Stock Market: CNBC Report

By: Bill McLaren | Mon, Apr 11, 2005
Print Email



Last week I indicated, if I were trading this index I would have gone long last week, looking for a rally. The nature of the trend down was indicating a struggle to go down and that should be resolved with a fast move up as is now taking place. A move up into the 23rd of April could put in a top. That is a probability, the reality will be the price action as the index approaches that time window. There is also a minor vibration in time on the 18th or next Monday, we'll look at that probability next week. This does look like it is going up into the 23rd and we'll see what the "pattern of trend" is like at that time. I see no reason to doubt the rally at this time.


Two weeks ago ended with a huge outside day down. I indicated that it could be too bearish to be believed and if it was bearish it need to show immediate follow through to the downside and be at a new low within two days, at the latest, if that bearish day was real. The index closed up the next day and eliminated that possibility.

The index then proceeded to test the high of that spike up and failed. The move down this last Friday presents another bearish pattern. The index moved just marginally above the spike high and failed with a wide range down day again on Friday. IF this whole move up has been a counter trend move, within a down trending market. Then the index should show two or three wide range days down and break the March low - this week. That is a definite possibility from this pattern. The failure to advance on Friday, leaves a marginal break of a spike move, that was against the trend - presenting bearish probabilities.

IF there is a wide range follow through to the downside today and Tuesday, then this past 7 day rally was a counter trend, within a down trending market and the index could show a new low this week. If there are a couple small range days down, then the index is holding a basing pattern and will test the March highs. Getting above last weeks high could be bullish if a daily low was produced above that high. The index is in the same position as last week, the first few days of this week are critical to completing this daily pattern and forecasting the future. Is this a counter trend within a down trending market or is it a basing process? The first few days of the week will tell the story.



The big question for this index: Is this sideways movement a consolidation for further advance or distribution and a top? Two weeks ago we had a 90 calendar day cycle for possible low on the test of the previous lows. I have previously shown how this has been a dominate cycle in this index. I indicated I couldn't qualify the extent of this rally. It should test the previous high to this sideways pattern, that would be the normal thing to do - unless the trend is down. This index exhausts into every high and low, so Friday's gap up is always something to be concerned about if it gaps down today. Next important cycle is the 23rd of April and if the index goes up into that date it does represent risk of ending this consolidation as a top and ending the up trend.


The divergence between the NIKKEI and this index is getting troublesome. My forecast has called for these index to test the April highs I gave up on the NIKKEI a few weeks back. But found no reason to change that forecast for the TOPIX. That last move down in the NIKKEI puts its ability to continue trending up in doubt. I could anticipate a small correction of one to three days from the TOPIX index. But anything greater than that multi day correction, at this stage, would put my forecast at risk for this index. In fact, I am starting to loose the bullish posture for this index also. This is obvious resistance and anything but a very small reaction would be bearish and put the up trend in question.

NOW LET'S LOOK AT THE ASX 200 DAILY CHART for the Australian stock index

This index drove up three days from the low and corrected three days. You can see the correction was very small, indicating support came in at a very high level. Almost too high a level to be believed. But that is what the first part of this week will tell us. We've been looking for this index to either show a counter trend rally and a trend down OR go into a topping pattern of some sort. It couldn't move higher today so Friday did exhaust this rally. It could produce a broadening pattern in order to put in a final top. A broadening pattern would require a marginal new, all time high. I can't forecast that price movement yet as Monday appears to have exhausted this rally. If this is going into a broadening pattern, there would be a new high and top within two weeks or near the 23rd of April plus or minus a trading day. If there is a broadening pattern in the making here, it would require this drive be exhaustive in nature and that would indicate no follow through to today's move down. If there is further move down on Tuesday and Wednesday, it could make this rally a counter trend and a new low would occur this week. Currently, I can't make that call - but the price action early this week will tell you.


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.

Copyright © 2004-2011 Bill McLaren

All Images, XHTML Renderings, and Source Code Copyright ©