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Summary for Week Ending 10th July 2004
After a couple of weeks of displaying a weak intent, we finally saw the
market tip its hand this week, and put on a excellent display of
bearishness. The consolidation that we saw last Friday did not last
long, although from the previous weeks action I half expected there to
be some attempt at rallying once more but this was not to be. A solid
slump after the Monday holiday set the tone for the week with a breakout
of the current malaise.
Looking closer at the week, Monday was a holiday, and as it turned
out, simply provided an extra day for the longs to sit tight. Tuesday
morning opened with a thump to the downside with a strong down
although there was an attempt to recover towards the end of the day. If
we look at this weeks chart we can see that this may have been a
reaction to the support level from the trend line from the March 2003 low. Wednesday saw a mid-sized inside day against
the Tuesday slump, and this was not unexpected seeing how much action we
have seen in the past 5 trading days in comparison to the previous 3
weeks and can also be seen as a reaction against the previously
mentioned support level. Following the inside day on Wednesday, the
market had an opportunity to put in an up day against the inside bar
which would have gone further in confirming the possibility of the
strength of the support levels, but this was not to be with Thursday
also showing a downside and showing little regard for the Trend line support and closing below this line. Friday gave us another short range inside day also closing below the support line, leaving us with a chart pattern that appears to be creeping south. Not a good omen if you are long.
Looking ahead we can see that there is little sign of strength in the
market at present and there is a real intent to head south. What is not
clear is if we will trend downwards or if we will see the market chop
its way down to the next level of support. As we see it now, we have a
lower swing high from last Wednesday and the market has driven south
quite hard since then, without any real evidence of a reprieve. If we do
get a rally, I will be looking to see if the market is able to chew into
the the range of the previous swing low, if not then we have a 'air-gap'
pattern to the downside, which is usually indicative of a market about
to seriously drive south. If we do get a rally then looking at how many
days it can sustain this will also be important as well as the number
of days it takes to wipe out the counter trend rally, as with all of
these basic tape reading signals, is an excellent marker for what the
psychological strength of the market truly is.
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