Summary for Week Ending 5th July 2003

The week shortened by the Friday holiday and the half day Thursday left little time for the reversal on Tuesday to work itself out. The spiking move down was sudden and swift on the open, but the rest of the day saw all this recovered and more.

The action we saw on Thursday was significant in that the market stopped on the 61.8% retracement level and then started to pull back. Unfortunately it was a half day so I'm less inclined to trust it. Looking at this from a larger perspective, we were looking for the decline to exceed the 42 point level in the S&P. We now have this as the markets spiked into Tuesday making the distance 53 points, so we now have our first principal signal that Gann highlighted as an indicator of a possible change in trend. The market has gone up for two days, and is yet to score a new high past the June 17 level. A lower top at this point would be obviously bearish and would provide the second principal signal for a change in trend as well as Gann's favorite place to short.

On the flip side, the brief break of the low parallel channel in the S&P is also an 'sometimes' indicator of an Elliot wave 4 which would indicate that there is one more push forward (wave 5) in this cycle. It is scenarios such as these that make trading financial markets such a challenging pursuit. To make a decision I usually look at what is happening right now, and set aside the future possibilities ( such as the Elliot possibilities ). What is happening now is a setup for a lower top and that's what I will be looking for.

Just the S&P chart this week, highlighting the channels an the retracement levels. I have also overlaid a 2 bar Gann swing chart which highlights the strength of the upside run. Two days down from the current level without breaking the old high will setup up a strong lower top which we haven't seen since the Mar 12 low.