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March 28, 2008

CNBC Report Europe
by Bill McLaren

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

On the 19th Power Lunch show I said there was a low in place and it could be of some significance. The reasons were numerous as consensus had hit an extreme and was at the same level as October 2002. There were three drives down into the last low with the second drive the biggest and fastest and the last drive the smallest of the three. There were time cycles for low that had historic significance and the price was a calculated number. It was also being publicized that the US economy was in a recession. And since the markets will do what ever will mess up most of the people most of the time. When the bearish recession news was public knowledge it was time to look for a low. Now all the index had to do was quickly run up to test the "Obvious" February high.

If we go back and look at the trading for the past one hundred years it is clear that when the index has a large decline in a short period of time as our 19% decline would qualify, the market will need to consolidate that large decline with a rally or sideways movement even if there is a bear trend. Those time periods for rally or consolidation, if the trend is down, are very consistent through out history at 34, 45, and 60 and 90 calendar days. If the trend is down that movement against the trend almost never exceeds 99 calendar days. During the month of March I presented Reports that covered all the Bear Trends in the Dow Jones for the past century. If you subscribe those reports and all the previous reports for the past four years are available including how the 2008 forecast was developed during the January reports. During November there were reports on how the "pattern of trend" will indicate the index will break support and trend down.

The time periods from the January low that can end the move up if the move up is a counter trend in a bear campaign are 34 days and that was the February 26th high, then 45 calendar days at the 10th March low and 60 days which was last Monday then 90 days which is around April 22nd. Those time periods are solid. So, moving up into May and exceeding 90 days would indicate this was not a bear campaign. Those time periods for counter trends in bear trends are factual that is true for every bear campaign this past 100 years. So it is very important that the index move up past Monday's high since it was 60 days from low.

There is another date that could be important. One hundred and eighty calendar days from the October high around April 8th can be significant especially if around the price levels of 1396 or 1306.

In order to assume the index is trending up this move down needs to find low today (Friday) or Monday at three days or four trading days down from the high.

Remember those intermediate term time periods are in calendar days and everyone should look at the history of bear trends and the pattern of trending in counter trends because they are all very, very similar. Remember there is nothing new in the markets; everything is a repeat of the past. So this index desperately needs to move above Monday's high.

Also keep in mind everybody's bearish; the banking system in the states is in a shambles. But it's not what you know right now that matter, it what things may be like 6 to 9 months from now.

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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