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October 23, 2006

Stock Market: CNBC Report
by Bill McLaren

CNBC EUROPE

LET'S LOOK AT THE FTSE 100 INDEX DAILY CHART

Last week the index was at the same position as the end of November. It was testing the "obvious" resistance of a previous high. So if the index is going through and put on another breakaway move or a further trend this move against this resistance needs to comply with counter trend probabilities and not give an indication of trending down. So far there is a low on the third day after the high (normal counter trend) and Friday did an early morning run up to a marginal new high and couldn't hold the gains and closed down. Friday broke no support and so far the move down is one day and a test of support on the third day and very little in points lost. A wide range down day would appear bearish and indicate a problem with the up trend and take it out the fast trend category. A wide range up day would look like a completed move down and a resumption of the trend.

LET'S LOOK AT THE FTSE WEEKLY CHART

There has been a 6 months vibration in time and this week will be the next in that series at two years form low, 1 ½ years from low and 6 months from high. Please understand this is resistance in "TIME" just as the index is up to the previous high and is obviously resistance in "PRICE." IF markets can push through resistance in both price and time it would indicate a strong leg up. But right now the index is at resistance and I am looking for the daily chart to indicate the resolution-so far the trend is intact but it needs to show some strength.

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

The S&P 500 is at the "Time" I forecast would start a sideways movement for the next 30 to 45 days and probably correct the small amount of 30 to 36 points. So far the index has congested but no indication of weakness. If it cannot move above the old high today it would start to look distributive and if followed by a wide range down on Tuesday it would look like a small distribution pattern that is complete. The first real indication the momentum of the drive is over is if the index can close below the price high of previous swing at 1354. Consensus is almost at the extreme bullishness necessary for a consolidation of this trend.

OIL

The pattern in crude has reached a very important juncture. Is this congestion a low, because if it isn't there will be a spike down to end the move down -- but the spike down could be four or five dollars in a matter of 5 to 10 days. IF oil trades below the current lows and rallies one day only to see a new low the next day will be a pattern to indicate that spike or panic down is in progress.

CNBC ASIA

LET'S LOOK AT THE HANG SENG DAILY CHART

Almost all major world stock indexes are at calculated or "obvious" resistance and many are in exhaustive style trends. Remember stocks and indexes exhaust into highs and that is what I see going on now in many indexes. If these indexes do exhaust into highs as I anticipate most of these highs will result in a consolidation and not yet a change in trend, but there will be a correction to start the consolidations. I believe most indexes are at that point or will have one more multi-day move up to complete. Keep in mind the fastest part of the move in an exhaustion style of trend is the last part of the move and I am not recommending anyone sell these indexes.

Now to the Hang Seng. We have been watching a very significant pattern developed over the past three weeks. There was a congestion that developed within the trend from August through September. I've drawn a box inclosing that congestion. If the index could show support on top of that congestion it would indicate the probability of starting a fast move up. Then there was the North Korean news item that caused the index to momentarily break that support level but successfully tested it on the third day down. And since three days down is the normal counter trend move down in a fast trend up this still left the index in a position to possibly spike up higher. Since this should be a fast trend up any faltering here will end the uptrend. If the index breaks even a swing low the up trend is over. For now it is still holding that strong position.

LET'S LOOK AT THE TOPIX INDEX DAILY CHART

You can see the similarities between the Hang Seng and the Topix patterns. Will the Topix show us a lower high and a run down to test the September low or will it manage a low on top of this congestion as the Hang Seng resolved its congestion? There is some resistance from time cycles in both the Topix and Nikkei this week but the daily charts are at the point were there can indicate the direction this week.

I still believe the US Stock Indexes will start a consolidation process this week and that could bring some selling in these indexes. If the US market cannot make a new high within the first few days of the week, then it is at risk of correcting. Even if it does run to a new high it still looks like it will be the last multi-day drive to complete the leg up and start a consolidation. I don't see much of a correction, maybe 30 to 36 points. I am looking for a sideways pattern to consolidate the current fast move up. If I am correct this consolidation should last 30 to 45 calendar days and at that point the index will resume the trend for another 60 or 90 days or start a bear campaign. Bullish Consensus is not quite at the extremes seen at tops but is getting very close.

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.

Copyright © 2004-2008 Bill McLaren

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