No, the S&P is not yet showing the Fallen Angel pattern but there is a possibility. It
has form the left side of it. Only the right side action from here will decide whether
it completes the pattern or invalids what has formed so far. If it does form then it
will be many years before more good years can return. This is the danger.

But judging from news media bombardment of rate hike danger to the stock
market and the fear they have generated, I read otherwise. Shaken by the daily
news media bombardment, quite a lot of weak hands should have already bailed
out by now.

And yes, I refer to the fund managers too. Afterall they have since long time ago
taken over from the retail individuals to play the role of the public (vs the smart
money). Many fund managers are young graduates with at most few years
experience so they can never be the smart money?

With news media bombardng with negativites when the S&P 500 is at this "relative"
high level, and still staying here, and with weak hands already out, the underlying
structure may now be more solid than few months ago. It may not be prone to
panic. You can bet there will be more hype about the Fed raising rates but as you
will have already read in the Fed Fund thread (link) that the market has already
decided on a 0.25% hike on 8 Aug 2006. The panicky will still panic but the
non-panicky will not.

We now have to see how this form out. Whatever we think now can only be a
guess, nothing more.





Edited to add:

In case you may be wondering what is Fallen Angel pattern, it is the pattern of an
instrument that rose in stature to be an angel, to be loved by many, only to fall
back down to earth.

Some past examples:

The news media is once again hyping up the interest rate fear just because of one
economic data. You can be sure that their euphoric reporting will be repeated time
and again and now is no exception. You can be sure those young fund managers
will be frightened the shit out of their pants to follow the hype for fear of losing
their jobs.

If you have followed the Fed Fund thread (link), you know all this are just plan
human stupidity. The market has not decided on another rate hike so what are
the media so frantic about? Or are they just creating another story to sell more
papers? But since the media has began their assault on the market and there will
be funds who will react without excercising their brains but with full-blown
stupidity, there will be no doubt be the effect.

There have been attempts in applying Sun Tze Art of War to the market. I am not
familiar with it. But I play the PS2 game, Dynasty Warrior 5, a la Romance of the
Three Kingdom. There is a time for defence, for consolidation, for strengthing your
bases and outposts. There is a time for retreat. And there is a time for attack.

For the market at this point, it is the time for defence, for consolidation, for
strengthening your bases and outposts.

We just have to see how the market weather this second attack on its health, the
first unsuccessful one four months.

Happen to came across the daily chart of Equation and well.. the pattern was so similar to those shown below. Out of curiosity, I've checked with CSK and he has the following comments:

The pattern can be applied to daily chart. The time perspective will be shorter. It was a fallen Angel on the weekly chart in 1999/2000 and remained in the doldrum for 6 years.

At this moment, it looks like a candidate. It became an Angel when the market got exited about it and pushed the price up sharply. Buying an Angel stock gave people some sort of confidence that they are buying a good stock but that is just a preception at that time swayed by human emotion.

When it drop below $0.115, we can confirm. Shoud it go back to the area between $0.07 and $0.10 then it is a definite Fallen Angel once again. But OHL is involved in this stock so he may have interest to make it stay up.

Current daily chart as of 2006-11-10


Weekly chart of Fallen Angel Pattern in 1999/2000

6 mths has passed since the last post HERE, how is Equation chart looks like? Still similar and getting more & more alike.

But of course, only if at least it falls below 14c, then the pattern might be confirmed.. I guess