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On Friday, when they could have easily closed down near their lows if they really meant business on the downside, all indices managed to recoup much of the loss before closing.

After a careful review of various aspects after Friday's close, I have strong reasons to believe that the 'capitulation' scenario can be averted, for at least the next couple of weeks, if not entirely:

1) NAZ has corrected 22.2% , S&P500 8.7%, while DJII 8.9% during the last 5 weeks. That 5-week stretch, without much of any interim rallies, is the longest such downturn in all indices over the last 6 years.

2) NAZ has cleared the 8/3 low of 3521, S&P500 has cleared its 8/3 low of 1425, while DJII has approached its July lows. All three indices, having met their downside objectives, have shown signs of downward fatigue during Friday's session.

3) Weekly stochastics for all 3 indices have reached greatly oversold levels and are turning up, while their daily stochastics are flashing positive divergences while the indices are hitting new lows.

4) The advance/decline ratio at the NYSE has dramatically improved over the last few sessions.

5) The put/call ratio has reached above 0.73, levels around which previous market lows were associated with.

6) 90% of earnings warnings are behind us.

7) Positive steps have been taken towards resolving the energy crisis.

8) EURO has stabilized with intervention followed by policy shifts.

9) Fed tightening cycle seems to be over.

10) Media and investor consensus has turned negative over the last 5 weeks, and ultra bearish during the last 2 days.

The term 'capitulation' has been thrown around in the media and in online chat rooms more frequently than I can ever recall. The 'fear' factor has clearly replaced 'logic'. If the market were in fact going to get a capitulation anytime soon, it would be the most publicized 'capitulation' ever.

The overwhelming 'Doom and Gloom' is prevalent in the market. If history is any guide, could this actually indicate that the 5-week correction is in fact approaching an end?

My research shows that market often times turns around after a long weekend. Can this quasi long weekend be counted on to deliver such a turnaround?

Please do your own DD should you decide to take action.

JMHO (my very 1st post on the FOOL)
Casual Techwatcher
October 8, 2000
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