Chart produced using Advanced GET End-of-Day

Several subscribers have written to congratulate Sandspring.com on our almost perfect prognostication of the lows touched by the S&P 500 and Nasdaq Composite in late September. But they have also queried: Why didn't we flip to being long when those objectives were reached? Surely there were some easy pickings out there -- particularly in tech land -- that in a matter of days vaulted 10-30%.

The answer is that only rarely will we flip from being short to long that quickly. In general, we like to give our psyche a bit of time to adjust to a new trading mentality and give the markets a bit of time to prove themselves. The only time we might act more impetuously is when an important Fibonacci target is reached directly on a cycle date also of some importance. And in our book, September 24th was not a day of any particular significance.

But as we have discussed in some detail over the past months in our subscriber-only articles and these pages, October 11th might be. We will thus maintain our market neutrality at least until then, hoping for the market's sake that weakness over the next few days turns it into a successful retest of our recent lows. Ironically, to go back down right now is actually more healthy for the market over the intermediate term (30-45 days out) than if this market were to trudge higher into October 11th. An October 11th high would only spell more trouble for the market all the way until February.

We also see many individual stocks -- Wendy's, Bank of America, and Bear Stearns among the more prominant ones -- that still appear likely to dive lower yet again. The above chart of Ford Motor Company is also an example of a stock that still looks incomplete from a Fibonacci rhythm point of view. We fear that $12.43 may have to be seen before this old Blue Chip can regain any significant footing.

Please note that for sentimental and personal reasons, we critique Ford with much hesitation.

Ford Motor Company first came public in January 1956, and my grandfather George C. Leib, a founder of the old white-shoe investment banking firm of Blyth & Co., was the team leader in its initial public offering. At the time, the 10.2 million share offering on behalf of the Ford Foundation raised $642 million from the public, and was the largest cash offering of common stock that had ever been made on the American market. Who knows, maybe my grandfather's successful launch of Ford Motor, and the fees he earned for doing so, may have trickled down through the generations to help my father pay for my college education. I am not usually one to bite the hand that feeds me.

Coincidentally, I also went to college with William Clay Ford, now a senior member of the company's board. I consider him a bright and honorable fellow. So saying anything negative about Ford does not come easy.

But perhaps like another fallen titan -- Xerox -- Ford has a major problem brewing. I speak not of the massive Firestone tire recalls, impending consumer law suits, or labor strikes at some of its global plants. I speak not of dwindling U.S. demand for new cars as recession looms. All of these negatives are there of course, but these events are not the cause of Ford's problems -- they are simply the catalysts to show Ford's true weakness. Ford's real problem is that its recent managers have allowed it to rack up too much debt: $174 billion to be precise. This currently causes the company's debt-to-equity ratio to hover near a high 9-1, and its quick ratio (current assets, not including inventories, divided by current liabilities) to be a sickly .50. Which companies will be able to service their debt and which won't is already a growing area of discussion on Wall Street, and while Wall Street hasn't gotten to express undue concern about Ford yet, maybe they soon will. Ford's debt-to-equity and quick ratios are embarrassingly poor compared to other car companies such as GM, Honda, or Toyota.

Of course when business is booming, a company like Ford can get away with carrying such hefty debt loads, but business is anything but booming. On a 1-year basis, EPS growth at Ford is down 65%; on a three-year basis EPS growth is down 31%, and on a 5-year basis EPS growth is down 10.6%. This is not the Ford Motor Company that my grandfather knew so well, nor the one Billy Ford likely envisaged running someday as he left Princeton. As earnings growth dwindles and debt servicing continues, how much longer can Ford's lofty 6.8% dividend stand? If that gets cut, who's going to continue holding this stock?

On an insider trading basis, Billy Ford has been one of the few buyers of Ford over the past year, while cousin Edsel continuously sells. But Bill's last purchases were above $27, so at least for now, Edsel appears to have been a far more savvy judge of the company's near term prospects.

In short, it is looking at chart pictures like Ford that make us want to wait and be patient before going long. In Elliott wave terms, we may have just ended a "three-of-three" decline -- a decline that to the neophyte may be tempting to buy, but of course is far too early in time. Multiple months of chop and agony may yet exist in this stock as it meanders through waves 4 and 5, and eventually towards the $12.43 price objective we show above.

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