CNBC Squawkbox Europe
LET'S LOOK AT THE S&P 500 DAILY CHART
On the daily chart there is a "false break" pattern for top followed by a secondary high that was a 7 trading day rally and a "one day counter trend" up from "obvious" support to signal the fast move down was starting. That is a "pattern of trending" you will see many times and it almost always brings in a fast trend down. On this show on October 26th I indicated we could see a 7 to 12 day rally for a secondary high and the end of the bull campaign.
LET'S LOOK AT THE WEEKLY CHART
When the index hit the August low I said if the rally could exceeded 12 trading days the index was going up to test the July high and create a large sideways movement or large distribution pattern. There is now a secondary high in place and the index is going to do the normal first leg down in a bear campaign at 20% to 25% or 1260 to 1180. In this chart I have divided the range of the bull trend into 1/8 and 1/3 as this is the best way to view support and resistance levels. The normal correction in a bull trend is 1/3 to 3/8 or between 1307 and 1273. This first leg down will likely run down to that level or marginally below it to the 20% mark at 1260 and bounce. The "pattern of trending" that occurs during that bounce will tell us what the next two years will look like.
Remember my theory that important highs or lows will become 50% marks when a trend is complete. You can see this occurred again with the index.
LET'S LOOK AT THE US DOLLAR INDEX
Last week I indicated both the US Dollar and gold were in exhaustion phases of their trends. You can see the dollar index has shown a panic or capitulation day on Wednesday. This may have temporarily ended the move down. The first confirmation of that probability is to rally past 4 days. But now it is in a panic. I still believe the index is going to 71/72 and possibly even 67. But for now it is likely to consolidate if it can rally past 4 days.
LET'S LOOK AT COPPER MONTHLY CHART
Copper has topped, there is an exhaustion high and has just completed building a secondary high to create a 17 month distribution pattern. That should allow for the market to break to February 2007 before finding the next low.