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July 20, 2007

CNBC Squawkbox Europe
by Bill McLaren

As a backdrop to the stock indexes the metals all look strong and trending. Commodities also look to be trending upward, oil is trending up and the US Dollar is doing its normal nose dive into new lows.

FIRST LETS LOOK AT THE US T-BOND MARKET

This market could hold the key to the stock indexes and is approaching a critical point. One of the styles of counter trend moves is a sharp three trust pattern upward that fails. One of the characteristics of this pattern is that each thrust to new highs immediately fails and if a new high occurs on this rally and also fails it could represent a counter trend completion and a new low would follow rather quickly.

NOW LETS LOOK AT THE NASDAQ DAILY CHART

Last week I indicate if the NASDAQ could show a low on top of the congestion it would indicate the start of a fast trend up. Remember the normal counter trend in a fast trend is only 1 to 3 days and it completed this move down in two days, indicating a strong trend. The last correction was only one day and left a huge space between that low and the previous high, a bit too much space with a huge gap up it may need a consolidation of some sort but will not exceed 4 days down until a top is in place and that could be August 5th if it spikes up into that date.

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

I've been saying if the index was going down it needed to show a lower or secondary high and that could occur at the end of this month. Since a secondary high would need to be a rally of 7 to 12 days, that obviously cannot occur within this time frame. The index could be setting up as did at the NASDAQ. If it could show a low on top of the last swing above 1550 it could also go into an exhaustion style of trend. It still looks like the time window between July 28 and August 5th could be important. But there won't be a trend down until we see a secondary or lower high and that takes at least 45 calendar days after a high is established. Resistance at 1584 and 1628.

NOW LETS LOOK AT THE FTSE DAILY CHART

This index, unlike the DAX and CAC 40, has been struggling in a sideways pattern while they have been trended strongly into their current consolidations. But the FTSE has also stayed on top of the previous high, thus holding the trend intact. I still believe this time window between the 30th and August 5th could set up the next significant move. Sideways moves of this length are followed by fast trends.

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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