I think you are wrong assuming that the P/C ratio is too high, it is a little high now, but it already has gone under .4 two weeks ago, and often that index peak a good week or two before the market (it did around 6/1 and major other local tops through the last three years). As for the bottom of the channel, I think that shooting for 1000 if 1670 fails is also reaching a little, though one leg of my model still have in it 950 before the end of October (that fork is getting weaker and weaker....) In order for such a major fall to occur, I think we will have to see on the first retrenchment major deterioration of the internals, for instance, if the number of SOX stocks (and other leading Naz groupsd like the BTK and networkers) above their 200 DMA were to drop under about 40% on the first leg down after such a failure, then yes a sharp decline could ensue after a bounce on the first leg down. Until I see such deterioration in the internals, I would treat retrenchments as buying opportunities rather than the beginning of a major leg down. Momentum as we have developed in the last few weeks does not get reversed on a dime, IMTO.
Zeev
