Summary for Week Ending 4th September 2004

There may have been some enthusiasm this week with the price of Oil perhaps providing some impetus, but I think this will lessen as an influence unless we get some dramatic movements. This is usually the case when the punters get bored with one external indicator and start looking for something else to provide a correlated excuse for market movements. In reality we all know that markets move because markets move but, like religion we need something to hang on to. If you believe in these correlations or not it is always worthwhile keeping track of what pundits and commentators are looking at since if you get enough believers you will get a self fulfilling prophesy. For the past few weeks its been Oil, and there is nothing on the horizon that looks capable of usurping its influence.

Looking at the week that was, I mentioned last week that we were heading to some consolidation. We had a marker with the lowering volume saying that there were less participants heading north and we had approached some technical resistance. Monday and Tuesday provided this consolidation, and history has now shown that that was all there was in it. Just two days of correction prior to resuming the run upwards. The market managed to recover to new highs for the cycle in less that 2 days, thus providing an indicator of underlying strength and the rest of the week showed that the previous level of technical resistance around the 1110 level was just a phantom.

This week its a little harder to work out what is ahead as the market has already played its hand. We do know that this recovery is not sustainable in the short term and it MUST take a breather at some point. The regulation resistance levels are again on this weeks chart as well as the declining parallel trend lines. A few weeks ago I highlighted the 31st as a possible change in trend. In actuality it simply highlighted the end of the 2 day counter trend movement we saw this week. Looking at this weeks chart I have highlighted the time frames for the various swings that have occurred of this corrective movement. We are 21 days into this move and 25 will be 50% which gives us Tuesday as a date to watch.

Charts

S&P 500 See Chart