Stock Market: CNBC Report

By: Bill McLaren | Mon, Feb 27, 2006
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I've been using the same chart the past three weeks. The index continues to struggle against the resistance of an overhead trendline. Last week was a very small range week and after a number of weeks up the small range is indicating supply and demand are about equal. I dislike triangles as a form of technical analysis as most end up as horizontal patterns anyway and just add to the normal confusion. But there is one triangle that was pointed out in Elliott's work that he referred to as a diagonal triangle and can be qualified because it only shows up in 5th waves of advance and can indicate a termination of the advance. This is a 5th wave and that pattern could be building on the chart and if so will be completed by this week. Last week I said it would go to 5860 and it hit 5869. If it can move higher the target is 5975, but I still have doubts that can occur.


As far as I'm concerned this is one of the most important weeks of the year. My forecast calls for the low on the 10th to have started the final exhaustion move up to complete this bull campaign. The only thing that could get in the way of that forecast was the 45-calendar day vibration we looked at last week. I indicated the only way that would concern me is if the index went up into that date and was showing a possible little distribution pattern. There are now 4 days "on the side" going into the time window and that does give some credibility to this resistance in "time." We can view this resistance in "time" just as we view resistance in "price," which the index is also up against at the old high. I can see one of three things happening here. The index blasts through this resistance in "price and time" and runs for 60 or 90 more days into the final top to this trend or there is a first-degree counter trend down of 1 to 4 trading days from this resistance and the trend resumes as per the 2006 forecast. Or the entire move since the end of November has been distribution and the trend is complete and the index will now trend down. Please understand there is nothing from the pattern of trend to indicate the up trend is complete, just the probability from "TIME." And that is only a probability. If it can move up past Tuesday then it is off and running again and my concern will be "much ado about nothing." But for now there some risk from this probability in time. There needed to be a lower high, significantly lower high, to set up a mini crash or fast move down and that has not occurred.

Gold only corrected between 1/3rd and 3/8th of the range up so it could be resuming the trend.

Crude Oil appears to have capitulated into the last low and that usually indicates some consolidation action or range trading for the next month.



Last week I indicated this was a very important point within this uptrend. The low of 16th February needed to be THE low or there was a real problem with the trend. I said 80% of the time this configuration brings in a solid low so all it needed was an up day to help confirm the low. Remember, the last high was a complete leg up and this low needs to start another leg up or the bull campaign could be in trouble. So this rally needs to conform to the criteria of a fast trend up and therefore a correction should not exceed 4 days and I could put that at three days being this close to the low. Since this is an exhaustive style of trend and problem that shows up while trending can be important.


Last week I indicated the Hang Seng had found a low and was starting the last drive up to this leg of advance. The price objective was between 16100 and 16200. Markets go into tops in two ways. They either exhaust into highs with fast moves. This gets all the buyers into the market so when it does start to correct down there is no one left to support the market. Or markets will struggle into tops, as this index appears to be doing. You can see the first leg was 300 days and almost 6000 points. The next leg was less at 225 days and almost 4000 points and the next leg was 170 days and 2300 points. This current leg is now 120 days and 1720 points, significantly weaker than any of the previous legs up. It would be NORMAL for this index to go to 16100 to 16200 for a top.

On occasion this type of struggling trend can develop into an exhaustion mode of trend but that would be abnormal and I didn't last over 40 years in this business looking for the ABNORMAL to occur. IF the abnormal does occur it will be easy to see developing.


This is the June Contract with the last range of movement divided into 1/8th and 1/3rd. The correction was between 1/3rd and 3/8th of the range up and that is the normal correction or counter trend to hold the trend intact for the next drive up, not only in Gold but almost all markets. The December Contract corrected less and is therefore in a stronger position. The move down was 9 trading days. If it is not at a new high or testing the high within 9 trading days of rally we'll take another look and see if there is a problem with the trend. The next high should be a proportional extension of this range up since "all highs and lows are exact proportions of previous ranges." So we'll see if it can test the old high this week and next week I should have a new forecast available.


Bill McLaren

Author: Bill McLaren

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.

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