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Summary for Week Ending 6th August 2004
The strength on display last week was short lived with Monday managing to hold on but the increase in the Oil price seems to be the straw that broke the camels back on this one. The last gasp we saw on Monday was indeed that and we have since witnessed the most impressive drive downwards since March this year.
Looking closer at the week, I was expecting the market to hold up a little better and run with the model that I have been proposing for the past few weeks. Looking at the rally that ended on Monday we can see that it was just counter trend in nature and the 'sucker play' I mentioned last week has come to fruition ( Isn't it always the case!). Whilst we did see some strength on Monday, this was dissipated by Tuesday and the rest of the week was strongly down. Noting the level of volume in the movements, it would indicate that its not over just yet as we haven't seen any capitulation style volume numbers. The market has traded through the level of 'obvious' support at 1076, indicating that the bounce we saw last week was simply a test at the level, and was indeed a sucker play to get the longs in. A cut through 1076 would have put a lot of stops into play as well, so this would have also exacerbated the situation.
Looking ahead the coming week may see some consolidation of this movement. We have 5 waves down so far and there are a number of Elliott related places that highlight various levels of support. My favorite at this point is the reliable 50% level at 966. This is of course a long way from where we are now, at least another 10% decline. I don't expect it to reach it next week, but it is the next major target for support. The 38.2 level of 1012 may also come into play, but it is volume that will be worth watching as a confirming indicator that the slump is slowing, or may even over. Until then I will be watching the counter trend rallies to see if there is also any other indicators present in there as well.
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