The Chart du Jour

1130 Blues

November 13, 2001

By, Barclay T. Leib

There is something about the month of November and the 1130-1140 range on the S&P that holds great distaste for me. Specifically, it was through this range that I can remember the S&P marching boldly higher in November 1998, breazily moving on from the Long Term Capital meltdown that just a few weeks earlier had almost proved fatal to our capital markets.

At the time, I must admit to anticipating little more than a large retracement rally. Instead, for those who remember their dot.com history, we moved directly into E-Bay mania.

Today's vault above our anticipated resistence at 1125-1126 came with the same feel as November 1998, and did so at almost the same range of prices. And once again I find myself trying to over-anticipate where a large A-B-C retracement rally will end.

This is not good, and for the moment must stop. 1125-1126 now blown away, Sandspring is now officially flat once again, scratching our prroverbial head at the ongoing market strength, but unwilling to get rolled by it. 1050-1126 has been an agonizing range with many cross-currents.

But is more going on here -- a la the November 1998 instance -- than a simple retracement bounce? We have to at least ask this question the second time around, even if we don't have a good answer.

One reader -- an astute Timothy Sharpe -- recently sent us his own Fibonacci calculations. His thought process goes as follows:

Whereas (a) of a = 945-1084 = 139 pts.

And (c) of a = 1053-1107 = 54 pts. = ~.382 (a)

Therefore, a of C = 945-1107 = 162 pts.

So 162 pts. X .382 = ~62 pts.

By the way, 162 pts. X .618 = ~100 pts.

In my humble opinion, b of C ended @ 1054

So 1054 + 62 pts = ~1116; 1118 was my first preferred target from over a month ago, and also seemed to fit best (as this correction was developing) for symetry's sake. Now in my opinion, SPX has too far exceeded this target, so I'm looking for the next most likely target.

Finally, 1054 + 100 pts = ~ 1154 (1150ish for rounding off sake), which is now my preferred target.

It appears to me that the SPX is now in a fourth wave of the final fifth wave series up (starting Nov. 1), which is the C-wave of a larger A-B-C corrective fourth-wave pattern, but I could be wrong, as the wave structure down thus far does look to be more impulsive than corrective -- but I've/we've been fooled before.

So maybe 1154 will be it, per Tim.

But I'm afraid to say, that when I now pull up my Fibonacci bands, the next level above 1125-1126 where the bands will "fit" the recent price action reasonably well, is now closer to 1161. This never-ending re-targeting of new potential highs is becoming downright nauseating, and costly.


Chart constructed with Advanced GET End-of-Day>

The bottom line: I'm still highly suspect of recent strength, but want to stand aside for a few days here to let the market run its course. Historically, over-anticipation of reaction rallies petering out has only led to trouble for me in the seasonally strong month of November. Once burned, twice shy. Money management occasionally calls for retreat.

Please excuse me if I quietly rest dormant watching these markets for a few days.


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