Summary for Week Ending 3rd May 2003

Much of the same as last week, with the painful march forward continuing this week. There was no shell shock news to report this week, so the markets have proceeded in their current mood. The Iraq war was officially called off this week with a very emphatic 1 - nil victory to the Allied forces, although the crowds in the terraces are having difficulty in expressing their appreciation...

Looking at the action this week, we have had a repetition of the 2-3 day rise followed by the 1-2 day decline, with each rise making it to a slightly higher high and each low managing to stay marginally above the previous swing low. For the average swing trader this is appears to be easy work, but the closeness of the swings bears out the psychological risk that is inherent in markets that compress in this fashion. Taking Options is possible, and with volatility almost half what it was 2 months ago and still showing no sign of halting that decline, it further erodes the time value in the straight Option play. There are plays to take advantage of this situation but I leave it to the reader to research these on their own account. Just out of interest I have attached the VIX (Volatility Index) chart this week.

Looking towards the week ahead, its difficult to see anything different happening, so more of the same is the likely call. Volume has been of little assistance at present with intra week variations highlighting the highs and lows, but there has yet to appear a killer day or days that would indicate a termination of the current upwards trend.


The DJIA chart is simplistic. simply highlighting the range that we have been trading in since Dec 2002. The Current movement is a rising 'slideways' pattern, which under pure technical terms always has 2 possible outcomes. Looking at the current shape of the DJIA a burst to the upside looks more obvious than a precipitous exhaustive decline. The burst out may be what leads to the false break on the upside. The S&P 500 chart highlights the Square 153/154 and the recent forward price ranges. the 33% (green) highlights FRidays push up, but its validity is in question until next week.

It may be worth noting that there have been a number of false breaks over the past 2 years and it may be worth betting on a false break than against it. This is of course in concert with other technical indicators,