Summary for Week Ending 1st February 2003

After last week s spectacular ride South, we had a week of essentially sideways action following the Monday dropoff. News events certainly dominated this week in the minds of many with the UN weapons report , the Presidential address and AOL all managing to cram lots into such a small time frame.

Looking at the week in review, we had another strong down day on Monday which was consolidated on Tuesday with an inside day. This was in turn followed with an unconvincing Outside day on Wednesday. Just to make thing more confusing this was followed by yet another inside day on Thursday and on Friday we finished the week with a down day, although the close was above the previous days close, and thus reported a positive price move. Looking at the chart, this kind of activity is not altogether unexpected, as the previous sudden decline had to be consolidated in some shape and form. A normal reaction would be expected to be a reactive drive upwards towards the 50-61% level and then a continuation, ie a 2-4 day countertrend rally. Looking at the intra day patterns for the DJIA there appears to be more of a battle between buyers and sellers and as such we get the sideways movement.

Again last week I mentioned that I was looking for a reactive movement to the decline and we are still without a common pattern. Nonetheless I took a small short position late on Friday and will be very impatient with it. Without a clear pattern emerging this week, the trade can be considered high risk and hence the small outlay.

Looking ahead for the coming week, perhaps the strength in the Friday close may be enough to give us an upday on Monday, but with the current international situation coming to an obvious head, it is becoming ever more difficult to make a plain assumption. If Friday is a minor COT day then we had an 18 day decline. A 50% retracement is around the 8400 mark (DJIA) and a 50% range in time is nine days which would indicate a 10th Feb date.

Until the world knows for certain whether war is on or off, this uncertainty will be reflected in the markets and as such, trading windows should be kept very narrow.

Note. There is no way of telling if the Space Shuttle Columbia breakup will have any effect on Mondays opening, although any bearishness will have some of this event attributed to it.

DJIA See Chart

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