Stock Market: CNBC Report
LET'S GO TO THE S&P 500 INDEX DAILY CHART
For the past few weeks I've been saying the index was going to trade the 1112 price level. This is the key drive to indicate whether the index is starting a new leg up or is going to now distribute and make another run to the August low and possibly below it. If the index consolidates this fast move up above the 1112 price level it would be bullish. If the index is going down from here, and I have reason to believe it is possible, it needs to show a small distribution pattern. I have enclose the previous distribution patterns, the first one on the chart is what I call a three thrust pattern. That type of pattern only follows a big strong drive, this is not that circumstance. The next two are more typical of what should show up here if there is a top. You could go back and look at January 13, 2003 and see another distribution pattern that could occur.
LET'S GO TO THE MONTHLY S&P CHART
I published this chart last week and explained, what appear to be trendlines, are really fixed angles that are drawn the month of the high or low. Last week I indicated the price level of the angle from high was around 1120. The exact level was 1120.87 and Friday's high was 1120.80. Unfortunately, that doesn't indicate it can't go through as the index could have stopped at that level temporarily, even if it were going through. But it is an indication that resistance could stop this drive.
The circumstance the index is in, is easily seen with this chart. There was support on a fast angle up and the fast move up was stopped by an angle that has stopped the two previous drives up. The support angle is at 1076.9 this month.
I believe the index is stopping here, but it is not with a great amount of confidence. We need some price action that is distributive or a lower high as occurred on June 30th to confirm this circumstance. So we are looking for a distribution pattern this week.
LET'S LOOK AT THE PREVIOUS RUN UP IN THE HANG SENG INDEX
There are two concepts worth discussing today.
The first - if you are a trader or investor, you are trading or investing in trends. Therefore, you should know everything there is to know about trends. That would include the "PATTERN OF TREND, VOLUME, WAVE STRUCTURE, PRICE RESISTANCE AND TIME."
The second concept relates to the trend analysis and states - Today's trading is nothing more than a repeat of the past - there is nothing new in the markets. So if we look at the previous bull campaign, you can see that once this index breaks above the obvious resistance (red horizontal lines). When it corrects back, the index leaves a space between the first correction and that previous resistance level (indicated by the arrows). That support coming in at a high level, leaves the index in a strong position for the next rally.
If we look at just the initial thrust out of the consolidations, they can run 24 to 32 calendar days before the first counter trend selloff. If we check previous trends, that point to where the uptrend was at risk of a counter trend move was 22 calendar days.
LET'S LOOK AT THE CURRENT DAILY CHART
The index is now up 18 calendar days and Wednesday is 22 days. From the historic trading we can assume the first selloff (counter trend of first degree) should not exceed 4 trading days and will likely be three days down, before attempting to resume the trend. Once 4 days is exceeded, it would be an indication the next move up could end the trend. The point is - we now have a road map this trend should follow and deviating from that PATTERN OF TREND will cause a reevaluation of the trend and will then setup a change in trend and change in strategy.
As I've said before there is no reason to believe the index will not test the old high. Possible resistance between 13.3 to 13.5. But, ultimately the index could go to the 15,000 plus level.
ASX 200 INDEX
The Australian stock index spiked up to a new all time high last week as was the probability. Friday's high was a bit of an exhaustion move and will now need to consolidate. If this consolidation does anything greater than a 4 day correction. The index could be in trouble. The question here is --- "Is this a False Break" topping pattern or is this a run to above 3700?" We should have that answer by next weeks message.