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Stock Market: CNBC Report



All market trends tend to run in 5 wave structures. This is very easy to see in hindsight and not so easy in real time. You can see there have been two sections of 5 wave trends within this advance from the October low. So the last small trend up is complete and if there is one more section to this uptrend (which would be normal) it will either stop at 5888 and possibly complete the bull campaign or exhaust to 5977 and possibly complete the bull campaign. Either one of these levels can be significant.


If you have been watching this show for any length of time you have heard me say ALL HIGHS AND LOWS ARE EXACT PROPORTIONS OF PREVIOUS MOVES. Those portions are 1/8th and 1/3rd. This chart shows the first range of the advance broken into 1/8th and 1/3rd and extended upward. You can see 90% of highs and lows to the advance since March 2004 have been at these price divisions. The current high was at 7/8th of that range and a full 100% is 5977. Right now it looks like a move to 5888 has a strong probability to stop the trend and possibly the entire bull campaign, exclusive of a distribution pattern of some sort. If not that price this picture then is showing 5977. This analysis I refer to as price vibration in markets and is easy to see. "Time" vibration is a bit more powerful and we'll look at "Time" or cycles next week and see if we can come up with a date these prices can be hit.


First week in January I indicated the index had cycles for high on the 11th and if the trend was going to resume as per my forecast for 2006, it would find a low on either the 3rd of February or better on the 10th of February. I also indicate the low would likely be a double bottom as this circumstance would call for a low that was proven by the price action. So the index is now at the price of a previous low on the 3rd. If it can hold this price level and rally there is a chance this could be THE low I've been look to occur. But when I go through stocks I don't get a secure feeling at this time. I still believe the time of 120 calendar days from low works best for this market to resume the trend. So let's see if this can hold this obvious place for a low or at least 1258. Holding this trend intact between now and the 10th is critical to keeping my forecast valid that calls for one more advance of an exhaustive nature of trend.



Last Wednesday I published this chart on this show and indicated there were two scenarios that were likely and drew those on this chart. Because of the magnitude of the two-day move to a new high I said the index would need to consolidate last week. I drew a hypothetical trendline and you can see that the index is too far away to be maintained and will need to go sideways and let the trendline catch up or better said let "time" catch up with the move up. Because the index stopped exactly at the resistance level at 1680 is a bit of a concern as that was an intermediate term resistance level. But the Pattern of Trend doesn't justify a top at this point and I'm still looking for this trend to run until March or April and follow one of the two scenarios I've drawn on this chart. Most world stock indexes are at critical points within their trends.


Keep in mind gold is in a vertical move up and looking at a daily chart from a computer screen can be very, very deceptive. The faster the movement the more the computer screen has to compress the picture to fit it onto the screen. So remember the pitch or momentum of this trend is almost vertical. You can see the index showed an exhaustion at the first high. Currently the market is struggling upward. It would be unusual to see a top that is not an exhaustion in this kind of trend. But this struggle can bring in a correction. This struggle is clear because each time the index breaks to new highs it immediately falls back below the break away point. The index also went 45 days low to low and is now 45 and 90 days from low and could bring in a small correction of some sort. A correction could only be viewed as a first-degree counter trend and likely three or four days. If the index can show a daily low on top of this "pattern of struggle" it would indicate a continuation of the vertical move up, but for now it is struggling a bit and looks like it is vulnerable to a small correction of some sort not to exceed 4 days down.


This is a monthly chart that has about 25 years of history. Make no mistake this is an exhaustive style of trend. Once the vertical nature of this trend is exhausted, this bull campaign will be complete and a bear campaign will follow. There is now a 5-wave structure on the daily chart so there is some short-term risk from wave structure but I still believe there is more "time" to run (a few more months) before this is complete. It could also reach a maximum of 5130, but make no mistake there is starting to develop some risk to this great bull campaign. This is exhausting and all surprises will likely be to the upside.

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