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Summary for Week Ending 20th February 2004
Last week I was commenting on the markets current propensity to recoil when a new high is reached and this week was again without exception. With the market having a day off on Monday, we saw a new high reached quickly on Tuesday and it appeared to hold well on the close. It was a solid performance so the Inside day on Wednesday was not a surprise, although a stronger finish would have been a useful indicator for Thursday which was the 90 day date I was looking at. We had an outside day ( not really an outside reversal as these are associated with new highs in this instance) but the very weak close was a good indicator that Friday was going to be less than impressive, which it was. Not too much to mention except that the downside continued in the morning and the market managed a rally of sorts in the afternoon.
Looking at Tuesdays high we were only 3 points away from the 1160 level which has been on the charts for some time now. It is almost as if the market is teasing the analysts by playing on this range but not doing too much that would provide a solid signal. Looking at the past 3 weeks, we can see that the market has essentially been stopped in its tracks, and the rising volume of the past 3 weeks may be a signal of distribution, an idea that is in line with the markets behavior ie swift corrections upon new highs, perhaps indicating that the rallies are being sold.
Looking at the S&P chart we can see that Fridays decline broke a weak bullish swing pattern on the 1 bar swing chart. We are also approaching one of the supporting trend lines so that will be worth watching. Again, of course we are looking at the 33/34 point decline level as a supporting indicator as we have yet to see a solid lower swing high develop. It is interesting though that we do have a solid lower swing high in the S&P 100 and the NASDAQ id clearly in decline mode, so it is worthwhile watching these other markets as the following weeks progress. There is no visible news event on the horizon which may provide a shock (as most shocks are surprises !!!! ) so its just a matter of wait and see. The current shape of the S&P 500 is lending itself to a soft 'rollover' pattern but again, time will tell.
On the DJIA chart this week, I replaced the Gann 75% with the Fibonacci 76.4% retracement level. Interestingly, the high was 10795 and the level is 10797.
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