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CNBC Squawkbox Europe

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

Let me start off by saying picking tops and bottoms to high momentum moves is the highest risk, lower probability trading one can attempt. I look for lower highs-first counter tend- or a reversal of a rally that closes on the high within four days of the high or other techniques that offer some evidence.

We had a price objective for the rally that is now being hit and runs up to 1068. The time period of 184 days from the March low carried a probability of bringing in a correction to the trend. If the index can move through this resistance in price and time then it will run to October 6th to complete this leg.

We have been looking for some evidence this uptrend could be terminating this week and so far nothing has materialized. So let's look at this trend. The index came off the March low with a vertical move up that was consolidated with a weak trend down into July. Weak because the highs overlapped the lows and it took twice the time to cover the same ground as the move up. As you can see the July low came in with support at a very high level at marginally below a mere ¼ retracement. The weak move down was followed by a vertical thrust up and a very small correction that again showed support at a high level. This usually means the index will need to exhaust the buyers to find a high and would therefore only come from a new high which has now occurred. The index can present a high with a "three thrust pattern" for top since this has the volatility to qualify. But continuing to see support at high levels usually means an exhaustion is necessary to use up the buyers. But this struggle up could also be consolidating the vertical move up from the July low. So I'm just a spectator until this daily chart can show some evidence of exhaustion. Just because I forecast the index would hit this price on this date doesn't guarantee it will stop here.

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

The notations on the daily chart may be a little clearer on the weekly. Once this leg exhausts there will be the typical Elliott Wave 4 correction and a struggling move up into 2010 to complete this bull trend. This will be followed by a 6 months sideways movement and a bear trend for 2011 and 2012.

LET'S LOOK AT THE NASDAQ

This has been the strongest of the indexes. In May I calculated the price between 2160 and 2260 as the high for this bull campaign. Our forecast called for that high in 2010 as a marginal new high and top. The index is close enough to reach that now and if it does it will be very meaningful resistance. If hit it means the high in 2010 will be marginally higher.

 

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