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CNBC Power Lunch Europe

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

This has reached a critical position within this move up. The trend since the low on 28 July has been struggling up. I can qualify this as a struggling movement since each time it breaks above a previous high it immediately drops back below the breakaway point. Unlike the trend down which left spacing between highs and lows this move up is struggling. These struggling moves up can be resolved to the upside or downside and a majority of the time when they are resolved it is with a fast movement and possible a change in the trend. I had a cycle that could end this rally around Thursday (+-one day). At this stage of a bear campaign the worst case scenario is a marginal new low and a rally back up to this price level. There needs to be more distribution before resuming the bear trend. This looks to be part of an intermediate term counter rally and should last 45, 60 or even 90 days from the July low. But if this is a struggling trend upward a new low is possible and if that occur this index will still rally back to exceed this level to complete the counter trend rally. I still believe that is the strongest probability, seeing further consolidation then one more leg down and that will be the fastest leg down.

NOW LET'S LOOK AT COPPER AS A REPRESENTATION OF THE COMMODITES OR CRB INDEX

At the April high I indicated Copper had hit an important high and likely ended the bull campaign. But the market struggled down and eventually came back up to test the highs for the third test of resistance then started the down trend. This third test proved to be the top to the bull campaign as I pointed out a few weeks ago. This move down is now in the capitulation stage of this leg down. You can also see there was a struggling trend down that was resolved to the downside as we just discussed in the S&P. Most of the metals and commodities that exhausted their bubbles are in that mode of trend now and until they can rally more than 4 trading days they will remain in a free fall. Remember 3 to 4 days is as long as counter trends last while in this capitulation mode of trend so exceeding that will indicate a larger consolidation is starting. I don't see why the December lows should not be reached and eventually even 215. Remember this is only the 6th week of this decline.

Of course the other side of the coin to this is the US $ which I forecast would exhaust upward into last Friday. It now needs to consolidate that huge move up with a correction or move "on the side." The next important time window is around 12th September.

 

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