Stock Market: CNBC Report

By: Bill McLaren | Mon, Sep 13, 2004
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Last week I indicated the index would go into a sideways distribution pattern. I enclosed the area on the chart that should have contained the pattern. It sure looks like I got it right last week, but there is a big problem with that forecast. Back in January I said there would be three thrusts down to this consolidation and after the third thrust down the index would either show a weak rally, followed by a spike down into a low and an end to the down move or the index would just go straight up to a new high for the trend. There are three things to consider here. The resistance level or "the low before the last high" (I've marked that point with a dash line) is critical and powerful as it can end trends-bearish. Second - the index is consolidating on top of the 1112 price level - bullish. That level is the midpoint of the entire move down since January. Consolidating on top of that level is bullish and could allow for a fast run to the 1163 area and higher. We are continuing to see support come in at a high level. If Monday is not a high and only marginally higher, then the index could resume the up trend and go directly to a new high for this trend. To put it another way, if it doesn't turn down here and now - the probabilities indicate a new high and possibly a move to 1263. That is the ultimate bullish scenario and this week could confirm that move.


Follow along with me. The index hits the highest high on the chart and falls three weeks. It rallies two weeks and starts the second drive down and breaks to new lows. The index immediately rallies back to test the previous high. The third run down occurs and again breaks to new lows and immediately rallies back to where it is now. So twice the index has broken to new lows and rallied back. That is a struggle down. The struggled down has lasted for almost 6 months, a bit short in time for this style corrections. But 180 days is a valid cycle for low. The low was only a ¼ retracement of the entire move up and that is bullish if it holds. That small retracement hold the index in a strong position for this rally. If the index can start to trade higher from here (past Monday)- I believe there is a new high in the near future. The only resistance I have between the old high and here, is 1135. That could present a temporary problem.

In summary if it struggles this week, the up trend would be at risk. If price can move higher, out of this consolidation - it could represent a resumption of the up trend and a move to new highs.



Last week we reviewed the previous trends and I indicated the current run up would move up until it hit the normal time for a correction and that would come between 22 and 32 calendar days or a window of 7 trading days. The high came on the 22 days. I also indicate the move down would be three or four day, but likely only three days considering the momentum.

You can see the low was on the 3rd day down and on top of the previous high as indicated by the horizontal line I'd drawn last week. If this correction exceeds 4 days, it could indicate a problem with the next advance. I had previously indicated that 30 days from low could be a vibration point in time from the cycles that are dominating this trading. I can't see how that could be significant at this point. Next dates are October 15th then October 29/30 and a possible top if the index goes up to November 15th. Please understand these are probabilities, there are no certainties. Next resistance is 13,350. Previously I had mentioned a long term cycle that indicates a possible, high during the month of September. So far there is no indication confirming that as a probability.


Two weeks ago the index moved to a new, all time high. Last week it struggled upward - A correction of 1 to 4 days could occur or if it can establish a low above the last high it will accelerate up from here. If the move down exceeds 4 days, there may be a problem with the trend. But for now I would expect a small correction that holds 3574 or an acceleration. Anything deeper than that would put the up trend at risk. There is a small chance this is a "false break" topping pattern, but it is small probability at this time. If this is not an exhaustion top here and I doubt that scenario, the index should manage a move up to the 3700 price level, consolidate and then move higher for a top. There is a possibility of a minor high today at 3606 INDEX - Next resistance not until above 3620 and next vibration in time is Wednesday, but that is minor in nature and not a completion of any sort. A high today could bring in a low Wednesday.


Bill McLaren

Author: Bill McLaren

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.

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