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November 25, 2007

Squawkbox Europe
by Bill McLaren

LET'S LOOK AT A DAILY S&P 500 INDEX CHART

In late October I indicate the index had just completed a false break distribution pattern and was in a bear trend. The 7 day secondary rally helped to confirm that probability and was followed by a one day counter trend bounce from the "obvious" support of a previous low. That one day counter trend indicated the trend was about to accelerate and has subsequently shown a two day counter trend that was held back by that obvious resistance. This is all consistent with the "pattern of trend" for the first leg down in a bear campaign. The index will either find a low early in the week maybe at 1400 (± a few points) and rally into next Friday or Monday for another counter trend rally and run down and break the August low. Or it will run down into next Monday for a low and possibly down to the August low for a rally. Either way the index will need to break the August low to find a significant low. The last few weeks I've put out the objectives for this trend and they are still on the website so no need to review those again.

LET'S LOOK AT THE US $ INDEX

Back in September when the index rallied 4 trading days and turned down without hitting the trend line I said it indicated the index was going into a fast trend down. The objective was 72 for this leg and it still could reach that level. When the index showed the big gap down on the 7th of November it indicated an exhaustion of some sort and the key would be if the rally to consolidate that exhaustion gap could move past 4 days. If it could then there would be a much larger consolidation. If it couldn't push past 4 days the trend would resume with the same speed or momentum that brought it down to this level. The rally went into the 5th day but that day was only marginally above the 4th day and was a reversal day. It is also turning down without reaching the trend line so the fast trend is still intact. The only indication for a low is the decline has reached 90 calendar days down and that is the normal time period for a fast leg down in the index. Once this fast leg down is complete there will be a 30 to 45 calendar day rally followed by a resumption of the bear campaign.

NOW LET'S LOOK AT THE DAILY CHART IN COPPER

Last month I indicated Copper had topped and was going into a bear trend that would need to break the February low to find a low. I also indicated copper would come down to the August low and bounce one to three days and resume the fast trend that brought it down to that level. The market showed a very large one day bounce and has now resumed the trend. Yesterday it showed a big gap down and will likely start a counter trend or consolidation next week. The consolidation will either be three or four trading days or seven to twelve trading days and it will then resume the fast trend. I don't see a solid low until January.

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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