Stock Market: CNBC Report
LET'S LOOK AT THE FTSE 100 DAILY CHART
Last week I identified this move up as an exhaustion move up. That indicates once it slows down it will indicate the trend is complete. If it corrects for than 4 days it would indicate the trend is complete and the next rally will fail. As you can see the index broke above resistance on Thursday and failed on Friday. So it needs to move higher or it will start to look distributive. My forecast calls for the contract to move up to between 5313 and 5360 and end by the 27th of July. It needs to hold together early this week to meet that forecast.
LET'S LOOK AT THE S&P DAILY CHART
The move up from the last low is vertical and will either exhaust and correct to give us the next low that will start the last exhaust leg up. Or the index is in that leg now. This next leg will complete the trend that started in March 2003 and will terminate the first quarter of 2006.
LET'S GO TO THE S& P WEEKLY CHART FROM 1945 AND 1946
I've been saying this index will follow a combination of 20 and 60-year cycles for 2005. This means the index will end this bull campaign with an exhaustion leg up into the first quarter of 2006. I have pointed out where this last leg up started in 1945 with an arrow. If you will look at the 1985 and 1986 market, you will see the same circumstance. So the important question is when will this final exhaustion leg up start and complete this bull campaign. I thought a top in oil could be the catalyst and that could still be the circumstance. This last exhaustion leg will have started at the last low or will start from the next higher low that will occur within the next 45 days. How this index performs the next two weeks will tell the story. The question is- will this current trend exhaust by this Friday or will it just keep running and develop into the final leg up.
LAST CHART IS CRUDE OIL
There is now the beginning of an intermediate term topping pattern I have been recognizing for a few decades. I call it a "three thrust pattern" and I've numbered the thrusts. There needs to be a further move down to confirm the pattern. There could still be a small distribution lacking or even a further move up into 14th of August. But the weekly and monthly pattern is telling me the probabilities for a top is now very high and once there is some confirmation from price action, stocks could view that as a catalyst to start their last leg up.
LET'S LOOK AT THE HANG SENG DAILY CHART
Last week there was a possibility of a false break top in place, which would have signaled a test of one of the two previous lows. The index had also shown two wide range days down and closed on the low. Many times a wide range, close on the low is a daily configuration to indicate an exhaustion of the move down. The only way to confirm that as a valid low is if the index could move above the low of the 5th. It did that the next day on Monday and is again at a new high, only this time it is in a vertical mode and could be temporarily exhausting the move up.
It looks like it can exhaust this week and if a low is found next weekend, it could signal a move to 16000. But for now the problem resistance is around 14635 and 90 days from low which is early this week. Now that it is in an exhaustion style trend, any correction that exceeds 4 days will indicate the trend is complete. If this move up does not exhaust this trend early this week, it is possible to continue this trend from a low next Monday up into September. It rests upon this week.
NOW A QUICK LOOK AT THE S&P 200 INDEX
Last week I thought the index had completed a "classic" counter trend move up and was about to trend down. It looked like there could be a day or two of weak rally and if it did anything other than one or two days of weak rally, I would be wrong about the counter trend. The first day was strong and the third day was up, so all that to say I was wrong about the counter trend pattern showing follow through to the downside. The index fell three days and is now up 6 days and still not at the high of the three day decline. So far the pattern is a classic sideways pattern being held back by a previous trend line and previous resistance. Each day support has come in at a high level so the up trend is intact. The time cycle to end this move up is not until 3rd of Aug. But if the index cannot see a new high the first part of the week, this pattern is going to start to look distributive and look like a correction could be starting. But if "they" couldn't break the up trend last week, I don't see why "they" could break it this week.
LET'S LOOK AT THE CRUDE OIL WEEKLY CHART
There is an intermediate term distribution pattern I have been using for the past few decades that shows up on weekly and monthly charts. I refer to it as a "three thrust pattern" and can also show up on daily charts, but is very powerful on weekly charts. You can see the third thrust I have numbered on the chart. There could still be a short period distribution or even an extension up and marginally higher up to 14 August, but I believe this up trend up is complete or will complete by the August date. And once the "street" realizes that is a valid top, it should be good for stock indexes. And could be the catalyst for the final exhaustion leg up in stock indexes.