Expert Chart Analysis for Beginners

Shares City - S&P500 Chart Analysis for Beginners by an Expert

Bill McLaren was on CNBC yesterday with his chart analysis of where the markets are going. If you want to know who Bill McLaren is check out his website McLaren Report - he has an excellent reputation – and he also makes it very simple - so here goes, all the opinions are Bill McLaren's.

Talking about the S&P500 he says that back in May we saw a false break top which he had forecasted would represent the end of an intermediate bounce back rally in a bear trend, i.e. the trend is still down but there was a bounce which has now ended.

He also said that in a down trend, any rally in the index would not be more than 4 days until we see a low. Rallies have been 3 days in duration. This, he say, is the way markets behave in a trend.

Forget about anything complicated - trends are the “Name of this Game.” If an index is trending strongly any rallies against the trend only last 1 to 4 days – that’s how simple it is !

He said the index needed to come back and test the lows of January/March. When he says ‘test’ he means stop marginally above the low or marginally below it. Once the low has been tested there will be a rally of 7 to 11 trading days after which the index will fall back and re-test the lows. If the low holds this time round then the index will transition into a 2-month sideways move which he says will be choppy. If instead of bouncing of the low it starts to trend below it, then 1180 could be the next target. He expects the end to the current move down will be around 3rd July (5 trading days away), which is when he expects to see an 11 day rally.

The price level for the next low is difficult to predict but he expects the downward trendline to be broken thus leading to a spike down to a capitulation low although this won’t be as large as the January spike. The low could be anywhere between 1296 and 1234 and he says 1276 is ‘interesting’. (Today 26 June 11 a.m. NY Time - the S&P500 has already put in a low at 1296 – down 26).

He said IF Tuesday was a low (and it was) that would be bearish and any rally would last 7 trading days only after which it would make a strong run back down to marginally below the March low (1257).

All fascinating stuff. So, if I have understood him correctly - around 3rd July we should get a 7 trading day rally after which the markets will fall back to their March lows or slightly below.

Bill McLaren
Chart Analyis