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Summary for Week Ending 11th September 2004
This week we saw the market take the expected breather (sort of). I was expecting the market to take a rest and we did not see any real gains for the week, but more on this later. Coming up to the anniversary of Sept 11, I have noticed that the market does not appear as apprehensive as it has done previously. Last week I mentioned Tuesday as a date to watch and we did get a new swing high on this date, although it was only short lived.
Looking at the week that was, again I mentioned last week that we were heading to some consolidation. Whilst it has not been what most would have expected, looking at the chart it can be seen that the market has traded the same price for the past 6 trading days, so there is a hint of a slowdown. In this shortened week, we can see from this weeks chart that the market has successfully created a swing 4 points above the previous swing high, which is a hint of strength in the direction of the trend. We also had a one day counter trend movement before this was take out in one day on Friday to new highs, again a sign of strength.
When looking at the movement as a whole from the August low, the first swing forwards was 49 points and the second swing forwards was 29 points, this is a compression pattern that signals, that although the charts patterns may be signaling strength, there is a contrary indicator saying that the level of strength in declining rapidly over time. This sort of analysis is not always foolproof but it is supported by some Elliott based analysis which says that the 3rd wave can never be the shortest wave. If the high on Tuesday was the terminus of wave three, then we can then assume that wave 5 ( the last wave under Elliott ) can be no longer than 29 points. This is of course predicated on the wave count being correct, which is always the major failing in Elliott based analysis, but it does provide a handy framework when forecasting into the hard right edge.
Just a quick mention on time. Sept 21/22 marks the equinox, which has been a useful date in the past. Projecting backwards from this date there are two major time frames ( 90 and 182 days) which come in with some support. These are also marked on this weeks chart. Interestingly, this crosses the top trend in line with the current bullish trend.
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