The Fall Fall
The CBOE Market Volatility Index, now at 34.36, is
nearing its highest level since early April. All the comments of analysts on
CNBC are negative. My phone is ringing as traders call for reassurance. Can you
say “extremely bearish sentiment?”
Contrarians would view current market action as nearing climactic proportions.
Seasonal tendencies would tend to support the scenario where we get a major low
in late October.
Let’s look at how things are shaping up chartwise.
When big events like what we’re seeing happen, I spend a lot of
time looking at weekly charts. The perspective you get is invaluable. The above
chart certainly proves the point.
Into the close, the Dow is nearing a break below 10,000. Once it
gets there, it has about 600 more points to go before it reaches a convergence
between the bottom of a descending trending channel and its 50% retracement
between its August 1998 lows and its January 2000 highs.
Price target? No. I hate that term. But certainly potential
support.
If we get down there, I’d be looking for a bounce.
Interestingly, that level also appears to coincide very well with the 61.8%
retracement I’m getting on my weekly Nasdaq chart. You can check that out in my October
6, 2000 Chart of the Day.
Those of you who will be heading out to Vegas…I’m looking
forward to meeting you. I have this one very interesting historical study that
sheds some more light on current action and what we can look forward to in the
near future. I would like to share that with you this weekend. Also, don’t miss
Duke Heberlein and me on Sunday morning as we discuss how to maximize the use of
TradersWire.
See you tomorrow in Vegas,