Stock Market: CNBC Report

By: Bill McLaren | Tue, May 2, 2006
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CNBC EUROPE

LET'S LOOK AT THE US DOLLAR AGAIN AND START WITH A MONTHLY CHART

Last week I indicated the US Dollar was going into a fast move and could develop into a panic move down. This is now in progress. If we look at the monthly chart you can see the magnitude of the last trend down. I put two fixed angles running down from the last two highs. You can see the last low produced a huge distance between the angle and the low price. So we could qualify that last move down as very fast and when you compare that move down with the previous move down in the early 1990's noting the counter trends in both of these trends it is clear the US Dollar was then and is still now under extreme selling pressure.

NOW LET'S LOOK AT THE WEEKLY CHART

Just as we do with all markets this chart represents the last trend divided into 1/8th and 1/3rd. You can see the rally only retraced ¼ of that large move down and that is a weak retracement considering the magnitude of the move down and does indicate the very strong downtrend is still intact. There will be small counter trends and likely one near the 85-price level as that is 1/8 of the downtrend and 50% of the rally but this looks like a new low is on the way after the rally. Rally could be about 12 trading days.

LET'S TAKE A QUICK LOOK AT THE FTSE 100 INDEX

The previous week the index had continued its advance but had a cycle on Monday that represented resistance. Last week I indicated if Monday's price could have been exceeded it would indicate a strong move up. But the high for the week was Monday and therefore proving the cycle and now being proven could indicate this leg is complete. The index has moved down 4 trading days (normal counter trend) and if the up trend is to remain intact it needs to hold now, if not the index could see 5900 very quickly.

The US Stock Indexes remain in the same critical state. There has been a very weak trend up this entire year and we are waiting for that weak trend to be resolved to the upside and drive the index into a top as per my January forecast. But time is running out for this bull campaign as bonds are now in a bear trend and that is an indication the termination point is getting close. The next cycle for highs in stocks is the week ending May 12th and could be a final rotation up for stocks. Today's price action was ugly if there is follow through we could see 1285.

CRUDE OIL fell four days and rallied; remember the 4th day is the last day of a first-degree counter trend. If that 4 day low is broken there is a good probability this move up is complete. But for now the trend is intact and resuming. If crude does rally up into the 17th there are cycles that can bring a correction.

CNBC ASIA

LET'S LOOK AT A WEEKLY CHART OF THE US DOLLAR INDEX

Last week I indicated the US Dollar could be in a fast move down or even a panic move down. That does appear to be the case. The chart is a weekly chart with the last trend down broken into 1/8th and 1/3rd. Remember our theory that all highs and lows are exact proportions of previous ranges and those portions are 1/8th and 1/3rd. You can see the rally only retraced ¼ of the entire bear run and that is a small retracement considering the magnitude of the move down and indicates the hard downtrend is still intact and should test the low. The 1/8th division of the range is also a 50% retracement of the rally and should bring about a counter trend rally of some sort. But as I pointed out last week, the downtrend is now resuming and the lows should be tested and likely broken. If broken the index will go to either a 1/8 or ¼ extension of this range down as marked on this chart.

LET'S LOOK AT THE TOPIX INDEX

One of the problems with this index is the declining US Dollar. When we view the daily chart you can see the move down the past 11 days has been weak. When it broke to a new swing low on the 11th day it immediately rallied but was back testing that low three days later. Since the high came in on a cycle for high we need to take this move down seriously. The move down so far has been bullish because it has been a weak move down. If the index starts to trade below the 11 day low and below the exhaustion high) it will put the uptrend at risk. So far the 11-day move down is still bullish as it was a weak move down and 11 trading days is the normal time period for a counter trend in this circumstance. If the index starts trading below the December high (I've drawn a horizontal line at that point) it will cause me to review my bullish posture related to the Japanese stock indexes.

LET'S LOOK AT THE DAILY CHART OF THE AUSTALIAN ALL ORDS INDEX

Last week I indicated there was no evidence of a top from the cycles on the 19th. The index showed a first-degree counter trend and resumed the trend although the index is showing resistance to the cycle with a congestion. The index is now consolidating the past 60 days run and could rise or move sideways into the next timing date on 17 May. I believe this has a stronger probability of ending the trend due to the longer term cycles expiring in May. The failure to advance today (2nd May) indicates the previous day's "close on the high" exhausted the rally and does leave the index vulnerable to further decline.

Also, it looks like crude could resume the uptrend with a low of 4 days or first-degree counter 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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