LET’S LOOK AT THE S&P 500 DAILY CHART
First let me say there is an old saying in this business “he who doesn’t change is mind will have no change to mind.” I have changed my mind. The previous target of 1115 or getting to 3/8 of the major range has changed; I said if the index had to re-test the low it would indicate a much weaker counter trend pattern of trend. The fact that the low had to be retested and now may come back for another test indicates this as a weak consolidation. So the index will be closer to the 1937 style of counter trend and likely only get marginally above the last high to 1024 or only 1//4 of the range. If it does start bouncing off the low the 4 test of support carries a high probability of going through support. The next leg could end the bear trend. The length of time could remain the same at 60 or 90 calendar days for the consolidation and if I am wrong it will be 45 calendar days to start a move down or near Nov 24th or the low won’t hold and the trend will continue. This has been a weaker rally than I had anticipated. The major problem is if this current run down tests the low because the tests are very close together and since the fourth test will go through support it is not leaving much time to rally and come back for a fourth test.
Only moving up to 3/8 of the last leg down keeps this leg intact and the trading since the October low has not been able to show any characteristics of trending upward. Again the normal intermediate counter trend is to see a V bottom and rally for 30 days and then distribute at a high level and resume the down trend in 60 or 90 days. This has been a strong pattern for low with 2 days up and 9 days down to successfully test the low but that style of counter trend that tests the lows usually doesn’t exceed ¼ of the major range down at 1024. Considering the magnitude of the October decline this has been a weak rally so far. I do have a cycle for low this weekend.
LET’S LOOK AT THE FTSE and this might help explain intermediate term counter trends.
The two previous counter trends are highlighted and are “normal” in their form. They showed higher lows without a test of the low. The July August counter trend was extremely weak and is why the down trend that followed was so strong. If this comes back and tests the low then there will be another very weak pattern developing. If it can rally back to the highs without testing the low it can still take on the form that is “normal.” Two very important things to keep in mind--each leg of a bear trend is faster than the previous until it exhausts into completion. And if the index can show a normal counter trend then there is a chance for a successful test or just a marginal break of the October low. If it is weak then a new leg down is likely. This coming weekend has a strong cycle for low if the index moves down into Friday or Monday.
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.
