Summary for Week Ending 12th April 2003

The biggest news this week is the apparent evaporation of primary resistance in the Iraq war. This is in itself a reason for honest relief on all sides as the world can rest a little easier knowing that the prospect of appalling carnage has been averted and we can all turn our focus to other, more productive matters. Of most interest this week is the fact that the markets in general treated this news with a collective yawn, and went looking for inspiration elsewhere....and didn't find it.

Last week I said that I was looking at the 6th and the 12th as possible dates with my preference for the 12th being of some use. As seems to happen when one publishes such things, I picked the wrong one, and the date to watch turned out to be Monday, although this was not really evident until the last half hour before the close. The reversal day that was Monday was confirmed on Tuesday and we had follow through on Wednesday and Thursday. I was short the DJIA but got out of my Puts near the lows on Thursday. My reasons for exiting were simple. Looking at the chart we had a lower double top formation, and this coupled with a 180 deg COT date on Monday, so things should be bearish. If the market is bearish is goes down, and generally goes down with some enthusiasm. The market during Tuesday- Wednesday displayed a distinct lack of resolve in either direction, which was simply eating into my options with expiry looming next week. Its was easier to get out with a small profit that wait and see if I get clobbered by a train next week. Looking at the DJIA chart, we really haven't had a decent continuous move since the July 2002 lows, and this one is not shaping up as one that will break the groove.

With the war ending and the cleanup to begin, there is little or no news that should have a direct influence on the market as a whole, although announcements by companies winning lucrative Iraq contracts will do well, the overall market itself is still hostage to wider economic forces, and these still look unpromising, even after the diversion of the Iraq war.

Looking ahead to the coming week, I am not expecting too much as we head to the Easter weekend, and I would believe that perhaps punters will be looking for a reason for a good time after the last 3-4 weeks of round the clock war coverage. The only possible COT date is around the 19th April (Sat) however the 21st April ( 30 solar deg from Mar equinox) perhaps shows more promise.

From a purely technical perspective, I would expect things to be mixed. Looking at both the S&P and the DJIA, we can see that the DJIA formed a lower double top this week, however the S&P did make it to a higher swing high, so in this respect, the signal of direction and strength is mixed, and I would expect this to follow through to market action. From a Newtonian perspective, the longer that markets behave a certain way, the longer one can expect them to behave in this way. In other words, the so called 'law of averages' does not apply to financial markets. The longer a trend is in place, the greater the confidence can be ascribed to it continuing. Since July Oct 2002, the market has essentially traded sideways, and until we have something that 'tilts' the machine, I would expect this behavior to continue. Bear in mind that as of writing, even a war has failed to provide the required impetus.

So we finished the week with a higher swing low, however with this market, it is difficult to get excited. I'm waitingto see how this unfolds.