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

Last week we looked at the weekly chart and how the forecast of a run to 1260 was developed. I also listed 10 situations that were historically similar in nature. If you looked those up you?d have seen they were all vertical moves up as this has been. This move is the epitome of a fast trend. The first consolidation consisted of two days of marginal higher highs and higher low to consolidate the fast move off the low. This was followed by a big thrust up and a consolidation that consisted of three inside days and couldn?t even show one day down before it took off again. The index closed on the high Friday and was also a time period for a high point of some sort. So we should see another form of consolidation within a day or two. Remember, historically there should be 7 weeks of trading above the old high before the move up becomes at risk of completing.

As long as we are on this chart. There is an old technique that says if you can draw three trendlines down from a high. When the third is broken, then trend may have changed. That is true of most time series of charts, this is a probability not a certainty. And is possibly another method of viewing Elliott Wave principles

LET?S TAKE OUR LAST LOOK AT CRUDE OIL for a while

I said "last look" because I believe the top is in for now. Last week I discussed the theory of "overbalance of price and time" which is applicable to "blowoff trends" and this bull campaign was a blowoff trend. The previous correction was 7.05 and this last correct is now 8.05 cents. The previous correction was 7 days and this one is now 15 days and thus, overbalanced the previous correction in both price and time. The significance of an overbalance like this is it indicates the trend is complete and rally should fail. This could create a trend in the other direction or a larger distribution pattern of some sort. Although, this does look like the current trend in oil is complete and will likely need quite a few months before it will consider a new uptrend.

Next week I?ll need to find another market to analyze - probably the currencies.

ASIA

LET?S LOOK AT THE DAILY HANG SENG INDEX

Since August we?ve been saying the index was going up into the 12^th (plus or + - 2 days) then we?d look for a high. This is a fast move up and Friday showed a large gap up. That could have exhausted the trend but further evidence would be needed to assume this trend is complete. Only amateurs sell into fast trends without evidence. Always remember that "time" as a function of analysis represents probabilities and the reality comes from the price movement. So we need to get some evidence over the next week. A big gap down that can?t get back into Friday?s range could represent an other island reversal as we saw at the previous low.

I?ve been mentioning this "broadening pattern" which is a classic technical pattern of distribution and a top. Many tops show extreme volatility and if you?ll look at the price action within the square I?ve drawn you?ll see a 5 point pattern - a high, a low, then a higher high, a lower low followed by a higher high and a top.

Now look at the current pattern, we can see the five point pattern but it is not as volatile as the January/February top last year and therefor not as reliable.

LET?S LOOK AT THE ASX 200 INDEX˜

Back in September I forecast this index would run up to the 15^th of October and correct 4 days, then exhaust up into the 14^th of November to end the trend. Usually, an index like this would need two or three months of distribution before changing trend - if a high occurs here. Blowoff trend may not need a distribution pattern before changing trends, but we need to assume the first decline will rally back for a test. The index did not hit the price objectives I had forecast, that is a bit troubling. But now we need to see if the index gives a reason to believe a top may be in place. Again, trying to make money by playing the short side of a massive bull campaign, is usually a painful exercise. So this week we look for evidence a top maybe in place.˜ The short term objective will likely be hit today.

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