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December 07, 2007

CNBC Squawkbox Europe
by Bill McLaren

LET'S LOOK AT THE S&P CONTRACT FOR A CHANGE

The move up from the low on the 26th (yes I know I said it needed to break the August low to establish a low) was again very strong as occurred in August. The 3 day move up ended with an exhaustion as indicate with the huge gap up on the 3rd day of the rally. The move down was only two days and also ended with a big gap down. The distance between the low and the low to the two day move down was very large indicating support at a very high level. The big gap up on Wednesday showed the move down to be complete and left a very bullish picture. Then today showed follow through with a wide range day but this is getting a bit frothy and will need to be consolidated in the next few days. In other words today may have temporarily exhausted the move up but this is a big thrust up and could drive the index into a large move up in "time." If it can move up past 13 trading days then it will either produce a secondary high by rallying very close to the old high or start another leg up. A rally to produce a secondary high is the highest probability. Since the move down was 45 calendar days there could be a 45 calendar day move up.

NOW LET'S LOOK AT THE NASDAQ

Last week on power lunch indicated the NASDAQ held the key to the short term trend as it was showing a high probability pattern for low. If the pattern failed there would be a fast move down. If it held together it would be a solid low. I have referred to that pattern of tending as a TAS or "trading against a spike" and is one of the highest probability patterns for low on any chart. As you can see the index held the pattern for the 5 the 7 day period as required and produced the solid low or base pattern. If your viewers would research this pattern of trading against a spike or look it up in any of my published research material they will find this to be exceptional for finding both highs and lows in any market on any time series of chart.

This is fully explained in the E-Book published on this website. I believe this E-Book is one the best products published in the field of technical analysis.

LET'S LOOK AT THE DOLLAR INDEX

The last squawk box report was the 23rd and I indicated the move down in the dollar was close to exhausting and since it had run past 90 calendar days which was the normal time period for low in this circumstance to look for any indication a low was in place. The next week showed "an exhaustion gap and false break pattern" for low. I indicated this low would not be permanent but a consolidation of the fast move down and could run 30 to 45 calendar days up but not recover much in price. The rally has now matched the previous 8 day move up and also matched the same number of points. This does put it at risk of resuming the trend but I still believe it will take a bit longer to consolidate the move down before resuming the down trend. But matching the previous movement is the first point of risk to the rally.

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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