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Summary for Week Ending 24th October 2003
The market this week has finally given a solid signal that perhaps
the end of this bull run is nigh. From the lows of Oct 2002 to the current
high 15th Oct is 217 days and looking at the previous history, this is
the best the market has done since the bear market ensued following the
bursting of the tech bubble.
In the last report a couple of weeks ago, I outlined a bearish scenario,
with a very simple indicator of this scenario was wrong. Well, we got
the 'its wrong' signal early enough, and the market managed to squeeze
a few more points to the upside before again encountering upside resistance.
This time the market made a sharpish decline which was followed by a one
day rally on Tuesday. Volume here was average and the following three
days saw continued declines, each with increasing volume - a good indicator
that perhaps the sellers were getting enthusiastic. The primary issue
here is that we are in a bull market, and trying to pick tops and bottoms
is a dangerous and generally fruitless exercise, unless we come prepared.
Looking at the current shape of the market, we can see that we have had
a very impressive bull market, lately, however each impulse forwards has
been shrinking in dimension, indicative of a lessening of energy in the
system. We have seen this before and been trapped by this indicator in
the 30th Sept decline so caution is always paramount. Looking at the weekly
chart it all still looks bullish, but we cannot ignore the lower swing
high we got on Tuesday. Friday the markets took another tumble but appeared
top recover somewhat.
It is still very difficult to make a solid assumption based upon the facts
available. A rally up beyond Tuesdays high would be significant to the
upside. A secondary lower swing high, preferably below the 17th Oct low
would be very bearish and indicative of a very fast move pending. Of greatest
concern to me at present is the overall shape of the market. The 30th
Sept decline is out of sorts for a classic pattern with the low cutting
deeply into the preceding rally. If an upside rally is evident I would
expect another contraction in dimension, giving a rising triangle pattern
( which is always a good one to end major trends). Looking at the downside,
the 960-990 congestion area should provide the majority of support.
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