Stock Market: CNBC Report
LET'S LOOK AT THE FTSE DAILY CHART
We have been watching this pattern of trend develop for the past three months. Remember, three thrust up below a high will put the up trend at risk of completing. Last week I didn't believe the third thrust up was complete since a lower high was unlikely until the third thrust shows a new high. If after the third thrust to a marginal new high a lower high does appear, as occurred in May, then the odds favor a sharp move down. This is a weak trend up and can be defined that way since each time in has broken to a new high it has immediately and significantly run back below that break away high. Yet, each of those moves down has become smaller and smaller indicating support is coming at increasingly higher levels. When this picture occurs it is usually resolved with a fast move and can be in either direction. The smaller and smaller corrections can indicate the buyers may need to be exhausted with a big spike up to complete the trend. Or once a marginal new high is in place to complete the three thrusts, the index could show a lower high and fast move down as occurred last May. As you know my forecast has called for the index to go up into September 12th. So next Monday could be a critical time for this trend if there is an exhaustion move up. Remember, even though this trend is weak it could still exhaust up into next Monday due to the consecutively smaller counter trends.
LET'S LOOK AT THE S&P 500 INDEX
This is another index I thought had a minimum move of 90 calendar days after the June low. You can see the subtle difference between these two trends. The last low was a one-day counter trend and was finding support on top of a previous high thus holding a strong position and moved up without touching the trendline. The FTSE went 4 days down and hit an obvious trendline. You can also see this move up has come from an accelerated trendline or could be viewed as "not reaching the obvious support." This usually indicates an exhaustion high is necessary to complete the movement. Resistance levels are 1313, then the old high at 1327 then a 1/8 extension to 1340 to 1346. Time remains the key factor for an end to this trend. The first date is the 12th then the 29th then October 16th. But we need to seriously consider the time window around the 12th for a top.
I have not changed my forecast, I still believe this current trend will end and the index will go back to test the July or August lows and then come back up to retest the highs.
Today I thought we'd look at two metals as most metals have been trading very much alike. As most of you know I am an old guy and when I started in this business over 40 years ago there were no computers or even calculators. As a technical analyst our analysis was based upon reading the chart and not a mass of oscillators. So we're going to do some "old time" analysis with Gold and Copper.
LET'S LOOK AT THE GOLD DIALY CHART
You can see the huge exhaustion move to end the uptrend. If you will look at the pattern that started that exhaustion move up in March. You'll see the market bounced up from an obvious previous low and moved up 3 days. The market then fell 6 days and was well above the low that started the 3-day rally. Then in one day it moved above the high that started the 6-day decline leaving a very powerful higher low. Now let's move to the right side of the exhaustion high. There was a 20 trading day rally and the index is now 35 trading days from that 20 day rally high and well above the low that started the rally. The next rally was 7 trading days and the market is now at that low but it took 19 days to get there. The market is finding it more difficult to go down. Twice the amount of time is a good rule of thumb to indicate strong support. Unlike the March low there is no higher low but it was 3 days up and 4 days down to the same level. Now here's the caveat. This bounce is up from OBVIOUS support and as you all know, a bounce from the obvious can be a huge trap. Especially when a market is showing three lower highs as this doing. So gold is now up three days and if a new low within two days the market will immediately go back to the 560 level. If it can move higher past 4 days of rally, the December contract should be able to hit 662 by next Monday. If that occurs next Monday will be very important in price and time and we'll discuss it next week.
NOW LET'S LOOK AT THE COPPER DAILY CHART
This is the same picture in copper. But there is a slight difference as there could be a higher low and the last move down was 6 or 7 days versus a two-day rally. And Thursday showed a gap up so it needs to continue the move up. A gap down would be quite negative. A new low below the obvious support would be quite negative if it got there in less time that the previous rally. But if it is going up, this is a place it could rally from. I still believe there is a probability for a secondary or lower high but they take more time to form (at least 90 calendar days) and unless these markets start down early this week with a vengeance, we should see a rally to test the last series of highs.
If bullish you don't want to see a weak rally now, this move up needs to exceed 4 days. A new low within the first few days of the week would set these markets into a panic move down. The number of days to the swings indicates a low, but it needs to exceed the time of a first-degree counter trend.