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January 25, 2008

CNBC Squawkbox Europe
by Bill McLaren

LET'S LOOK AT THE S&P 500 INDEX

Last week on my service I indicated the low would be 1274 and that was the exact low on the 22nd. The probabilities in "time" were 101 calendar days to 105 calendar days and it was 103 or 104 days depending upon the index so I got real lucky again. Again, there were three descending trendlines to indicate a capitulation style of trend. I doubt a "V" style bottom and believe there should be some test of the low or even a marginal break. This current rally should last either three or four days and then downward move or around 7 to 10 trading days and a test of the lows. There could be a move to 1261 but 90% of the decline is in place if not 100% in the intermediate term. I doubt the rally will be like it was coming off the August low and should struggle a bit. If the rally is 3 or 4 days then resistance is below 1365. If the rally is 7 to 10 trading days the resistance should be between 1372 and 1385 which is 3/8 of the move down. The banks are being bailed out by the fed with 30 day repos and taking this flim flam securitization of debt products as collateral, the government is working on bailing out the bond insurers, the brokerage houses and banks (our captains of democratic capitalism) are going to the dictators of the Mid-east and communist China for the capital to stay in business, so the day of reckoning will be delayed as previously forecast. But this should dispel any thought that the people who run banks, brokerage firms and insurance companies are really bright people and deserve their salaries of 10's of millions of dollars they receive.

LET'S TAKE A LOOK AT THE DAX WEEKLY CHART

The chart shows the major range in the DAX index divided into 1/8th and 1/3rd and as I point out about once a month on CNBC this is the best way to find price support and resistance. The DAX hit 3/8 of the range for low and was the same exact support hit by the S&P 500 index. This is further proof of my theory that important highs and low can become 50% marks into the future when ranges or trends are complete. You can see that on this chart. The ¼ mark of that range is 7024 but I believe more significant is the 3/8 division of the move down at 7134. On the daily chart the same pattern of trending I just explained for the S&P 500 would apply to the DAX. This pattern for top is explained in detail in the EBook sold on this site.

LET'S LOOK AT THE US$

Previously, after confirming the exhaustion on the 23rd of November I indicated the rally would likely be 90 calendar days and run to either 78.44 or 79 to 80. Normally this style of move if a counter trend rally will have three drives up and not test the low. You can see the there have been two runs up. The first found high at 30 days from low on December 21st I indicated that date for high. The next date at 45 days from low was close to a "low to low" and the second drive up was at 60 days from low. I doubt the index will hit the previous price objectives but a test of the last low looks likely and if broken then the counter trend rally will have been 60 days. If it can hold that level then third run up into 90 for a terminal move up will likely occur.

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 © 2004-2010 Bill McLaren

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