|
Summary for Week Ending 18th September 2004
A mixture of economic indicators saw the market swing erratically this week and manage to finish with a high. The pattern is still bullish although it does appear to be slowing down. Oil doesn't seem to be a factor anymore, and the wishy washy behavior this week in response to daily news shows the market is looking for a leading indicator, that is : the punters are nervous.
This week we saw the market trade to a new swing high following on from lasts weeks air-gap swing forwards. I mentioned last week that the previous swings were compressing, indicating weakness as well as the possibility of a 5 wave elliott count. Looking at the chart now we have a 7 wave set of swings, which is also a valid pattern, although not under the strict Elliott framework. The swing high we saw on Monday was of lesser magnitude than the previous swing ( 16 points vs 29 points) which is in keeping with the compression pattern. Friday saw a swing to a new high, so we are now in a 7 wave pattern and I would be expecting that this will be less than 16 points. When the market is in this mood the compression can always go in either direction so we look for other indicators that may support an expiry of the current trend.
The market as it stands in in 7 wave mode, which is near the upper limit of what we can expect a market to do. We can get more in a run but this is usually in parabolic shaped drives which end with a sudden capitulation. We don't have that customary parabolic shape with this drive and we are also not seeing any consolidation of any considerable dimension. As mentioned above, this can go two ways, and that is the market may be performing a rising consolidation. This is evidenced by a zig zag pattern where the market compresses but with higher swing highs and higher swing lows( the opposite for bear runs). This pattern is associated with very strong bullish movements, something I don't believe we are seeing at present, so I would expect that the near term outlook for the market is bearish. I should point out that unless we get a solid indicator, the pattern is still bullish.
Last week I mentioned the time of 21/22 Sept. This is coming up this week so it should be interesting to see what happens.
|
