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Summary for Week Ending 12th December 2003
Last week I mentioned that things were starting to slow
down coming into the holiday season and that perhaps players may be trying
to anticipate the January run and get set early. This is still on the
cards, but the reasons can never be confirmed, but it still stands out
as a likely scenario. The much anticipated 1068 area has seen plenty of
traffic through it to the point of no longer being of any significance,
This past week we saw the market follow down from the previous weeks bearishness,
but as I said last week, there is no real evidence of any intention to
get on with it. the decline marker to watch is still 54/55 points with
the S&P and we got nowhere near it this week. By Wednesday the S&P
was down 21 points before regaining some courage and recovering the complete
decline in just 2 days. This was impressive against what was a 5 day decline,
so from this you can take a picture of which side the sentiment is riding.
If we look at the S&P we can see that since the August low, the market
has managed to hard fought advance of some 12%. There have been 4 impulses
forwards since Aug 6 and we are currently within the 5th. Each run forwards
has been of a lesser degree than the previous and each retracement has
also followed in this vein. In essence we have a market that has been
compressing for some time now, and this is a behavior that can only last
for so long. the 1068 level was a good spot to try breaking this behavior
but to no avail. Also from a technical perspective, we have 2 possible
scenarios be on the lookout for. If the market can be said to be squeezing
to the upside then this behavior can end in two ways. the market can suddenly
jump out to the upside ( a possibility looking more likely ) or the compression
absorbs all the upside energy and the market suddenly collapses. A typical
each-way bet provided by technical analysis that really helps no one.
What we do know is that on the downside a 54/55 point move would be ominous.
On the upside, a break out above the upper trend would also be significant.
Whilst things are like this it is very difficult to play and its just
a matter of exercising patience until things work themselves out.
Looking at the DJIA, all the big news was the break above 10,000. This
is in itself significant however the market has been washing through this
level up and down since 2000, but is does make good headlines for the
financial press. Looking at this weeks DJIA chart (weekly), we can see
that the market is very close to the 61.8% retracement level. If this
is in play we shall see this week.
I am expecting that there will be a greater concentration
of the fast approaching Santa season than on the markets. If we get a
break either way, keep an eye on the volume to see if its real or if its
just boredom that got out of hand.
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