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Squawkbox Europe

September 25, 2009

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

The high two days ago showed a little "false break" pattern for top, there was a little 5 wave structure up from the September low, there was a bearish volume divergence at the high but I still don't believe time has run out on this rally yet. That won't occur until the index gets closer to October 6th. Two weeks ago I indicated if there was no top at 184 calendar days from low that it would then run to 90 days from the July low and that is still valid.

One of the techniques we use to determine if a trend could be complete is where 50% of that range is located. The fact that at a completion of a leg, the 50% division of that range can be at an important high or low. This can occur a majority of the time, obviously there must be other evidence but it is a good rule of thumb for forecasting and as in this instance can indicate resistance. The July low is now 50% of the move up and could indicate this is close to the price for the high of this leg. But I still want to see time move into October.

So if I am correct about the time factor then there should be a low today or Monday and not a lot lower, it should hold the 1027 level and move up into the time window around the 6th. The largest previous correction was 47 points and this correction could be at that same level of decline. This is not the end to the bull trend. After a correction there will be another leg up and a significant top in 2010.

Two weeks ago we said resistance for the NASDAQ was 2160 to 2260 and this high so far is 2167.

LET'S LOOK AT A FTSE WEEKLY CHART

This was an amazing move up but remember markets exhaust into highs and this move up since the July low is definitely exhaustive. Normally an exhaustive move might show three ascending trendlines but a third ascending trendline couldn't occur with this trendline almost vertical. The low to the bear trend was 50% of the high price and is the normal price for a low in a severe bear. The index has now moved all the way back to 25% of the high price or what is also a 50% retracement of the entire bear campaign and a classic place for resistance.

 

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