Summary for Week Ending 8th March 2003

Interesting patterns with the week begriming with an open high and closing low and ending with a lower open and a higher close. News items where mostly mixed, and the open letter from Warren Buffett also blamed for some of the bearishness. For those who did not get to read it, I recommend it as he does have some very pertinent things to say about our global financial system.

Last week I was looking towards both Monday and Friday to provide possible COT dates. With the mix of news items, and the overhang of the war with Iraq, the primary signal for Monday was a start of hostilities, however this was not an option, and as I mentioned, we would be left to look for technical indicators. Bearing in mind that Monday was a significant 'time' day, the formation of an outside reversal was probably as good as it was going to get, allowing for the possibility of a short position with the stop being the high for the day. This analysis was confirmed on Tuesday, Wednesday and Thursday. Of note with this middle week action was although the charts kept recording good sized red bars ( down days ) the closes were all within close proximity. Looking at the DJIA, logical support was the 25th Feb. low which was taken out on Tuesday and then the Feb. 13th low which was taken out on early on Friday. The point to note is that there is yet to be a close below the Feb. 13th low in the DJIA. In Contrast, the S&P 500 managed to briefly sneak below the Feb. 25th low on Friday, but has yet to seriously threaten the Feb. 13th low. Seeing as we had a good entry on Mondays COT, the issue was what to do with Friday. Pre-opening trading in futures indicated a weak open and the markets duly followed suit and opened lower, briefly trading downwards and then spent the rest of the day marching forward. If Trading was allowed to go past the close, it was conceivable that we would have an outside reversal on the upside, which would have confirmed the COT for Friday. As it was the action was bullish, but will require better forward momentum to prove a good confirmation. The other problem I have with it is that Mondays COT was in the direction of the underlying trend, and the Friday date was against it. Also, volume was not a factor in confirming any exhaustion move for the Friday rally.

So, after all of the above, I managed to get short on the Monday COT as the date coupled with the Bar formation was too hard to resist. My problem now lies with the Friday COT. There was a possibility of exiting on the Friday open, however I have decided to stay in, banking on the possibilities of a 1-2 day counter trend rally early next week and then a resumption of Southerly intent. If indeed, Friday eventuated as a primary COT, then I will have to look more closely at my exit strategies, as my entries are generally very good. .... Time will tell.

Of interest in the coming week is the 12th-13 March. Should the week begin with a counter trend rally then Wednesday would fit in with a 3 day response, else another valid pattern has a 1 day reversal on Monday followed by 3 days down into Thursday. With the Iraq business drawing to a close, and the Date of the 17th being widely touted as the 'line in the sand', my expectation is for more of the wild fluctuations to continue. In essence the markets are struggling with the uncertainty of war occurring. Once it starts, the next concern will be how long it takes. If its quick as the pundits are forecasting then this could be seen as good. If it drags out, then this would take on a more ominous tone. Either way, the general shape of the market itself should provide a reliable indicator of future intent, its just a matter of ignoring the noise and reading the signals correctly.

No Charts this week. Nothng pertinent to display.