Summary for Week Ending 12th June 2004

After last weeks flirtation with consolidation, we did see the expected short term explosion to the upside that I was expecting. Monday started the week with a flourish rocketing forwards as if there was nothing wrong in the world. The oil picture didn't seem to be playing to much of a part this week and the death of R Reagan seemed to take precedence in the news. Following on from this event, the week has been shortened to just 4 trading days with markets closed on Friday.

Looking at the week that was, we saw a very strong performance on Monday followed by a slower day on Tuesday, which was not to be unexpected. Wednesday we saw the correction for the counter trend and Thursday was very slow with the market trading within a thin range but still countertrend. Since looking at the chart we can see that Thursday is a slight down day leaving us with a two day correction to the rally (so far). If this was indicative of strength I would have expected to be at or very close to a new high on Thursday, but the Regan memorial may have put a dampener on things so its difficult to make a judgment on this at present and we will need another full uninterrupted trading session to pick the sentiment.

Following on from the above, we can see that the market made a 2 day correction, which has so far managed to hold above the previous weeks corrective behavior. This is another 'air-gap' in the swing pattern which is a signal of underlying strength, hence I would have looked to see if Thursday preformed strongly. Due to the domestic news situation I will wait till Mondays open to see how this unfolds. From a time perspective we are approaching the June 17 date of time equality for the last 2-3 months trading ranges. I would be looking to see the market breech the new high before the 36 day range is complete. If we are at range equality on the day then we would be looking at a high probability double top formation which would be indicative of short term bearishness. Any failure to rally and trend strongly and we could be in for a period of sideways action ( read boring !).

In the coming week I will be looking at Monday to see how strongly the market performs. If we get a strong rush to the June 18 date the we will also have a good signal for a possible change in trend. My preferred scenario is for the market to maintain its long march forwards, but with a keen eye on external influences to economic health ( eg Oil)

Charts

S&P 500 See Chart

DJIA See Chart