Stock Market: CNBC Report
LET'S LOOK AT THE FTSE 100 DAILY CHART - McLaren - Oct 31/05
Last week the index exhausted into a low marginally below the 50% mark of the last range up. I felt the index needed to touch the "old high" as marked on the chart. If the price could move back above the 3/8 level it would take a lot of the selling pressure off. The index came up to that level and failed to move above it but did no damage to the downside as it held the midpoint and rallied. If there is further rally it should be stopped by either of the two horizontal lines I've drawn on the chart. If this is a low for further rally then Wednesday around 5297 could be the next resistance in price and time.
One of the problems I have with the price level of the last low being the low for the move down is that price level would hold this trend in a strong position for another leg up. The manner in which this index has moved down does not make that a strong probability at this point. So unless something changes dramatically, I still believe it has to test the old high price of February 2005. So a rally should stop at the resistance I've market on the chart if the trend is to remain down.
LET'S LOOK AT THE S&P 500 DAILY CHART
The index has moved to a critical point. When this market rallied up to the 3/8thmark of the range at 1204 on Wednesday I thought the index was going straight down to a marginal break of the lows. Friday's clearing up of the uncertainty about the indictments and a strong GDP figure caused a very large rally. And this could have changed the pattern of this congestion. This could have set in another higher low and that does change this picture dramatically. This could represent a three or more higher low basing pattern and is an indication of accumulation and not the weak rally this was representing until Friday's large move up. Is this now a higher low base pattern and not a weak rally? If the index can show a low above 1204, the index could be in a three-month move up to exhaust the bull trend. This week should answer that question (a weak rally versus base) along with the trend in oil.
LET'S TAKE A QUICK LOOK AT CRUDE OIL
My forecast called for OIL to break its uptrend and stocks to resume their up trend. When the US Stock Market showed the last trend to be weak it put a lot of doubt into my forecast for stocks. Bull campaigns can end with weak trends on weak volume so the last drive up in US Stocks did set up a bearish possibility. One of the things an analyst would or should look for in event of a blowoff trend as is occurring in oil is an overbalance of price and time or better said when a correction exceeds in price and time any of the previous corrections it indicates the blowoff has completed. It is very, very close to doing just that but not yet. If you compare the previous move down with this move you can see they both struggled down. The past 4-weeks have traded in the same small range below the previous low and could be viewed as struggling to go down. The next two weeks are very important to oil and I still believe could be a catalyst for stocks in either direction.
LET'S TAKE A LOOK AT THE HANG SENG DAILY CHART
My forecast called for the Hang Seng to trend down to the Dec 2004 high and bounce. Last week the index exhausted into a low at the previously stated objective. I indicated there would be a bounce but the odds favor lower prices. You can see the rally was only one day and maybe too weak even for this fast trend down and may have exhausted again. But note how the move down from the August high was 8 days and how the retest move up took 25 days to cover the same ground, obviously showing a weak rally.
LET'S TAKE A LOOK AT THE HANG SENG WEEKLY CHART
Notice how the last move down in the bear trend was a weak move down relative to all the previous moves down. This was followed by the first leg up in the bull campaign that was very large and almost vertical. Then the inevitable correction in 2004 and a second leg up that was smaller and not quite as strong but still a powerful leg up. The third leg up (as you can see) was significantly less in price, time and momentum. And remember how that last rally on the daily chart was also weak and on the weekly chart appear as part of a sideways pattern that took over 7 weeks. If it can hold this support you can see it will be holding very close to the previous high and that holds a strong position within the up trend. That would appear unlikely to me considering the distribution at the top and the nature of the trend down. The 14thof November is the best date I have to complete this move down.
LET'S TAKE A LOOK AT THE AUSTRALIAN ASX 200 INDEX
Last week I identified an exhaustion low in this index and that set out some probabilities. Last week I indicated if the index could move above the low of the 14thit would take the selling pressure off the trend and a normal rally would occur. The index rallied above the 14thand managed to reach a 3/8- retracement value. It is now testing that level and a move to 4500 is not out of the question. The big question regarding this index is; can this bull trend resume from this small a correction in time and price? If it can resume the bull campaign from this point it would do so at an even faster pace than the last tend up. This is difficult for me to believe at this point considering the exhaustion at the last high, but I sure don't want to fight the last exhaustion of a bull campaign. This has a probability of a second- degree counter trend of 7 to 12 days and a failure and further move down but there is also a probability it can resume the trend. At this point I don't have a lot of confidence in a call here, but I am still leaning toward this rally being a counter trend rather than a resumption of the trend, but the latter is now possible. Hopefully I can answer that important question by next Monday.