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CNBC Squawk Box Europe

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

S&P500

Our price targets have been 1220 to 1225 and 1247 to 1255. The time for this leg to end has been 90 to 99 days from the February low with a chance a high on the 3rd at 180 days from the November 2nd low. The index hit the lower level of the price resistance and has fallen back to the previous low. If there is a high within this time period the correction will likely only go to the 1150 level and start a large sideways pattern that will last close to 6 months. The index hit the lower level of the resistance and I doubt a high much above 1225 if this is valid. Most tops need distribution and this is what appears to be occurring.

LET'S LOOK AT THE RANGE THAT CREATED 1247 LEVEL

S&P500

This is a weekly chart of the range from the May 2008 high down to the March 2009 low and divided into 1/8 and 1/3. You can see every swing was precisely at a division including the lows the past two weeks. The ¾ division is next at 1247 but may not be hit until later and not this drive. The current resistance at 1220 is a ¼ extension of the previous leg up as described in the report two weeks ago and is posted on the website.

LET'S LOOK AT THE T-BOND DAILY CHART

T-Bonds

Two weeks ago I indicated T-Bonds were going to make an important test of a high. If the index failed that test and gave an indication of trending down there could be a large fast move down. This was based solely upon the pattern of trend. There are three attempts at resistance well below the exhaustion high or blowoff high. This third test is now in progress. There was a huge spike into the test and now the spike is being tested and could set up as the high. Please understand I don't have any time to indicate a top but the pattern is a high probability IF there is evidence of trending down from this location. This is a picture of an intermediate term distribution pattern if the market can fail and show a counter trend up or some indication of trending down. This may not occur but is worth monitoring for the next week. If it rallies two or three days and cannot move above the spike and turns down, that could represent the first counter trend rally in a down trending market. I've drawn that possibility on the chart. Next week should tell the story. If the market trades above the spike by more than just marginally then the pattern of distribution disappears and the bonds will move higher.

 

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