Stock Market: CNBC Report

By: Bill McLaren | Mon, Nov 1, 2004
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CNBC EUROPE

LET'S GO TO THE S&P DAILY CHART

Last week the indexes were down to a critical point, with the Dow Industrials at a new low for the year. Although the NASDAQ was the strongest index and the S&P was still sitting in the middle of this huge sideways pattern. It was critical the indexes show immediate support as there was enough volume to produce a low. I indicated that going lower from this pattern would be something that "very seldom occurs." On the web service I indicated if Monday was a small range day it would indicate a low was in place, as indicated by the False Break pattern that had shown up at all the lows and highs (I've indicated that pattern with an "FB" on the chart) . But I couldn't qualify the importance of the low then and I still can't qualify the importance of this low, now. If the index goes weakly up into the end of the week there could be a high point of some significance. If there is a problem with this rally, it should show up today or tomorrow.

LET'S TAKE A LOOK AT THE S&P WEEKLY CHART

You can see that the last two times this index broke to a new low, it immediately rallied back to test the previous high. This is a picture of a market struggling to go down. IF you look closely at the high for the trend, you can see the same situation only in reverse and covering a significantly shorter time frame. The top showed the index struggling upward for six week, with two marginal new highs and the past 6 months have show the index struggling down, with two marginal new lows. A vast majority of the time this pattern of trend down is resolved to the upside. And the move up is usually large. On rare occasions this struggling move down can be resolved to the downside. But that will only come from a weak rally off the obvious support level. As you can see the last rally was another test of the highs, so it was not a weak rally. For me the question is now - is this last low a higher low to resume the bull trend? Or said another way - Is this move down since the highs in March - complete and now the uptrend is going to resume? I cannot answer that question yet. Hopefully, it might only take another week to come to a conclusion. The strength of the move up is impressive. But the cycles that have brought in all the previous highs and lows within this basic sideways pattern come up again next week, actually starting this Friday through next Friday. Moving past that resistance in time would be very important. But for now I need to let this trade another week before I can draw a conclusion related to the intermediate nature of this basic sideways pattern and the relevance of this last low.

CNBC ASIA

LET'S LOOK AT THE HANG SENG DAILY CHART

Last week there were some conflicting patterns on the daily chart. It appeared as though there could be a scary move down on Monday. The key being, if there was any "follow through" to a sharp move down. It appeared as though everyone else saw what I was looking at, or I saw what everyone else was looking at. As the index showed a huge gap down on Monday, but showed no follow through. This big gap down was followed by a big gap up leaving an "island" bottom. I've drawn to fingers pointing to the gaps. Island bottoms represent exhaustion's and are usually solid lows. This has also left a "false break" pattern at the low, which usually acts a spring board for higher prices. And the index is back to showing a possible "broadening" pattern if it goes to a new high, which would indicate a possible top in November. Our forecast has called for this index to go up into November 12th for a top of some sort. Last week's price action still leaves that scenario of up into the 12th as the highest probability.

LET'S LOOK AT THE ALL ORDINARIES INDEX

I've been saying, for many weeks, that the index would go up into the October 15th and correct three or four days, resume the trend and exhaust into November 14th. Last week we still felt the forecast was still valid. But I was getting concerned it may not hit the upper level of our price objectives. That concern was alleviated since the price objective were hit during the week. But there is still 10 trading days left until we reach the first objective in "time." Since the move up is exhaustive in its nature, it could continue the spike or develop a distribution pattern. History indicates that even after the trend is complete a distribution pattern of at least another 30, maybe 90 calendar days will be necessary before the trend will change. In fact, if history repeats exactly, we would see a retest of the Nov 14th high on December 14th and an end to the distribution pattern on February 12th and the start of a bear campaign. That is a long way from now, for now we're looking for the index to exhaust into the 14th plus or minus one trading day. The probabilities then call ffor a retest of that high 12th of December. Of course, that will depend upon how the index goes up into the 14th of Nov.


 

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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