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Summary for Week Ending 29th August 2003
A positive week this week saw the markets make their way
back towards the recent highs. They aren't there just yet but they are
certainly close. With this inexorable crawl forward, a false break and
swift decline certainly looks possible but only time will bear out the
true intentions.
This week it is again worth looking at the S&P from an Elliott perspective.
We already know that we have a flat correction in place which is in all
possibility a wave 4 correction so we know that there is a wave 5 to come.
Since the market has been vacillating in recovering from the wave C of
the flat ( 6th Aug low). There has been a march forward but it has been
very slow and has at this point failed to cross over the July 14 high.
From a bullish perspective, it could be said that the 6th Aug was the
completion of the corrective wave and we are now in the beginnings of
the final assault or wave 5. This all looks good on paper except that
the market so far has shown very little enthusiasm for going forward and
the day ranges have been smaller than usual. Also, I would have expected
that the first wave of the final run would have breeched the old high
and corrected back. It hasn't, in fact it got close to the old high and
then fell away briefly. On the daily chart we now have our second higher
swing low in place so on purely technical grounds it all looks bullish.
From the bearish perspective, we still have the possibility of an Elliott
'Double Correction'. This is of the a-b-c-X-a-b-c variety. I have never
personally been a fan of this idea, but simply put, its an Elliott corrective
pattern that says that the correction isn't finished and we're going to
do some more! If this is the case then the 22nd Aug high is a good candidate
for the 'X' part of the pattern, If this is to unfold, the we are expecting
another 3 wave corrective pattern, which via the rule of alternation,
we know cannot be of a flat pattern, but most likely a standard zigzag
decline. This is of course all premised upon the idea that this will come
to pass.
So I have now put forward a case for both the defense and the prosecution,
so which one is real ? Good question, and it explains why I'm not trading
in the index options at present. Looking at the chart, there is certainly
no truly definable trend and anything is still possible. Bull and Bear
traps appear to be everywhere. the failure to strike new highs is worrying,
even though wi have a bullish swing pattern on the daily chart. Looking
at the weekly, this appear neither bullish or bearish at present, just
status quo.
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