating it? We will never know of course, but from his 13th century grave, Fibonacci would say "yes."

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