Stock Market: CNBC Report

By: Bill McLaren | Mon, Nov 22, 2004
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LETS LOOK AT THE S&P 500 INDEX - DAILY CHART

Last week I indicated there was a "high" in the making and should start a consolidation within two days. I was off by a day as It started with the third day. If you will look at the first trend I have boxed off on the chart, you will see a vertical move without and significant consolidations or counter trends. Once that exhaustion was completed (and I forecast the exact day of the completion on this show - months in advance) the index distributed with two marginal new highs and reversed trend. Now look at the current trend, it started under different circumstances but it is the same high momentum movement that cannot be sustained and is now consolidating. If the index is going up to the 1250 level (which is my forecast), it will now consolidate this fast trend for a few weeks before making a final run up. The form of this consolidation, will allow me to forecast the remainder of the move. But for now I believe the index is establishing a sideways pattern that will run for a few more weeks. It should not correct back below 1151 or the uptrend will be in doubt.

Last week we confirmed that the uptrend in crude oil was complete, so we'll look at the US Dollar as it has finally become new worthy.

LET'S LOOK AT THE US DOLLAR INDEX - MONTHLY CHART

This is a monthly chart of the Dollar Index. You can see it is now testing the previous lows within this huge bear campaign. The last intermediate trend up was 76 months or just past 6 years. It took only 39 months (just past 3 years) to get back to where the 76 month move up started. Obviously finding it easier to go down that up. If this were a struggling move down, there might be a chance for a low. But this is a capitulation move down or it could also be defined as a panic move down. The US dollar index has lost 30% of its value in the past three years and the decline is accelerating.

It would be very unusual to end a fast trend down with a double bottom. Especially when it is moving down at twice the rate that it was able to move up. Most fast trends down terminate with a capitulation or panic move down. We'll look at the daily chart next week and develop a forecast for the future in both price and time.

ASIA

LET'S LOOK AT THE HANG SENG DAILY CHART

For many months I've been saying this index is going up into the weekend of the 12th of November for a top. The reason for this forecast was the vibration through "time" of a 90 day cycle. The May low was 90 days down from high. The index then went 90 days low to low, which set up the high probability of going 90 days low to high to complete a 180 day cycle low to high cycle for top. The pattern on the daily chart since Monday is distributive. There was a large gap up to set in the high with an exhaustion, followed by a wide range down. This was followed by two inside days or weak rally days and followed by other wide range day down. If there is no follow through to Friday's move down, there may be a chance to avoid a correction, but for now it looks like the next stop is a test of the October high or back to 13426.

IF this is a full fledged correction, the move will find support at 13115 and depending upon the strength of the move down- maximum downside 12700 to 12850.

LET'S LOOK AT THE ALL ORDINARIES INDEX REPRESENTING THE AUSTRALIAN STOCK INDEX

This is a weekly chart and represents a classic "blowoff trend" or the "exhaustion phase" of a blowoff trend. This style of trend can be seen in most all markets at one time or another. This is representing an exhaustion of buyers and when they have exhausted there will be little underlying support for this advance. Three months ago I made the forecast the index would exhaust up into last week for a high. I also said that during that 90 day period the index would not correct back more than 4 days at anytime during the advance, and that was true. Is this an important high and reversal? There is no evidence of trending down only the probability in "time" that I worked out. Yes, I do believe this is am important top. If I am wrong and this "blowoff trend" is not complete, then it will add another 100 points before it is over. If I am correct the index will drop between 330 and 430 points in the next three or four months. Please understand I am not recommending anyone short a vertical market like this, I am recommending investors take a very close look at their long positions. This market is in the process of exhausting this uptrend.


 

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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