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Summary for Week Ending 6th February 2004
This week we saw the previous week dalliance with higher interest rates appear to evaporate. Monday saw the market jump out of the gates with an impressive move forwards. After a good move such as this Tuesdays inside day was perhaps understandable but we saw the market decline over Wednesday and Thursday in what appeared to be a corrective movement. At this point if there was anymore in it, I would have expected the second days decline to be well beyond the low of the previous Friday,, but the market held up well. This set up the move we saw on Friday, and we now have a higher swing low to go with the lower swing high.
Last week I made mention of the 33 point decline and its relationship to an earlier decline. This has obviously held until now, showing that Ganns concept of following previous ranges is more than a worthwhile exercise. Looking at the Friday movement we can see that the market is very keen to go upwards but less than interested in the short side of the market. As we should always look at the path of least resistance, we can see that the path of least resistance is to the upside at present. This also follows that sentiment is still bullish.
Looking at this weeks S&P chart, it is similar to the previous weeks as we have the cascading trend lines applied. Also the 33/32 point ranges are highlighted. I have also added the price range of the last decent rally, which comes out at 40 points. When we add this to last Fridays low we can see that this tops out just marginally above the 50% retracement level which has been on our charts for some weeks now. Again I have to say that this level is still of importance as it has not been breeched convincingly and is still seriously in play. We should also look at the number of bars spent going up and down. So far in the past week, the market can manage at best two days down without experiencing a significant rally. An increase in consecutive days down will be another trend changing signal to watch for, but until then we can only go with what the market is telling us, that being, it is not intent as of yet to slide backwards.
Looking at the DJIA, it is less impressive again, but we have similar swing patterns to go by. The level of resistance is yet to be breeched and as with last weeks chart we are close to a significant area but this is of little consequence until it is much closer.
Looking at the coming week, I would be expecting the rally to follow through into new territory. We saw a one day rally in the S&P virtually collect three days of declines so the sentiment appears obvious.
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