The Chart du Jour

Corrective Mush

October 31, 2001

By, Barclay T. Leib

It took our admission of being out of synch with the markets in the 10/29 Chart du Jour to truly mark us as being out of synch. Specifically, with our 1111 short-stop level on the cash S&P 500 index yet to be elected, but close at hand as of Sunday evening, it took our warning that this stop would likely be taken out with time to send the major market indices immediately lower.

These things happen.

It has also led us to do a bit more intensive chart analysis. Depicted below is now our "best guess" wave count analysis of the current S&P chop, done on a 60-minute chart. It argues that we are in the midst of a sloppy A-B-C corrective period, in which we likely have finished an A up-wave, recently experienced B down-wave (maybe not quite done despite Wednesday's rally), and then will eventually experience a C up-wave. It remains our pre-disposition -- given the current Fibonacci "fit" of the price action -- that a target for the corrective C up-wave to finish now stands in the 1124-1128 region. This is quite simply a sloppy choppy mess -- as corrective periods tend to be.

Chart constructed with Advanced GET End-of-Day>

As far as timing a high is concerned, we add below to our 60-minute chart a Gann angle Box. In this chart we set the two-box interval to the S&P high of last Friday. If this added tool points to anything, it would point to support along the Gann angle line near point B labeled "support zone trend check," and a potential C-wave high toward the 16th-19th of November.

Chart constructed with Advanced GET End-of-Day>

So our official call for now is this: Corrective head-fakes up and down in the short term should eventually yield back to a more bearish trend post November 16-19. Patience in the short term should yet yield a better level toward 1124-1128 to re-establish short positions. The ultimate down-move that should reemerge out of this corrective period will then represent at least a serious retest of the lows of September 21st, if not something far more serious.

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