CNBC EUROPE
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LET?S LOOK AT THE FTSE 100 INDEX
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Last week I thought we could still see one more weak rally to 5549 but it only made it to 5536.˜ There is now a complete leg up.˜ The previous correction was 11 days and 160 points.˜ This move down has basically matched that move down in price at 166 points but is only down three days.˜ A ª retracement is marked and is the strong retracement value and would hold the trend in a strong position.˜ The more normal correction would be at 3/8 of the range up and would also match the previous largest correction of 285 points.˜ The index should get a bounce around the ª mark.˜ I need to see that bounce, as it could be a first-degree counter trend of 1 to 4 days and indicate a run to the August lows.˜
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LET?S LOOK AT THE S&P 500 INDEX WEEKLY CHART
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Last week the criteria for holding the uptrend intact were very clear.˜ It could not drop below the 50% mark.˜ It could not drop back into the little base or it would cease to be a base.˜ It needed an up day Monday or Friday would look like an exhaustion of the move up.˜ Monday was down and a reversal day of sort and Tuesday showed ?follow through? to the reversal.
The weekly chart has a very interesting ?pattern of trend.?˜˜ I have enclosed the trends since the bear market low.˜ You can see the first two trends were very fast and very strong. Trend number 3 was well defined with three waves and a correction of about 50% of the range.˜ The last drive up has been the weakest of all the drives up and could be the weakest drive to a new high I have seen in the past 40 years.˜ Our strategy was to look for a low the early part of this quarter as the 20 and 60 year cycles called for an exhaustion move up to complete the bull trend.˜ But the nature of this last trend up is putting that strategy into doubt. I am very concerned about the weakness of this last trend up.˜ I thought a sharp decline in oil would be the catalyst for the last move. We need to see this index hold here or there could be a problem with the intermediate term up trend. Next trading day should be up.˜ The CPI number is now the concern.˜ We will even start to hear about an old term called stagflation.˜˜ ˜˜˜˜˜˜˜˜˜˜˜
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LET?S LOOK AT CRUDE OIL DAILY
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Last week I said if crude could not go to a new low the first two days of the week it wouldn?t be going down without a run up first. A move down would also carry a high probability of breaking support since it would be the 4th test of that low.˜ As you can see the market went to a new low on Tuesday indicating lower prices.˜ Thursday gapped down and is showing a temporary exhaustion.˜ A counter trend rally should not exceed 4 trading days and should not see a lot of trading back above the horizontal line marking the previous support. There is a good chance the top is in this market.˜ This week could give that confirmation
So why are stocks behaving so poorly?˜ This possible change in trend in oil may get some recognition this week in stocks.˜˜˜˜˜˜˜˜˜˜˜˜
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CNBC ASIA
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LET?S LOOK AT THE HANG SENG INDEX
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Last week the index came up to the old high or ?obvious? resistance.˜ A move below the high of the 27th would indicate a problem for the trend (highlighted with a horizontal line).˜ A move to a new high that could hold the new high without breaking that level would look positive. That was our criteria for the week.˜ The index then showed the same small three-day ?false break? pattern that it did at the August high and broke the high of the 27th.˜ This picture is not very pretty.˜ There was a fast 8-day move down after the trend initially exhausted, no problem all quite normal.˜ Then the rally had a ?time setup? to indicate a test of the high, which it did.˜ But it had to continue the trend with strength or there would be a lot of time moving up and would leave a weak rally behind.˜ The high was 25 days from low and the index is now back to the low in a matter of days.˜ This type of move down after the high is tested is not a good sign.˜ This type of move down will usually need a base of some consequence before being able to move back up.˜ Or it also gives the probability of testing the December high.˜ Anytime there is a weak trend up that fails below a high.˜ It does represent a lot of risk to the long side of any market until that weak trend is resolved.˜ In this instance it was resolved to the downside.
A rally from this point could be a first-degree counter trend of one to four days.˜ Followed by a move down to test the price level of the December high.˜ Those are the probabilities. Following a weak trend up, one needs to be careful concerning the first rally.˜˜
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LET?S LOOK AT THE ASX 200 INDEX
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Last week I indicated the index had hit our long-term price objectives and we could look for a fast move down.˜ The move down started down after a very weak one-day rally or what I refer to as a failed rally below a high.˜ There should be a bounce up from the 1/3rd to 3/8th retracement level.˜ Friday?s low was 1/3rd and 3/8th is the August low.˜ The rally up from this support will tell me the magnitude of the move down.˜ Expect to see a low this week and a rally that will very likely be a counter trend rally and could be 7 to 11 days. If the rally is less than 3 days, it could represent a continuation of the fast move down.˜˜ If that rally proves to be a counter trend, which I believe is the strongest probability, then the index will go down directly to the June high. This week should find some support and start a counter trend rally.
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LET?S TAKE A QUICK LOOK AT THE NIKKEI
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Last week I said this was a classic ?blowoff trend? or exhaustion style of trend.˜ I said it would end with a gap up and gap down.˜ That is exactly what occurred last week.˜ We can assume this trend has exhausted and it will now take some time to consolidate the exhaustion trend up. There is no evidence the market will trend down from this exhaustion.˜ There is no evidence this exhaustion has reversed the intermediate term up trend. But it will be awhile before the market can launch another leg up.˜ It will need to consolidate this exhaustion.˜ It is only 3 days down but the exhaustion looks significant.˜˜˜˜˜˜˜˜˜˜˜˜˜˜˜˜˜˜
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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.