Summary for Week Ending 11th January 2003

Following on from last week, looking at the DJIA, we had a burst forward on Monday and that appears to have exhausted the system for the rest of the week. Tuesday saw another attempt at forward motion, however Mondays high appears to have been an impediment and then Wednesday saw the first real decline that the markets have seen in 5 trading sessions. Looking at the speed of the ascent, I was expecting a second or third day of declines, however we instead got a lot of nothing for the next 2 days and the DJIA closing the week marginally ahead of Mondays close and the S&P 500 closing marginally below.

Looking at these two markets from the technical perspective, Tuesdays decline and Wednesdays subsequent rally, gave us the Higher Swing Low that we were looking for. In fact, Wednesdays rally did catch me by surprise as I was really expecting at least 2 days in decline and was looking to take a call on Wed close. The rally threw me a little and I decided to sit tight and wait. The worst case scenario was that Tue was a simple one day countertrend decline and the market would lift off and I would miss out on the action. As events would have it, the lift off did not occur and although the higher swing low is in, the higher swing high is not, and will not be until Mondays high is taken out. In the meantime, there is a possibility that a classic Elliot 3 wave corrective pattern is in play, although this is an outside chance and does leave the entry for longs at higher risk as this would come off a lower swing high. What is of most frustration is that we have been trading within the same price band ( S&P 867-954 and DJIA 8198-9043) since late October 2002 and been without a primary trend to hitch our wagons to. There have been a number of short term trading opportunities although without a trend in place these are high risk and only serve as entertainment for those who are bored. The action for the past 10 weeks certainly has me bored, but not to the point of swapping prudent decisions for rolling the dice.

So again we look ahead to see where the markets may take us. At this point it can really go either way. If we look at the 30 Deg cycle which came in of the 2nd Dec high then it has us looking at the 45 60 and 90 deg points off this high. 45 deg gives us the 16th Jan. Anniversary times are All Time High DJIA 14th Jan, Desert Storm 16th Jan (I think!). Looking backwards, mid Jan appears to be a popular time for a break and the escalation of the war rhetoric is certainly bring back memories of 1991. Whilst the markets appear loathe to take a position, then we can expect more of the same, that is ; Short runs followed by consolidations and general indifference. After so many years of high speed action in both directions, having patience appears to be a new skill that needs to be acquired. I will wait out this week as see what the action is coming into Wed-Fri. A sharp movement in either direction might lead to a valid turning point, preferably to the upside.


No Charts this week...Awaiting the COT this week.