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CNBC PowerLunch Europe

FIRST LET'S LOOK AT T-BONDS

Last week T-Bonds ended the capitulation move at the "obvious" support. They should now consolidate the fast move down before heading to 95. This consolidation should take some time, could be as short as three weeks but more than likely as long as 3 to 4 months. I need to see some further price action to forecast when the next move down will occur.

NOW LET'S LOOK AT CRUDE OIL

When crude came down to the "obvious" support in May I indicated if it could rally more than 4 days it was likely to go up and test the previous high. An intermediate term counter trend will usually have three tests of a resistance or three drives against resistance. If crude is going to trend down this is the resistance that is significant. 80% of counter trend rallies stop at 3/8 retracement and that was the price of the spike high at the end of March. The technical pattern of trending the next few weeks is very important and will determine if crude is going to resume the down trend.

THE US DOLLAR COULD POSSIBLY CHANGE TREND-this is a Monthly chart

Whenever markets struggle they are setting up for a fast move. Notice in 1995 how the index struggled up (where I've drawn an arrow) and that struggle was resolved to the upside. That fast move was resulted in another struggle that was resolved to the downside. Now the index is struggling down with 12 months up and 18 months down and there are some cycles to indicate a possible low. At this point I'm not confident how this struggling trend down will be resolved as it could test the lows or produce a higher low but it is time to pay attention and a fast trend will materialize soon.

NOW LET'S LOOK AT THE S&P 500 INDEX

The move up in May was weak and weak moves normally are followed by fast moves down. This move down was only 4 days and only 53 points and both those numbers keep the up trend intact. My forecast was for the index to test the "obvious" support of the February high and I could be wrong. Since the index didn't hit the normal exhaustion percentage on this run up it could show another spike up. I still believe this is starting a larger distribution pattern, but a spike above the last high to get bullish consensus up to extreme levels and then correct down to the forecast level is a probability with only 4 days down. Remember, one to four days is the normal counter trend time period for a fast trend. If there is a high in this time frame at this level it needs to be in the next few days or a further spike is probable.

 

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