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February 19, 2007

Stock Market: CNBC Report
by Bill McLaren

LET'S LOOK AT THE FTSE DAILY CHART

Last week I indicated we could have a strong trend starting as indicated by the one day counter trend down. IF that were the circumstance the index needed to hold the low of the one day move down and it did that last week.

There are a few time periods that run from low to high or high to low and repeat in most markets, over and over again. In the US Indexes it is 90, 135 and 180 calendar days. In the FTSE there is also a 144 vibration that can end trends or be viewed as resistance in time. So whenever the index is 144 calendar days from low one should look at the probability of a correction the key word is look. Remember these time periods are in calendar days. Friday was 144 calendar days from the September 25th low but there is little on the chart that makes the index appear vulnerable -- no distribution pattern and no exhaustion.

So we can continue to apply trending criteria to the move up. Because of the nature of this advance it should not correct more than 4 days or it will indicate the trend is in jeopardy and if that occurs it indicates the next rally could fail. Please understand indexes need to exhaust or show a fast move into important highs and this is an exhaustive style of move now as was the September and October move up of last year.

S&P 500 INDEX

The previous week the index showed a high and corrected back to the obvious support of the previous highs thus holding the trend. It then needed to show a second wide range down day or it would be back testing the highs. There was no wide range down day so it is back marginally above the high. I have had 1458 as significant resistance in price and that is still holding the index back. This trend has been struggling up the past three months as each new high immediately falls back below the breakaway point. Analysis of the pattern of trending makes this an important point. It could either start an exhaustion or fast trend up-now-as occurred Oct 3 2006 or Dec 16 2003 or we'll see a correction greater than the normal three days. This week should tell us if the index can get legs. Volume has been decreasing the past three weeks and does leave a possibility for further correction. But a strong up day would be bullish and indicate the index had held a previous high holding the index in a strong position for the next rally. Dropping below the high doesn't end the trend but if there is follow through to the down day it could indicate the 30 or 56 point correction that is inevitable.

US T-BONDS

Last week I thought bonds could still be vulnerable to a fast move down if they could stay below the 3/8 retracement, which was also the price of the December low. Moving above the price of the December lows exceeds the criteria for a fast trend. The trend still looks down but when it will resumes the trend I can't see. The low was 60 calendar days from high and many times that sets up a 90 or 120 vibration in time so March 1st we'll look at this item again. Steve, when you told me last week everyone was looking for a move down that was the key to this pattern.

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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