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Market
Commentary
The
Story of Alan and The Boat
Feb. 2, 2001
by Charlie Miller,
Analyst-at-Large |
The
tide was rising, and the boat rose with it before Alan's eyes.
"That boat is rising too high" he mused to himself, and grabbing
an ax, he leapt into the boat, the "SS Markets", and began
to hack holes in the hull, a task that continued for 4 years.
"Ahh, I've finally shown that I can stop this boat from rising"
he beamed, as the water about him rose higher and higher.
"Hmm, perhaps I've let in enough water. Perhaps I'll stop
chopping, and cover up a couple of the holes" he thought just
as the water began spilling in over the sides and onto the
deck. Twice he took boards, and with hammer and nails in hand,
he dived to the bottom of the hull and covered a couple of
the holes. "Hmm, this boat certainly is undergoing a natural
correction to rising high on the tide. They do that, you know?"
he announced to the hapless crew. And with that, he sprang
over the side, wearing the only life jacket that had been
aboard. "Don't worry" he comforted the crew, "I'll watch from
shore for a while, and if the boat seems to be in any further
trouble, I'll send out some more boards and nails. Good luck!"
(Now, replay in your mind the final scene of chaos aboard
as the ship went under in "Titanic")
Chaos is about the most apt term I can think of as I watch
the screen, and listen to CNBC day after day. I heard at least
a half dozen young and old explain breathlessly their newly
discovered understanding that all these companies that are
in trouble are somehow interrelated, and the problems of each
are actually the problems of all. My, my, why didn't I think
of that? Perhaps I could have called it "The destruction of
the fabric of the American economic and manufacturing infrastructure".
Nawww.
Day after day now the indices just decline in lockstep, both
in the micro and the macro levels, as can be seen in the intraday
charts A372 and A373. No capitulation, no conviction, no good
ideas about how to save ourselves as the water keeps coming
in over the sides.
It was one of those days when so many interesting things happen
that silence eludes me. As expected, the Dow finally broke
resoundingly out of the tightening coil of the (6) - (2) triangle.
Unfortunately, it broke out to the downside. That it continued
to be attached for the 3d straight day to my "Dead Bull Line"
(1) is not surprising. Also, it had stayed very obediently
within my last EWA prediction for 7 of the last 9 days.
The COMPX had paused at the Support line of my EWA prediction
(1) for 4 days, then took off in a burst of irrational exuberance
for a day on Feb. 15.
Then the flood of damaging information again began to come
in, and made the markets look like the astonishing multicar,
nonfatal pileup at the NASCAR race last weekend. The interesting
thing to this chart reader is that today's Low was within
5 points of the Low on Jan. 3, the day of Alan's first panic
0.5% rate cut of last month.
The EWA prediction of Jan. 11 has held up for 24 trading days,
not too bad for such a manipulated market. It may still have
some life in it, if Alan wakes up to the fact that the secret's
out that a lot of people actually know that he's responsible
for this mess, and takes some serious action - immediately.
It's interesting to compare the current slide to the 3-week
slide ending 7 weeks ago. That one was characterized by much
higher daily volatility, and on much higher Volume. There
was a lot of conviction that the bottom had fallen out, and
doubtless helped to panic the Fed. Our slide for the last
4 weeks has just been a gentle, inexorable sinking, as indicated
by the Resistance line and it's extension.
Curiously, this evening was the first time in months that
EWA detected a useful set of patterns for the 1-year data
span of the DJIA. It continued to show great downward pressure
on the index. Without further manipulation by Alan, the current
"next floor" for the Dow looks like about 10,200. That's about
150 points below Support line (7), but these days, what's
150 points more or less?
EWA continues also to show downward pressure on the COMPX,
which is what led me to suggest that the Support line of (1)
was likely only to be a pause, rather than a bounce. My ultimate
floor level continues to be in the 1,600 to 1,500 range. People
will really be getting mean if that happens.
- Charlie Miller 02/21/01
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