LET’S LOOK AT THE S&P 500 INDEX
The chart is the S&P 500 Index divided into 1/8th and 1/3rd and is still the best method of viewing price analysis. The index has corrected down to a ¼ retracement. Now a ¼ retracement is relatively small and therefore holds the uptrend in a strong position for the next advance. The normal correction during a bull campaign is 1/3 to 3/8 retracement. So the question is now was the move down a counter trend that is complete or is the rally a counter trend move that when complete could be followed by a move down to the 3/8 price level or 1146. If the index moves down to the ½ retracement it puts a lot of doubt into the strength of the next move up.
Keep in mind the picture of the last 6 days as we look at the next chart.
THIS CHART IS THE 1990 DECLINE
Notice the similar pattern and if this index does go lower it will be an indication of trending down leaving a counter trend up in its wake. Prior to 1990 all small or first degree counter trends were 3 or 4 days up and down in less or the same amount of time to a new low and resumption of the downtrend. Then in 1990 we started to see countertrends start to show a congestion or little two wave or thrusts up as can be seen in the chart. So a new low should put the index down to 1146 zone. I do not expect this style of decline but it was the best example of this style of counter trend.
NOW LET’S LOOK AT THE TIME FACTOR
The ideal completion of the bull campaign is early March at 180 days and 2 years from lows. Then 180 calendar days from the July low the first week in January, always a good time for top. Then a window of 90 to 99 days from the August low so a rally that eliminates this pattern as a counter trend can still run into a problem at the old high. We are assuming the next rally or leg up will be the last leg up in this bull trend.
LET’S LOOK AT A MONTHLY CHART
This is the 10 year cycle the index is following. There was a 5 year bull cycle up and now a 5 year bear cycle down. There is a 5 point broadening top in the process of forming and is a high probability pattern for top in this index. Once this broadening pattern is complete in January or March there will be a bear trend that will end around October 2012.
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.
