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Summary for Week Ending 13th March 2004
There was plenty of action this week, with the markets deciding to take an aggressive stance on the short side only to have this attitude amplified on Thursday, with the disgraceful bombings in Spain, sending a shudder throughout world markets. The S&P started a serious slide and then fell like a hot knife through butter coming into the close on Thursday, and we saw a break through the 54 point decline level.
Looking at the S&P chart we can see that the markets were already in severe decline mode before the events in Spain, which only served to provide conviction to those playing the short side as well as gouge into whatever feeling of security that investors had at the time. We can see that the market sailed through a number of previous swing lows (almost as if they werent there) which after the previous months behavior certainly came as a surprise. The decline itself was only really signaled by the false break last week, and a weak time range (50%), which is only apparent on a weekly chart.
Following on from the NASDAQ last week, we had a good price-time square. It has also provided a valuable lesson in that no matter how well things appear to be working out, at all times its the market action that matters. We had a bounce off the Feb 24 low confirming the PT square and everything was looking good. We had four days down, and after 8 trading sessions the market still had not recovered the previous high. We were at new lows in 2 days, displaying where the path of least resistance is currently lying with the NASDAQ
Hopefully the best thing that this weeks activity has done is knock the market out is its recent malaise and give us something to do. When its not going up or down, its just boring, and as we saw this week, when it breaks out, there is certainly plenty of excitement. When this market begins to rally, expect considerable short interest as it climbs, and there will be a considerable body of investors looking to sell the rally and hoping to ride another wave of panic selling. This is were the bulls and the bears will be fighting it out and the bulls will be looking to squeeze the shorts and the bears will be simply hoping to stay in the game. The following weeks should be interesting to watch.
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