LET’S LOOK AT THE S&P 500 DAILY CHART

We know the July low was an exhaustion of some sort and likely ended the current leg down because of the consensus readings and the “pattern of trend.”  I don’t believe the last low ended the bear campaign.  If I am correct then there are three probabilities from this location.  The first is the index will turn down the next two days and marginally break the July low and come back up with a pattern of trend similar to what has just occurred creating a larger pattern of distribution.  The second is the index will run up into the 14^th and turn down dropping sharply but again bouncing back up creating a distribution pattern that will be a struggling trend and consolidate this trend before the final leg down.  And third, the index will struggle up from here and not exceed the price of 1340 and turn down to resume the bear campaign and the last leg down.  Either way it looks like were in for a consolidation of some sort.  A downward tilting struggling consolidation that gets resolved to the downside with a panic move down to end the bear trend or a continuation of the struggling move up not exceeding 1340.  Moving above that level puts some doubt into the bear campaign still being intact.  The last leg down could start the mid to end of September.

This is very typical of bear campaigns.  They all exhaust into lows and consolidate the fast trend down with a rally of some sort.  A really strong bear trend will consolidate with a struggling move down that eventually breaks away to the downside.  But either way this now needs some form of consolidation.  Consensus was at an extreme and there is a short term pattern for an exhaustion. 

LET’S LOOK AT THE US DOLLAR INDEX

During July I indicated this would be a very important rally for the dollar.  If it were going to break out to the upside of this sideways consolidation this would be the rally.  If it were going to turn down and break the lows and resume the bear campaign it would come at the conclusion or completion of this rally.  I said there were two dates that could end the rally.  The last one was around August 8^th +- a few days.  This has been a fast move up with only one day moves against the trend so a breakout is not out of the question.  This will likely show an exhaustion in the next few days and then we’ll see if it can show any ability to trend higher or show a lower high and indicate the uptrend is complete.  If it can move past this time window there is a chance a low of some magnitude is in place.  Yes it seems almost impossible to justify a further move up by the fundamentals but an exhaustion style of trend is a probability from this pattern of trend.  

The commodities and metals still look like important tops are in place.  Keep in mind that these markets will exhaust into their next lows, likely with big gaps down.  Then there will be a counter trend rally that will likely be multi month.                  

Disclaimer: All the reports and content in the entire McLaren Report web site (including this report) are for educational purposes only and do not constitute trading advice nor an invitation to buy or sell securities. The views are the personal views of the author. Before acting on any of the ideas expressed, the reader should seek professional advice to determine the suitability in view of his or her personal circumstances.