Stock Market: CNBC Report
LET'S FIRST LOOK AT THE DAILY S&P CHART
Two weeks ago we looked at how the index was against a calculated resistance level and was vulnerable to a 4 day move down. The index has been trying to base with three small range days, but the odds favor a rally that fails rather than a run back to a new high. The previous correction was 52 points and this correction shouldn't exceed 52 points which will put the index down close to the March highs. I would anticipate a multi month consolidation now. When the index advances during the next three months, it will not get legs.
NOW LET'S LOOK AT THE WEEKLY CHART
I have drawn a rather crude forecast for the remainder of 2005. This is what I expect the pattern of trend to resemble. The next many months will produce a consolidation that will be bullish. The big question will be how many months this struggling up trend or consolidation will last? Because, it will be followed by an exhaustion leg up to complete the Bull Campaign in 2006. We will likely see three ascending trendlines when the bull trend is complete in 2006. I will get a little more exact on the "pattern of trend" once we see the low to this current decline. If you want to see a trend that could be similar to our current trend, go back and look at 1942 to 1946.
I would expect the index to be rather choppy for the next three months and produce a consolidation for the final leg up. That final leg of advance will be an exhaustion trend and therefor a fast move up. There has never been a down 5th year of a decade in this market, during the past 100+ years and I don't expect a down 2005 either.
LET'S LOOK AT THE HANG SENG DAILY CHART
There was a bit of a problem at the end of the year and the trend up from the May low is complete. The question becomes "is this index going to trend down or stabilize, consolidate and resume the trend. But, for now, this current trend up is complete. Notice when the index broke above the March high, it came down to test that level with a 7 day move down. Then it took 11 days to get back to the point that started the 7 day decline, making it obvious it was finding it more difficult to go up than down, but not giving an indication of a problem. Then, within 5 days it was at a new low. So it took a mere 5 days to take back the 11 day rally and creating an indication of trending down. The recent support has been the previous high and that is positive. Although it could test the 13000 price level and still be bullish. In summary this index is trending down, but the odds favor this trend going into a consolidation rather than a full fledged bear campaign.
NOW LET'S LOOK AT THE NIKKEI WEEKLY CHART
A few weeks ago I indicated the index could have completed the sideways pattern and was going to resume it upward trend. This was based upon the observation of completing a three thrust pattern as indicated on the chart by the three downward pointing arrows. The index has moved up to the old high or the obvious resistance. If I am correct about the trend this "obvious" resistance needs to be overcome. Trading below 1126 or 3/8th of the recent advance would put significant doubt into my scenario of starting a trend upward. Trading below last Wednesday's low would be strike one and two and below 1126 would be strike three to my scenario.
The Australian index remains quite strong. I was looking for a high last week or on January 23rd. There has been no evidence yet of a top. Please remember, picking tops to high momentum moves is the lowest probability, highest risk trading one can do. There needs to be evidence of trending down before one considers this trend complete.
On January 25th and 26th I will be speaking at a Technical Analysis conference in Zurich. The conference is called Kapitalanleger-Tagung 2005. They can be contacted by tel. 41 1 722 85 85 - fax 41 1 722 85 86 - www.zfu.ch - firstname.lastname@example.org