Stock Market: CNBC Report

By: Bill McLaren | Mon, Nov 6, 2006
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CNBC EUROPE

LET'S LOOK AT THE FTSE 100 INDEX

The message for the week of the 23rd of October I said the 6-month cycles indicated a possible high. So we needed something from the price action to indicate that probability could become reality. Last week we could identify an exhaustion of some sort and I indicated the market would move down, and then rally 4 days. At that point (after the four day rally) we would get a look at the ability of the index to continue to trend upward or go into a consolidation or correction of some sort. Last week the index came down and found support at the previous lows and has rallied four days as forecast. Holding that area of support is impressive but seeing three days down and now four days up and still well below the high leaves the index vulnerable to a further move down. If it cannot move above the old high this week or moves down after only a 4-day rally would indicate a probability of a top of some sort starting to form. As I stated last week this index could distribute a few weeks before seeing a more significant running down. But it is now vulnerable to 6088 or worst case 6032.

LET'S LOOK AT THE S&P 500 INDEX

Last week we were looking for a high to occur and a correction of 31 to 36 points to follow. The index has hit the high and come down 28.5 points. Friday showed an "outside day down" and at this stage of the decline the normal pattern to follow the "outside day down" is a run down the next day but reverse back up establishing a temporarily low. So if Monday runs down I would expect it to close strong. We should then see a counter trend rally later in the week if that scenario unfolds. Remember I was looking for a sideways pattern to occur and last between 30 and 45 calendar days or could be exact at 30 or 45 days. If there is a further move down, after the next low this week, the objective will be near 1333 or 56 points down from high. At that point there could be one last leg up of 60 or 90 calendar days to complete the bull campaign after this consolidation is complete. I am assuming the next rally will be a counter trend that it will not reach the highs and come back and break this weeks low and establish the low to the sideways pattern. I believe the index has gone down too far to test the highs and the next rally should complete as a lower high.

Last week I indicated the DAX and CAC 40 had exhausted their trends. The CAC 40 has moved down but the DAX is just congesting but is currently moving down from a 3 day rally that failed so there is still some vulnerability left in that index even though it did well last week.

CNBC ASIA

Today we're going to look at two very strong indexes

LET'S LOOK AT THE HANG SENG DAILY CHART

I have two cycle dates left to end this leg up. One is 144 days from low that came out this weekend the other is 180 days from low on December 10th. In a majority instances, if the cycle is valid, the mid-point of the cycle will be in the opposite direction of the trend. You can see both 72 (1/2 of 144) and 90 calendar day (1/2 of 180) came in as lows indicating highs on either today at 144-calendar days or December 10 at 180-calendar days from low. Time cycles represent probabilities; we then go to the pattern of the trend, volume, wave structure and price level to determine if the cycle has a chance to go from probability to reality. Remembering how I've pointed out this style or pattern of trend will likely exhaust into its high so we can look for something excessive to the upside to signal a possibility for a top. Thursday was a spike up going into the cycle so there is a probability for a high of some importance. Keep one thing in mind. The next date and is very reasonable is December 10th. So if the index can move past this point the trend could continue another 36 calendar days at this rate of advance. So how the index deals with this last spike up is very important. Personally I thought it could run to December but the wide range day on Thursday looks exhaustive so we need to see how this plays out the remainder of the week.

NOW LET'S LOOK AT THE ALL ORDS AUSTRALIAN STOCK INDEX

This overall pattern of trend is abnormal. This market showed a multiple higher low base pattern after only a 36-calendar move down. This is a strong base pattern but only shows up after a long hard move down of a minimum of three months not 30 days. Yet the move up is obviously consistent with coming out of a base. The largest correction has only been 2 days. The last three weeks have seen only one day counter trends yet nothing excessive to the upside. These are the same cycle as appear to be working out in the Hang Seng. If the index can move up past Tuesday it would indicate the possibility of a drive up into 10th December and significantly higher in price today hit very important price resistance. Typical of this style of trend is to show an exhaustion followed by a sharp three or four-day move down and a final vertical multi-day move up to complete the leg up. We have "time" cycle today but there needs to be some significant evidence to assume a trend with this strong a momentum is complete. The next time window of the 15th through the 18th has a lot of multiyear cycles expiring and could bring in a top of some sort but the longer term cycles usually time out with the shorter cycles and they point to today or 10th December. Friday did close on the high of the day and it is struggle a bit today against very important resistance but what occurs after Tuesday should tell us if the 10th of December is our next important short term cycle or if today is significant.

 


 

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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