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October 02, 2006

Stock Market: CNBC Report
by Bill McLaren

CNBC EUROPE

LET'S LOOK AT THE FTSE DAILY CHART

Last week I forecast the index would go to the July low. The index moved down to the August low, which was also the 50% mark of the chart I showed you last week and came screaming back. Remember how we've been looking at the trend up and qualifying it as a weak trend up because each time in broke to a new high it immediately turned back with vigor. This move down has now shown the same characteristics of a weak or "creeping" trend, only this time it has been down and on a smaller scale. One thing that is very important about weak trends is they are always followed by fast trends in the opposite direction----if they are a weak trend. If the movement following the weak trend is not fast, then something else, besides a weak trend, is going on. The weak movement could be a slow accumulation.

So when there was no follow through to the downside on Tuesday and the low on the 19th was recovered, it indicated a weak trend down. Remember it is the three thrusts that set up this pattern of trend. And since there was a weak trend up followed by another weak trend down. Something abnormal was occurring and could indicate the weak trend up was accumulation. The weak trend down has been followed by a fast trend up so that appears to be the valid short-term direction.

The index is now up to the "obvious" resistance but is coming from a higher double bottom. It should only show a first degree counter trend or it should not correct more than two or three days if it is going higher. Just as the S&P had done at the "obvious." Best timing I have is October 21, 27 and 29.

LET'S LOOK AT THE S&P 500 INDEX

The index came up to the "obvious" resistance fell only two days and within one day was back at the highs and has tested the forecast level of 1340. The next significant level of resistance above 1346 is 1360. There appears to be three days of congestion after the breakout move. IF there are a few more days of marginal higher highs and higher lows and little downside testing the index could show an exhaust move up into the end of October. If there is some downside testing from this congestion the index could get choppy and give us a pattern similar to the end of 1993 style of movement. Although, if the index does repeat that 1993 end of year congestion, it will likely sap what is left of my sanity. I don't believe time runs out on this drive until Mid-October at the earliest and the bullish consensus is not quite high enough yet to look for a significant top but consensus could be at that level by the middle to end of this month. Any downside test or test of the 1327 level would be normal but will also put the up trend in doubt and leave a much larger congestion or "false break" as the probability. This week should tell us if this is an exhaustive and vertical style of trend, remember that is how bull campaigns end. If we don't see a continuation pattern then there could be a problem at this level.

CNBC ASIA

LET'S LOOK AT THE ALL ORDINARIES AUSTRALIAN STOCK INDEX

Last week I said would tell the story for this index. There were a large number of higher lows in the sideways pattern but the index had just done a 4-day rally that failed and could be trending down. I indicated if it couldn't take out the low the first two days of the week it wasn't going to do it. Monday and Tuesday were small range days and couldn't break the low so Wednesday was up and it is now testing the significant (obvious) resistance. If "they" couldn't break the index last week, why would "they" be able to this week? This is the third attempt at the "obvious" resistance if this is going to test the all time highs there should only be a small multi day congestion or a counter trend of one or two days. This needs to continue with a strong move and if this is a trend coming out of a base it will not correct back for than four maybe even three days at anytime until this trend is complete.

LET'S LOOK AT THE HANG SENG

Last report I did on this index was the first week in August and I said the objective was 17.8 to 17.9 and September 11 was the key date. September 11 was the last low and it drove up to 17.78 or very close to our objective. The next date in the time series is for high on the 26th or 27th of October. You can see the index has been in a congestion phase the past three months as each new high has resulted in a significant downside test. This is also approaching the price of the March 2000 top so some congestion could be anticipated. Here's the deal. This is normally a bearish pattern coming at the end of a fast trend as it normally represents distribution. If that is not the case and this is a bullish congestion this range will represent between ½ to 2/3rd of the leg up. The first move down within this pattern was 6-days, the second move down was 5 days and currently the index is down 4 days and still close to the high. If this is going to spike up out of this pattern it needs to do it this week and early this week. I have identified a similar circumstance on the first part of the chart in March. If it is going to break out to the upside it needs to do it now as it did back in March. If not then there will be a fast test of the September low and quite possibly lower.

I see no reason to change the forecast for the Topix-it should see a marginal move above the September high. This weekend has some timing and well look at this market next Monday and determine the significance of those cycles if any.

It is as though every world stock index is at resistance all at the same time, interesting.

Bill McLaren
McLaren Report

Disclaimer: This message is for educational purposes only and does not constitute trading advice nor an invitation to buy or sell securities. The views are the personal views of the author. Before acting on any of the ideas expressed, the reader should seek professional advice to determine the suitability in view of his or her personal circumstances.

Copyright © 2004-2008 Bill McLaren

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