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Stock Market: CNBC Report


This is a continuous contract. The index continues to struggle against the "obvious" April/May highs of last year. The tendency for this pattern is one of distribution before a move down. There has been no evidence of trending down. Let me make that clear there is no evidence of trending. Just a lot of sideways struggle and upside testing. If it cannot move out of this pattern now with the other stock indexes staring to trend there is an intermediate term problem.


Last week we looked at the DAX and CAC 40 and I explained that the current pattern was a" running congestion" and is always followed by a fast movement. That movement could be in either direction but after three thrusts the index was going to start the fast move last week. You can see the fast trend is up in the DAX. This is now an exhaustive phase of this trend and will not correct back more than 4 days until the trend is complete. Or better said when it corrects more than 4 days the trend is complete. The DAX should not pull back into that congestion or the uptrend is likely complete.


We had a Gann forecast the index would go up into this time period with a top between 1450 and 1458, the index hit 1449 on Friday. If price can move through this level or past the 90+ calendar day" time," the next level in price is 1484 and the next time is not until the 28th of February. There is resistance today from price and time but with momentum this strong the resistance could create a multi day counter trend down and not a change in trend.


This capitulating trend down was interrupted by a large two day rally that momentarily moved above the last low and gave stock traders a reprieve. When a market is in an exhaustion style of trend down, as this is, moving above a low is usually an indication the trend is slowing. This is a bit close to the high to see that pattern, so what occurs the next two or three days is very important. This market should continue down and not test that reversal day high. That rally was only 2 days and bonds should see a new swing low this week or something is wrong with the downtrend. It is still possible to see a scary move down that could slow the advance in stocks. The best timing I had is for a March first low.


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