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Squawk Box Europe

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

S&P500

There is a chance, a probability for a high today or Monday. When the July "False Break" low was hit I indicated three probabilities. A new leg up running to a minimum 1247 in 90 to 99 calendar days, a secondary high or fast rally that exhausts before a new high usually 7/8 of the range down in 60 to 65 calendar days. Or a lower double top and this is where the index is now located. So as the index moves into these time window we need to look at the wave structure, volume, price level and the pattern of the trend to confirm the probability. The index is at the "OBVIOUS" resistance of the previous high and now within the time window at 180 days.

There is a 5 wave structure up (5 or 3of 3), volume has been decreasing but not unusual if the trend were up at this stage, but the pattern of trend is not setting up well. Notice how small the daily ranges have become. High points and tops tend to have some volatility. Notice the expansion of ranges during the January top and the April top and in this case the ranges are narrowing. If there is a move down it is possible to see just one to three days down and resumption of the trend due to the resistance being "obvious."

Running out cycles from the July low has 45 days on the 15th and if a low could indicate a 90 day move up. If this is a counter trend rally in a down trending market the highest probability is to run out 60 to 65 days or out to the first week in September. If there is a high point now it should not exceed 1134. I don't like the odds for a top due to the small range days and the probability the move down could be a small counter trend down. The small range days leaves a possibility of a large spike up. If today can not advance following yesterday's reversal up and a daily low is broken I'll consider a short term move down to trade but I doubt the trend reversal. I hate those small range days as it usually indicates support coming in at high levels and an exhaustion up might be necessary to eliminate the buyers.


GOLD

Gold

The two weeks ago I said gold would go to 154 to 157 for a low at 50% of the last leg up. We are now looking for this rally to fail and confirm a downtrend into one of the major support. The move down to 50% of the last leg up to consolidated that leg up. I felt the entire trend since 2008 needed to be consolidated so we are looking for this rally to fail and run down to ¼ of the major range which is the minimum move down to correct or consolidate a major trend or 1122. Once gold establishes a downtrend there is a fast rally as occurred in this uptrend as noted with arrows and this occurs in almost all up trends. So we are looking for evidence this rally will fail at a price above 1212 and possibly on the 12th of August at 1220. If the index runs past 12 trading days there is no high in place and a new high is likely. The pattern of the downtrend was weak so we need solid evidence to conclude a lower high is in place. But that is what we are looking to occur.

 

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