FIRST, LET'S TAKE A LOOK AT A CRUDE OIL DAILY CHART
Intermediate counter trends or rallies against a major down trend have very similar characteristics no matter the market. They do not test the low; the retracement of the move down is 1/3 to 3/8. The time runs approximately 90 calendar days but can run out to 144 days on rare occasions. There are three tests of the upper level of resistance followed by a lower high or two lower highs. This is followed by a fast move down to break the lows.
This move has done everything but the third test. But there is now in place a possible lower double top with a 5 day struggle up into the last lower high. If this takes off down now and moves through the last low in a few days it could indicate the completion of a counter trend. I have been waiting for a clear third test by maybe in this instance it may not be necessary. I am still hoping for a third test but you may want to watch this for a few days. This could be a catalyst for a further spike up in stock indexes.
NOW LET'S LOOK AT THE GOLD WEEKLY CHART
You can see there was a huge exhaustion move March through May of 2006. This is the same pattern of trending that is now going on in the stock indexes. Gold then had a fast reversal down and a big 3 week retracement. This was followed by a 12 week struggle down to successfully test the low that started the 3 week rally. The market is now up 28 weeks and was a weak trend up. I said weak because the retracements of each 7 week rally have been large and the last rally has been weaker than the previous two rallies. A big three thrust structure below a spike high can be a large distribution pattern. I would prefer to see a marginal new high to complete the pattern, but this is something to keep an eye on for the next few weeks.
LET'S LOOK AT THE S&P 500 INDEX DAILY CHART
There have been 3 down days with the last day reversing back up after running down. If it cannot extend that reversal back up today it will likely make a run down to successfully test the "obvious" old high. If it can move higher it will be doing so from a 3 day move down which does keep the fast trend intact. It still looks like this is the start of some sort of congestion or consolidation before the final push into the June 12th high. If we look at previous exhaustion legs of similar circumstances they run 15% to 22% and that yields a minimum move to 1568, so there is still more of this fast trend between now and June.