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Summary for Week Ending 8th August 2003
No news is exactly that - No News and when the markets have
been in this mood for this long, if there is nothing to think about then
the best plan of action is to do the obvious - Nothing. We saw a small
slide this week, but also a little rally as well just to balance things
off. The interest of course the touch near obvious support in the S&P.
Last week we were looking for the flat corrective pattern in the S&P500
to continue playing out and we weren't disappointed. Monday started with
a decline to the mid 960's where we were expecting support to come in.
Tuesday saw another play at the depths and Wednesday saw the market tickle
just below the primary support of the 1st July swing low. From there we
saw the market attempt a rise and Friday saw a nothing day. The market
was up, but not convincingly and volume for the day was the lowest we
have seen in some time, so not too many players are sure what to do at
present. This uncertainty is understandable as we have had this sideways
flat pattern extending for some time now. The bounce off the July 1st
low was predictable and any strong move through this point would have
been ominous. The question that is left of course is whether the rally
on Thursday and Friday was a new start, or just a counter trend movement.
We have been viewing the markets for the past few weeks from an Elliott
perspective, as this was the technique that was best at explaining what
we were seeing. The flat correction has terminated ( so far) at the predicted
levels, but the response has been weak. Going back a few weeks I mentioned
the possibility of applying the Double Top rule of the final decline terminating
at 100% below the terminus of the first leg down. This of course flies
in the face of what Elliott had to say, but we cannot ignore the rule
as it does have some use. If we ignore Elliott completely, and simply
look at what the market is doing, we can then make a new assumption that
the next target is following the 100% rule. We have no valid signal saying
the decline is over so we can simply look for where the next point can
lie. From the obvious point of view we are looking at the Dec 2002 high
of 954 and the Wave 4 of the lesser degree ( Elliott) of 912 on 20th May.
The 100% rule comes in at 909 points, so we have a smallish clustering
of price around the 910 mark. I have added a couple of Zero lines to this
weeks chart to highlight the current levels of support and resistance.
Looking now at the DJIA, we can see that although we have had a decline
for the week, we have not yet come close to the July 1 low. I have attached
a parallel channel to the chart this week as a simple indicator to the
pathway of the current trend.
We have the anticipated COT date of Aug 13 this coming week so it will
be worth keeping a close eye on. If we get a solid technical signal from
the S&P and the DJIA gives us a standard Elliott flat the we may be
back in business again. I will be planning into this date to see what
we get.
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