Summary for Week Ending 7th June 2003

Another week where the markets displayed considerable resolve to ignore the ever present overhanging threats of global recessions etc and posted very strong gains running up to the proposed Friday COT date. Unlike the previous week, the action has been consistent with each rise being well consolidated, and very little evidence of resistance to the upswing until Fridays Gap open and eventual close in the red.

Looking at the week that was, the markets leap out of the starting gate strongly and maintained the performance for the session. Tuesdays saw the obligatory consolidation appear with a dull day, Wednesday again saw lots of heart and a very strong and impressive run forwards followed again on Thursday with a strong consolidation of the Wednesday move with a slight move to new highs. Friday, the day I was watching closely saw the markets bolt out at the open like it was on speed. There was a short time after the open where there was a brief attempt to hold the move but this evaporated and we saw the initial gains melt away at the day progressed, and the S&P managed to close below the previous days close. Not a good look ! Interestingly the DJIA managed to stay marginally above the previous days close.

Looking at the S&P on its own we can see that the market has had an incredible up from the 20th May low. The angle of the rise is also far sharper than the previous run of 31March to 16th May and is also indicative of a finalising movement. From the price perspective the Friday High of 1007 doesn't trigger anything on the radar and is a slight breakout through the upper parallel channel. If this is indeed a last gasp expiry then this is permissible from a purely technical perspective, but again is not what I would consider a strong signal. For the past few weeks I have been ignoring the DJIA, simply because the story there has been confused at best. Friday saw a slight breakout from the Aug 2002 high. The S&P in contrast is well beyond this point, so we can see how both markets have performed during this bullish phase. the Broader S&P has proved to be more enthusiastic whist the luggable DJIA has now only just shown the kind of support that we have been seeing in the S&P for a couple of weeks.

Looking closely at where we are standing at present we have a slight possible false break in the DJIA. The current bullish swing has been running for 86 days. the S&P has had a gapping open Breakout on the COT day of Friday only to finish poorly below the previous days close. We have seen the market react off the 144 cycle in the recent past and as such cannot be ignored... Yet ! On the volume front, Friday saw a biggish volume day, but certainly not the biggest ever. Taking this in context with the average volume of the past few weeks it is indeed noteworthy. If Friday was indeed the day of reckoning then we should see a break in the S&P of at least 42 points, the last being 37 and the previous before that being 42 so we want to see recent history beaten to see that sentiment has changed. From a time perspective, we had the Friday COT as an indicator ( yet to be confirmed ) Also the current run has lasted 86 days so a solid 90 day run would time out on Tuesday the 10th June and 90 solar degrees will time out on Thursday 12th June. Which cycle dominates, if any, will become apparent in the coming week.

From the Elliot perspective on the S&P we have a clear 5 wave count upwards. Wave one at 107 points, wave 3 at 105 points. Currently, wave 5 is 96 points. If the wave count is correct ( always a problem with Elliot ! ) we know that wave three is normally the longest wave but is never the shortest. Since we have 3 shorter that 1 we can assume that 5 must be shorter than 3 so the current level is still supported by this analysis. A move to new highs under this analysis is allowable but should it exceed the 105 point limit then the Elliot pattern gets trashed and we start again. So much to watch.. so many possibilities..

I have included the above simply to illustrate how easy it is to get enamored with the analysis and forgetting the underlying cause and effects. The markets will always do whatever it is they want to do. We can only apply templates and rules to make our decisions. The more templates and rules the more confused our analysis can become.

My advise as always is to keep it simple.. I will be..simply looking for confirmation.

A short note to the Australian Readers regarding the weeks Rene Rivkin Business. Personally I find it ludicrous that our corporate regulator managed to incarcerate Australia's best known Stock market player with a spurious charge of making a $350.00 insider trading profit, when the Wunderkind of Aussie businesses have spent years perfecting the art of looting of treasuries with unearned bonuses and exit plans. AMP, OneTel etc. Our Watchdog leads the burglars to the Silver but bails up the Postman....Its all very sad.