Stock Market: CNBC Report

By: Bill McLaren | Mon, May 15, 2006
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CNBC EUROPE

I noted that last week most of the world stock indexes were in the same position. They needed to accelerate or they were in trouble.

LET'S TAKE A LOOK AT THE FTSE 100 INDEX

We have been looking at this weak up trend since March. I've been telling you weak trends are followed by fast moves. They can be resolved to the upside or downside but the move will almost always be fast. So once that lower high materialized, as I pointed out last week, this and the other European markets are trending down in the short term.

LET'S LOOK AT THE NEXT FTSE CHART

I post these charts on my website so you can get these price levels. But as we do with all markets we break the range of movement into 1/8th and 1/3rd and first look for support at ¼ if the trend is to remain strong (that is doubtful here) then 1/3 to 3/8 to hold the up trend intact. There will be a rally from that level and that rally will determine if the uptrend remains intact. And that is in doubt right now. Another lower high on a weekly basis; which will come from a rally starting at that 3/8 price level will tell us if there is a bear trend in place. .

LET'S LOOK AT THE S&P 500 DAILY CHART

This is the same chart I put up last week. There were cycles last week on the 8th that could end the weak uptrend. It was up to the index last week to prove itself. A move down below 1317 would indicate the weak up trend was complete and a low above the high at 1326 would indicate the weak trend was resolved to the upside. When the index broke 1317 there was no doubt to its significance. There is now a strong probability the bull trend is complete. One thing to keep in mind is when a weak trend is complete it is almost always followed by a fast move.

It is possible to correct now 22, 30 to 45-calendar days and still resume the bull campaign. Or this bull campaign that started in 2002 is now complete and that is probable. If, after the index stabilizes in a few week and rallies. If that rally produces a lower high we can confirm the bull campaign is complete.

INTEREST RATES/BONDS

Let me mention something about interest rates that I hope everyone understands. The highest prices in bonds or lowest long-term interest rates have been seen for the next 20 to 30 years. This market is now in a long-term bear trend. That is how it works with interest rates-no exceptions. Remember four weeks ago I put up a chart of the dollar index and said this was starting a panic move down to new all time lows and its not there yet. There is still a huge liquidity floating around the world looking for a home and a number of commodities will likely play catch up.

CNBC ASIA

LET'S LOOK AT THE TOPIX INDEX

I sure got it wrong last week. I indicated the move down from the cycle high was weak into the 11th day and that could be the low to the correction. If that 11-day low was broken it could indicate a serious problem for the uptrend and if the index started to trade below the horizontal line which was the previous exhaust high it would weaken the pattern of trend significantly and indicate a possible top in place. Obviously the Dollar is a problem and my forecast calls for a panic move in the $ index to a new all time low. How that relates to the $/Yen I don't know. There is also a possible distribution pattern of a lower double top in the Topix so until this index can get back above 1700 there is a chance this up trend is complete.

LET'S LOOK AT THE S&P DAILY CHART I PUT UP LAST WEEK

This was very clear last week there were cycles on the 8th for high. IF the index moved below the 1317 price level the up trend would be complete and therefore the bull campaign that started in 2002 could also be complete. The index went through the 1317 price level and accelerated. Because the last move up was weak the move down could be very fast and could take 22, 30 or 45 calendar days to find a low even if the bull campaign is going to continue. If this is a top, the next multi week rally will only produce a lower high that will be followed by a very fast move down or even a crash. Once the index stabilizes I'll give you a forecast for the next three months.

LET'S LOOK AT THE ALL ORDS AUSTRALIAN INDEX

There is also a very strong probability a top is being put in place in this index. I had two cycle dates that were of a concern-the 17th of April and the 17th of May. When the index went up into the 17th of April I indicated the worst case was a sideways pattern, as the index had given no indication of a problem. Now the 17th of May is different. Today will be a big down day and will significantly drop below the last high that is current support. This leaves a "three-thrust distribution pattern" and possible top.

LET'S GO TO A MONTHLY CHART

These are a series if moving averages that are 240 points apart moving at 8 points per month. This price vibration has caught 90% of all the highs and lows on this chart and that's using 25 years of data. As you can see this has been a huge blow off trend and is now at extremely important resistance in both price and time.

Please understand we have hit a peak in US bond prices or better said, long-term interest rates have started a rise that won't reverse that downtrend for at least 20 years.

 


 

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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