Summary for Week Ending 11th May 2002

A remarkable week of high drama yet again, with a massive one day rally appearing out of nowhere on Wednesday. All three markets rallied to the first technical resistance levels (the previous swing highs), however action and most notably, Volume prior to this move indicated that is was a likely sucker play. News reports of Short covering etc overlooked the psychological state of the market at present, which is desperate to be long. The fact that a supposedly single news good report about a major tech stock sparked the movement, displays that the bulls will grasp any gossamer thread. Taking the contrarian point of view, the market should be in for further falls until these wannabe bulls have given up. The forecast COT is also approaching with action expected early this week, and sharp falls with high volume coming into these days should be a strong indicator of the effectiveness of the call.
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Swing Charts

DJIA The action this week as spun the Daily swing into a bear neutral pattern. On the weekly bar chart, we have seen successive lower lows for the previous 8 weeks, all of which have been on rising cumulative volume, although there has been no blow out in these figures. A swing to a new lower low, below last weeks rally point, might be enough to flush out the system. The weekly swing is in definite bear mode with the initial swing down at 613 points and the current swing down at 688 points.

S&P500 More of the same again on the Daily swings, with the current downward pattern still firmly entrenched. The weekly pattern is still in its second swing down running at 84 points in comparison to the previous 72 point swing down.

NASDAQ A continuation of the Downwards pattern this week, even taking into account the recent monster rally. All indications so far are that the run was hollow, and prices have been retreating as expected. Similar to the DOW, a break to new lows might accelerate the downward push and go some way towards finishing off the current bear run.

Charts
This weeks chart again has the 12x1 line running from the high, showing the reluctance of the market to penetrate this line. The COT for the end of April was short lived, as expected and we await movement early this week, to either confirm or deny the continuation of the trend. It is worth noting that at this point, neither of the three markets have made news lows since Wednesday rally, and whilst appearing hollow in form, the evaporation of the movement could have been expected to be swifter than it has been so far.

The S&P Chart this week has Standard retracement levels Highlighted as well as the Range Square from the initial push down. As we approach the COT dates, the primary support levels will be worth watching. A bounce of the Range Square levels, would indicate a relationship between both downward waves, and should it occur, should be taken as a strong indicator.

The NASDAQ chart this week very interesting as we have approached the wave equality that was first mentioned on April 6th (see chart). The 75% line ( 1x1.33) was touched early on in the week and then we had the big rally. Also of interest is the cluster of support indicated around this area. If this current downswing is an Elliott wave 2 of a new bull market, then we would expect the decline to be deep, with the psychological overhang of the crash still present.

DJIA See Chart

S&P 500 See Chart

NASDAQ See Chart