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August 02, 2007

McLaren Report
by Bill McLaren

LET'S LOOK AT THE WEEKLY CHART FOR THE S&P 500 INDEX

This chart shows the entire range of the bull campaign divided into 1/8th and 1/3rd. Dividing ranges into these simple mathematical divisions is by far the most accurate roadmap for support and resistance.

A small retracement for a leg in a bull market is ¼ and normal is 1/3 to 3/8. When a trend changes to bear from bull, a normal move down could easily run to 1/3 to 3/8 of the entire trend. Viewing bull campaigns that have run this length of time, a normal first leg down is 20% to 25% and you can see where that is marked on the chart. Considering this bull campaign has run close to 5 years, the percentage gained has been relatively small historically. Whether that means we can look for a larger or smaller first leg down than what is normal I haven't determined yet. But either way it should see a break of 1300.

It closed on the low today after a failed one day rally at important resistance. If that was a one day counter trend the index is still in a fast move down and should see 1419 quickly.

THE DAILY S&P CHART

The daily S & P 500 chart below shows where the 90/135 cycles started and does leave the index vulnerable to a bear campaign and a large move down. Starting from a point below the lowest low is very unusual but the movement down indicates their validity.

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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