mclarenreport.com.au

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FTSE 100 INDEX

Last message I indicated the index would start the resumption of the trend on the 20^th and could run up to the 19^th of January. I don?t see any reason to change that forecast unless index drops below the low of the 20^th. If that drop occurs it will raise some serious questions about the trend. You can see how support came in at a high level after the three-day correction. That should carry this index further than just one week of advance. So further weakness does put some risk of seeing the index reverse its trend. The trading this week will be helpful and I?ll draw up a forecast for 2006 by next week.

S&P 500 INDEX

On the 16^th of December on my web service I laid out this exact scenario as a possibility and it is quite troubling. If you will recall we identified the exhaustion of the trend when it occurred as marked on the chart and I said the index would then consolidate. As long as the index consolidated below 1283 there was a risk of a top forming. The long-term probabilities from time cycles indicated there would be one more exhaustive move up to complete this bull campaign in the first quarter of 2006. But I have pointed out that is a probability and not a certainty, as there are no certainties in this business.

If you will look closely at the trading pattern since the exhaustion there has been a weak trend up. There have also been three tests of resistance and a failure. This failure left a 4 day rally (remember that time period can be a counter trend within a downtrend) that was a lower high and followed by a wide range day down and an extremely weak rally and another down move to test the previous high. The point being there is some evidence of trending down. This does not indicate the bull campaign is complete but it does present that scenario as a probability for the first time since 2002, primarily because this is occurring below 1283. Support is the obvious old high and holds the up trend intact followed by 1235. Then 1221, but trading below 1235 would be a concern for me and I will consider changing my forecast if that occurs. Let me emphasize if the index stabilizes here then my current concern will be for nothing and the index will have held a strong position. I still believe how the index goes into the 11^th or next Wednesday will be important.

Many time there are mechanical portfolio changes that create patterns of trading at the end of the year that are unrepresentative of the true nature of the market. That may be the scenario now but I have learned not to make excuses for the index. The pattern could be trending down or it could still be consolidating we?ll know by next week. I am still looking for one more exhaustive move up, but there is now something on the charts that present a bearish probability.

CNBC ASIA

LET?S LOOK AT THE HANG SENG DAILY CHART

Last message was on the 12^th and I said the index was at a low and should run up until the 26^th of December. The index has turned down with big gaps after the 26^th and is a bit disturbing. The index will likely need to consolidate the sharp move down at the end of the year. But after that multi-day consolidation occurs, if there is further weakness later in the week it will be significant because it may be setting up a lower high and that is not good for the trend this late in the bull campaign. My forecast has been for the index to keep its bull campaign until April. But that is a probability and the reality is there may be a lower high setting up. So All I can say now is be cautious this week and see if there is any follow through to the downside movement, as it could be a significant problem.

LET?S LOOK AT THE ALL ORDINARIES AUSTRALIAN INDEX

Last message was on the 12^th and I indicated the index was going to resume its bull campaign. My forecast has been to find top either around 19^th of January or out to Mid-March. At a minimum price at 4735 or a maximum price of around 4850. I see no reason to change the forecast and by Mid-January I should be able to make the exact call.

NOW LET?S LOOK AT THE NIKKEI DAILY CHART

Not much change here, the index remains in the exhaustion mode of trend. The last correction was two days and held the exhaustive leg of the trend intact. My forecast has been for the index could continue this exhaustion move up until Mid January. Once the index corrects back more than 4 days we can assume the trend will be complete and the next rally will fail. There will be a correction and a retracement of about 1/3^rd of the last advance and a sideways pattern will follow into April. At that point the trend will be over or there will be another leg up. I won?t know which scenario until I see the completion of this leg in January.