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Summary for Week Ending 13th November 2004
A slight nudge on interest rates and a falling Oil price saw the market finish the week with a strong boost into clear territory. As it stands at present, international news such as the death of Yasser and the Iraq war appears to be having no impact whatsoever on events at present, and with the market moving as fast as it is at the moment, there is little wonder that anyone is stopping to take a breathe and look backwards for even a moment. Whist this mentality remains, we can expect more of the same, until at some point when some essence of sanity may prevail.
Last week I mentioned that until we see a correction we wont be able to gauge the true strength of the rally. Some form of consolidation was expected this week, and as mentioned last week as well, it was very weak indeed. Essentially we saw the market take a slight rest from Monday to Wednesday, but the market was simply marking time with some wishy washy behavior during the trading session, kind of like a driver caught at a red light... you have to stop even if you don't want to, just waiting for a green light to take off again. And that is what we saw on Thursday when the market broke upwards once again and this was further consolidated on Friday with strong gains taking the market to a close above the Jan 2002 area of resistance. If we look at the chart we can see that the consolidation that occurred early in the week, managed to stay above the March 2004 high and the market was able to lift off once again.
When looking for likely end points there are a number of methods for determining likely points of resistance. One of Gann's lesser known methods is to take the previous correction, multiply it by 2 and add this distance to the base of the correction. This is evidenced on this weeks chart where we can see that the previous correction was 102 points. Multiplying this by two we get 204 points and adding this to the August low of 1061 we get a target price of 1263. There is a cluster of price resistance levels just below this price, which may set up for a false break finish although this a well and truly speculative at this point.
In the coming week, I would expect much of the same. We will need a larger correction than what we have seen so far and we are very overdue for it. As mentioned last week, Nov 17 is the Price Time square of 769 days from the Oct 2002 low. So we'll see what that brings in.
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