FTSE 100
Last week I indicated the sideways pattern had run its course and there needed to be an up week or the pattern could represent a problem for the trend. We got the up week, now it needs to continue and not leave a little “false break” pattern behind. Most fast moves come from breaking to new highs that fail to follow through. The low of the one day counter trend needs to hold to keep a strong trend. It can be broken but needs to be recovered the next day or the index will be starting to show risks of a false break pattern.
DAX:
First the DAX and there are now two little thrusts that broke to new highs and were turned back. The moves down were only three or four days, which is the normal counter trend time period. You will see this type congestion within strong trends often. This congestion is resolved one of two ways:
- There is either a third thrust that can’t hold the previous high and after that third failure the index will show a very sharp move down or possibly a change in trend.
- Or rather than a third failure the index will show a low above or on top of the previous high and go into a vertical move up to exhaust the trend.
You can also see the last low on Friday was well above the trendline and therefore a very important low as support has come in at a high level and could resolve this congestion to the upside with a vertical move up. The CAC 40 is in the same position so this rally in the European indexes is extremely important for this trend.
S&P 500 INDEX
Last week we were looking for a possible correction between
1450 and 1458 in price. There was a 90 calendar day increment that appeared to be resistance in time so we were looking for a correction of some sort. Whether this was going to get legs to the downside is in doubt since
this index is more likely to exhaust into a high than limp into it as this has been doing. As you can see we did get the correction, if there is a real problem with the trend today will be another wide range day. Because the low to the move down stopped at “obvious” support it could show a small range day with Tuesday as a down day if there is a short term problem with the trend. Any other price action but those scenarios likely means a test of the high but I still believe the bond market is important for stocks at this stage.
The risk in the S&P is 56 points down.
NASDAQ
On my website I been saying
this is an extremely bullish pattern of trend. So much so I was having a difficult time believing it is real. The consolidation was very tight and actually showed a space between the “obvious” old high and the current support. One of the things that have been
missing from a topping pattern was a rush of speculation and this could be representing that missing component. This index has the same cycles as the S&P
either a high by Wednesday or out to the first of February. Price for high if this week is 2516 through 2525 and if the 1st of February price top then price could be 2563, 2581, 2616 to 2638 or
even 2700 . If there is no “false break” pattern by Wednesday then we can assume an exhaustion or a vertical move and the higher price levels listed.
HANG SENG
January 22 2007: Last week I said the index had found a low and would rally. If the rally could exceed four days there was a probability of resuming the uptrend. You can see the low was an island so there is an exhaustion at the low and an exhaustion at the low. The index is now up 5 trading days and
there is resistance in “time” (from time cycles)
the end of the week from Wednesday through Friday, then
Feb 2nd and
March 10th through 14th.
If the index can move up past Friday then a top will come in either the 2nd of February or Mid-March for an end to the uptrend.
US T-BOND MARKET
Notice the rally has been 7 trading days and could still be a counter trend as long as it stayed less than 12 days. It could also indicate a fast trend down if it turned down prior to the price low of December 28 and 29 and both of those criteria are met. The rally was also a 3/8th retracement and that keeps the downtrend intact. We have discussed many times how that 3/8 retracement level is the highest probability for a counter trend rally. It is possible to see another marginal new high to give a little 5 wave structure up and a higher probability to the pattern completing as a counter trend rally. Bonds could still show a fast trend down this week or next as long as the criteria I just laid out remains intact. The next important time period appears to be the
first of March.
