Stock Market: CNBC Report

By: Bill McLaren | Mon, Sep 25, 2006
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You all had some technical difficulties so we didn't get a message last week, although I still posted one on the website.

One the 11th I drew how I thought this index would play out, I indicated then, if it couldn't make a new high within three days (normal counter trend) it would likely go to a new low in the same or less time and establish a lower high-that did occurred.

There is weak 5-wave or three-thrust structure up we've been discussing the weak nature of this trend for a few months now and it is occurring below an exhaustion high. That can be a very dangerous or bearish pattern. But you can see since the last high this has become a bit of a struggle down. There are 13 days down and not a lot of damage. So if it is going to move down it needs to start in the next few days.


As we have done on many occasions on CNBC we break the range of movement into 1/8th and 1/3rds. The move down has held 3/8th of the rally up and that specific division does hold a trend intact. But as we've been watching this trend develop we've seen how this could be qualified as a weak trend, therefore I don't see why this key support should hold a strong position within this weak trend. So I still believe this can go to the July low or lower. If it doesn't get extended down within the next two days it would too much struggle and could indicate it isn't going down and then I'm wrong. But now I still believe the July low is possible but it needs to break in the next few days or it isn't going to occur.


Our strategy has been to look for a high after the 12th at the old high at 1327. Remember this is "obvious" resistance so a move down could easily be a counter trend. Back in July I indicated this would be a huge sideways pattern test the high and come back to test the low. It could go marginally (a few points) higher to show a bit more distribution. If my forecast is wrong, then to could spike to 1340 to 1346. Just as I forecast in July I think we're putting in a top and it could be confirmed this week.

Next time for top is not until 17 October.

Remember I'm looking for 2008 to be a big bull year so what occur the next 6 months should be setting up that move. But the index needs to correct or consolidate to set that up.



A few weeks back I explained the significance of the September 4th high and indicated it would break below the July high. And run down maybe into the next cycle expiration October 4th through 7th. There is then a possibility of coming back up and testing the price of the last high again, after the current sell off is complete. The dates I had for the move down to complete were Oct 4th through 7th. Now, I also have to add the time of September 28 or 29. We'll simply need to see how the pattern sets up at the end of this week. I can't be much more help at this time.


We haven't discussed this Index lately since it was obvious after the spike down in June the index wasn't going to do much but go sideways. Historically that is how it should behave. Now it has established a possible lower double top distribution pattern. But there are also a lot of higher lows on the weekly chart. But there is some indication of trending down with a 4-day rally (normal counter trend time period) and three days to reach the price or the start of the rally. If it is trending down, as I believe is a strong probability, it needs to break this "obvious" support within the next few days or it may not occur. The 4800 to 4815 level is extremely important support and not the June spike. If it does run down to 4800 and doesn't hold the 4620 is the next objective. If it can hold for a few days then I am likely wrong. Once this market starts to trend down there is usually very little doubt about direction. This week should tell the story.


On the September 4th report I thought the metals were all bouncing up from the "obvious" support of a previous low and were vulnerable to putting in a first degree counter trend up of one to four days and then a fast trend down. They all showed counter trends and broke except copper. Which was a surprise to me as thought this would lead the metals group down. The general rule for technical analysis is three tests of support or resistance is common, a 4th test carries a probability to go through. Don't confuse multiple tests from the same drive so it is still in the third drive down. But if it makes a run to the high it will carry a bullish probability with it. This could still the third test of the low with a 3-day rally and if it cannot break in this week it likely isn't going to do it.

Gold has a strong "vibration in time" on October 3rd.

That is all I've got for today.



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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