Summary for Week Ending 6th December 2002

The week started with a bang on Monday morning heading towards the long awaited August Highs.....and that was it. If you blinked you missed it. The downward track was set with Mondays Outside reversal and the mood was accelerated with the UAL debt problems, and a general feeling of resignation seemed to take over for the rest of the week.

Looking closer, Monday and Friday were the days to watch. Monday had the Outside reversal and Friday also declined to new lows, however it did manage to close above the previous days close, and record a slight increase so perhaps there is an essence of strength that may return next week. Looking at this technically, the decline which lasted 4 days so far has cut into the previous swing highs which under normal terms may put us on a more bearish heading. Looking at the movement from an overall perspective since 28th Oct, it has been slowly creeping forward and as such, we have not had a 'natural' rally where swings have been cleared. Instead we have had essentially what you would expect with a sideways market except with a slight elevation attached. From a standard analysis perspective, this makes thing difficult as normal triggers are difficult to apply, and gauging a major turning point is also fraught with danger. So, the question is ..

What are we looking for ?

Since the upward swing movements are not shrinking, we know that the market is not compressing. What would be expected is a breakout to the upside out of the channel and with this time of year, such a movement has a high probability, although it should be noted that this would possibly be an expiration movement and I am not inclined to take a punt on what might be the last wave forward. The next possibility is that Mondays minor break to the upside was this movement and that we are now heading south. If this is correct then the signals will be self evident : A lower swing High would be a good place to take some Puts as it allows for Stops to be held very close. Further declines below the Nov 13th low would be very unhealthy at this stage so the market is delicately poised. At present I am on the sidelines as the movements for the past 2 months have offered little in the risk/reward matrix. I know the above appears like a bet each way, but this is the state of the market and as such...if in doubt ..Stay Out. I'm far more interested in seeing if the Christmas turning point shapes up. Until then, unless there is a clear cut opportunity, I will be saving my ammunition.

Charts

DJIA A simple chart this week highlighting the rising channel and the upper trend line. I have also highlighted a time range which is one of the time based indicators pointing to the christmas period.

S&P500 Similar to the DJIA, a simple chart highlighting the twin rising parallel channel and the upper trend line (which is a long, long way away)

NASDAQ The NASDAQ has been behaving in a normal trend fashion and as such basic technical indicators such as the price retracements are evident. This market doesn't lead, so if things go 'pear shaped' in the other two markets, you can expect this market to get hammered. Until then, simply following the trend and watching the swings is all that is required.

DJIA See Chart

S&P 500 See Chart

NASDAQ See Chart