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CNBC Europe Squawkbox

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

Previously I indicated if this pattern was a counter trend rally and another leg down were to start it would be from two areas in time. The first was this week but we needed a price around 1396 to balance price and time and it only got to 1386. Or the more probable time window of April 22nd which fits the historic probabilities for countertrends in this exact circumstance. If the index is able to move up past the 22nd then the indications would be the rally is not a counter trend move up.

There are a number of items that can be read as bullish, the most significant was the consensus readings at the March low were the same as at the October 2002 low and could indicate a low of some significance. The forecast that is made up from the decennial pattern going back over 100 years called for a January or March low and a significant rally and even a possible positive year for 2008. But that is a probability the reality is how the index is trading. The index is back up to horizontal resistance and the last move down is a weak 3 day move down nothing to confirm the last high was an exhaustion of the move up. There is usually a period of distribution before moving down and that hasn't occurred so the 22nd along with being a measurement for a counter trend of intermediate term is also a cycle expiration and a period of distribution into that window would set up the run down. Again, if it can move past that time window the rally will not be a counter trend in a down trending market. In the short term if there is a rally today and a new low Monday it will look like it is trending down and could have completed the move up. But for now I am looking for a form of distribution or an exhaustion into the 22nd.

LET'S LOOK AT THE US DOLLAR INDEX WEEKLY CHART

Last week one of the viewers asked about the US Dollar and I indicated it could have found an exhaustion low. Trying to pick bottoms in markets that are capitulating down is the highest risk, lowest probability type of trading anyone can attempt and not something that anyone who cares for their money should consider. The Weekly Chart of the dollar index shows the chart in a panic move down that is indicated by the three descending trendlines and the large spacing between the previous lows and the rally highs.

NOW THE US DOLLAR DAILY CHART

Remember this is in a multi decade bear trend and goes from exhaustion lows to counter trend highs and back to new exhaustion lows. The ends of the exhaustion lows tend to be 90 calendar day moves down and this last low was 90 from the December high. But this could also be running the 90 block in time from the January high and sets up around the 22nd or even out to May 7th. There has been an attempt at a higher double bottom and is a possible base pattern but this could also simply be consolidating the last fast exhaustion style of trend down. Last year I indicated the index was going to 71 for low and just hit that level but could eventually see 65 to 66. Even if this is a low of some sort the only thing that could be anticipated is a rally of 90 calendar days or less. But one would want to see evidence the capitulation or exhaustion is complete and that would take another week at least. For the past two weeks I've been hearing advice to be short the Euro and long the Dollar too many times.

THE FOLLOWING IS A CHART HIGHLIGHTING SOME OF THE ANALYTICAL TECHNIQUES EXPLAINED IN THE E-BOOK AND DVD. THESE TECHNIQUES REPEAT OVER AND OVER AGAIN IN ALL MARKETS.

 

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