When the most widely held stock in America recently shed over 25% of its market value in a matter of hours, CNBC shuffled the story into the background. But we continue to see the collapse of Lucent to be a fascinating and important chart pattern -- a chart pattern that by its very structure may hold a lesson for the broader market.

When we last wrote about Lucent, we suggested that a bounce off of 51 was likely to transpire in a 4th. wave. Ideally we suggested that one might have a chance to resell it toward 62. As the picture above shows, we have obtained a small bounce, but have yet to achieve a rally higher than 58. Whether we get to a further "bounce" to our original 62 objective or not, this stock remains in overall trouble, with the Fibonacci rhythm of the decline to date suggesting an ultimate target of 40 1/8 to complete 5 waves down. Regardless of its immediate short term path, Lucent is likely to eventually achieve at least two more new lows (v of 3, and then wave V itself).

But away from Lucent itself, what if anything can we learn from this chart's overall price pattern? Well, we think that it may be a leading indicator for the broader S&P index itself. Note in the side-by-side weekly chart comparison below, how Lucent made three thrusts -- each of diminished momentum -- to a final high, before collapsing. The current position of the S&P is not dissimilar in structure. If the S&P were now to follow a similar path as did Lucent, a daily price decline in a 1-2-i-ii fashion will transpire, before a 3 wave finally emerges that will break through the October 1999 S&P low. We can't wait to see how CNBC avoids talking about that one.

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