Stock Market: CNBC Report

By: Bill McLaren | Tue, Mar 22, 2005
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There is a point I would like to make today for your viewers who have an analytical curiosity. Here is a fact that I have proven to myself over and over again the past 40 years. "All highs and lows are exact proportions of previous movements and those portions are 1/8th and 1/3rd and each of those range divisions have significance for the present and the future.

When this index started to move up at the end of January I said it would be a powerful move up, which is was, but I also said it would need to hold 3/8th of the advance to hold the strong trend. You can see it did just that, but it did not advance and came back last week to test that level. I told you to be very leery of finding support at the "obvious" - when in a high momentum trend, as this appeared to be, to hold that trend it needed to come up from that 3/8th test with a resumption of the trend or the trend was starting to smell a bit. The test of the "obvious" didn't hold and support has now come in at everybody's technical support or a 50% retracement. But this has changed the character of the "pattern of the trend." It is no longer a strong trend up. If it to resume that status it needs to be at a new high within 5 or 7 days and that seems unlikely. On the 28th message I indicated a turning point low for the 18th of March but qualifying its significance I cannot do at this time. But this is no longer a strong trend and the powerful move up may be an exhaustion of the intermediate trend.


Remember our major premise "All highs and lows are exact proportions of previous movements." If we take the first leg up to the bull campaign and divide that range of movement into 1/8ths and 1/3rd you can see the first correction was a ¼ retracement of the entire range and is quite small and therefore quite bullish. This almost always guarantees a ¼ extension. In this instance the last high was exactly a 1/3rd extension of that range and is why I was able to see this last correction.


Last week the index had failed at the previous high and left a false break distribution pattern. It had fallen to an obvious support level of a trendline and I indicated there would be a counter trend move and resumption of the downtrend. But no real chance for a low until either the February low of January low are successfully tested. The index is now down to the February lows and will likely show a rally. But this rally could still be of counter trend nature and further downside testing or basing will be necessary before another attempt at an up trend is possible. The 25th is Friday and looks like the best time for the next reversal. You can also see the January low was a 3/8ths correction of the trend and held the trend intact But the subsequent rally has been a weak trend up.



Last week we looked at the Nikkei this week LET'S LOOK AT THE TOPIX. I prefer this index to the Nikkei as the trends are less volatility and therefore easier to read. Last week both indexes where up to the obvious resistance of the July 1st high and my forecast has called for a test of the April high. Last week I said we'd see a correction of one to four days and a resumption of the trend. This appears the have been the case as the index has gone down 4 day (the normal counter trend for this circumstance) and the wide range day up looks like it is starting the final drive to the April highs. No I don't know what will occur when that level is tested, I'll need to see a few days trading before I can give another forecast. APRIL 23RD is the next significant time window for this index.


Last week I indicated this index wasn't worth looking at as it was going to do nothing last week. Considering the fact that "ones purpose in this business is to find a trend, enter that trend with limited risk and stay with that trend until that trend becomes at risk." This trend is smelling the place up a bit. When the index went into the December high it did 7 days down and then took 11 days to get back to the high of 7 days prior indicating it was becoming more difficult to go up than down. Then in 5 days the index was at a new low having taken out 11 days of lows in 5 days. The index then showed the "false break' low in January, followed by a 4 day corrections setting up a higher low but instead of a nice trend, it exhausted two weeks ago with an other island reversal "false break" pattern I then indicated it had exhausted the trend. This current move may be a base but it is coming within a weak position within the larger picture - I would assume this is a sideways consolidation but for positioning or trading there are much better trends around.


Last week I thought there might be a chance for a correction of some sort. But it had to exceed three days down or all it was doing was a normal counter trend in a fast trending market. It went two days down and held the previous high. If it could then exceed a rally of three days (a normal counter trend time period) there would be an indication the trend was resuming and Friday was the 5th day up, indicating the trend was resuming. The All Ords Index is now at 4242 as of Friday and my forecast called for a price level not to exceed 4290. This is one powerful trend that started last August and except for one, 12 trading day consolidation. It has not corrected more than three days in a row at anytime the past 216 days. That is a trend.


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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