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Summary for Week Ending 10th October 2003
There is very little that stands out this week except the
market action on Thursday which saw a leap forward into the white space
only to spend the rest of the session eating into the good fortune.
Last week I mentioned that a double top would not be a good thing to see
and that a false break would be of greater interest. Well so far it looks
like a false break is in after the fore mentioned Thursday run. If we
look at this a little closer there is a scenario which can play out. From
a time perspective I was looking at the 10th, but if the Thursday high
holds then I was only a day out. Looking at the S&P chart we had a
severe break from the 18th to the 30th of Sept. This decline was both
swift and unbroken by any counter trend rallies. Since the 30th the market
has rallied just beyond the previous swing high giving us ( at this point
) the possibility of a false break, so we can now play further with this
scenario. Assuming that the Elliott style 5 wave advance was complete
on 18th Sept then we are due for a correction, the magnitude of which
is to the wave of the lesser degree. In this case expectations would carry
to the terminus of the previous wave 4 Flat correction which terminated
around the 960 area.
If we assume that the coming correction will be simple ( as opposed to
complex) then a basic 3 wave decline pattern would eventuate. If we extend
the initial decline ( 18th-30th ) by 50% - 61.8% we can see that we are
back into the realm of the terminus of the previous decline. Of course
the above is all premised on the current state of play being a false break.
Looking at volume, we really don't have any confirmation there. the action
of friday was more of a consolidation and I would have been happier with
a continuation of the bearishness that we saw for most of Thursday. We
would see confirmation with the establishment of a lower swing high, and
if its on, we will see one form simply because we saw no counter trend
rally on the Initial decline. This is sort of playing around with Elliott's
rule of alternation. A swing to new highs would push the above bear scenario
out the window and we would again be looking at the upside targets mentioned
in the past few weeks. A decline on Monday / Tuesday followed by a weak
rally to a lower high would be an excellent setup. Time will tell.
The DJIA chart this week is a weekly simply highlighting the retracement
levels. The S&P chart has the Range square from the initial decline
highlighting the range extensions near the Wave 4 lows.
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