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December 06, 2006

Stock Market: CNBC Report
by Bill McLaren

CNBC EUROPE

FIRST LET'S LOOK AT TWO OF THE EUROPEAN STOCK INDEXES

The FTSE has shown, what to me is a classic (as described in my DVD Foundation series) setup. I have described this many times on this show and those explanations are still on my website. The index came down to the "obvious" support with strong momentum and bounced two days. Five weeks ago I report there were yearly cycles that could bring in a top. All that was necessary was a bit of distribution with a sideways move to confirm that scenario. This appears to be complete and the index is trending down. This is a capitulation style move down so it could continue at this same rate until it can rally past 4 days, then we can assume a low of some sort. This does look like a top of some significance. I'll try for a forecast next week.

LET'S LOOK AT THE DAX STOCK INDEX

A few weeks ago I indicated this index was exhausting into a top. It went about a week further than I anticipated. You can see it also gave the setup I have been describing with a bounce up from the "obvious" price of the "old high" and has only showed a first-degree counter trend of two days. This is evidence of trending down. Because of the wide range day it could consolidate or rally a bit but only multi day. It could even test the high if it needs further distribution but I believe it will go to the first objective of 1/3 to 3/8 of the entire rally up from June or close to the 6000-price level.

LET'S LOOK AT THE S&P 500 DAILY CHART

I still believe this index is consolidating the fast trend up since the July low. This market continues to match in price the previous moves down of 30 points. The index has a high probability of matching previous moves down and will eventually match the previous 56-point move down. This index has a good probability to put in a top of some sort between now and the 11th of December not to exceed 1426 (the last high could be top) and will be followed by the 56 point move down.

Early in the year I gave you a forecast the Dollar Index was going down into June of 2007 and will go to either 73 or 67. Those are huge declines and would take an outside event to bring that about but that is what the charts are telling me. The index is now in a capitulation trend down and will exhaust into a temporary low, possibly as low as 78 and a then another bounce. The long term downtrend has resumed.

CNBC ASIA

LET'S LOOK AT THE TOPIX INDEX

In August I forecast this "pattern of trend" and the time cycles developing from the 67.25 calendar day time period. This has all become exact with ½ cycles and full cycles and the last low occurring on the 28th as a full cycle. The next in that time series is not until January 01 (+-2 days). This cycle will eventually loose it dominance but we need to consider it valid until it fails. There is also a vibration in time that will present resistance on the 6th of December (previously report as 5th). It is very important this rally exceeds 12 trading days or we could be looking at a top being completed. It is promising that there is a little "false break" of the September low but this rally needs to exceed the normal second degree counter trend time window of 12 days. Next week I might have another forecast.

LET'S LOOK AT THE US DOLLAR INDEX

We looked at this chart in the beginning of the year and I reported that the rally had only gone up ¼ of the range down (remember this is a monthly chart) and if that was the entire rally the Dollar could manage the fast downtrend was still intact and would go down into June of next year according to the 12 year cycle. I am assuming it will go down below the last low to 72.78 and possibly a worst-case scenario to 67, which would be a real panic and would take an outside event. Short-term support is around 80.4 and 78.2. It is now testing the "obvious" support but if you look closely there were 5 months up and now in one and a half months it has taken back that entire run up and considering the small ¼ retracement this is in a fast trend down. A rally could occur at the "obvious" support as it appears to be capitulating but that rally would be a counter trend and will run down to the 78 price level in this dollar index.

I haven't changed my forecast for the Australian stock index. This is now distributing, this looks like a short-term top and a lower high will confirm an intermediate term top is in place.

I am still looking for the US stock indexes to put in a top of some sort between now and the 11th of December.

HANG SENG looks like it exhausted with a three thrust pattern of distribution and could be trending down. It should bounce up from 18, 380 but go to 18,000 to 17820 for next major support. The 11th of December still looks like an important vibration in time and if the index goes up into it will be a lower high.

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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