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Summary for Week Ending 24th July 2004
We had a week of remarkable finance news with Microsoft announcing that
it is handing back some if its retained earning to shareholders. 75
billion was the number bandied about and its difficult not to take notice
when the number is that large. Aside from this news there was nothing
else that really got any attention and whilst it did provide a brief
moment of hope for those on the long side, the effect only really lasted
a day, before everyone got back to the business of selling.
Its been two weeks since the last report where I was discussing the
strength of the counter trend rallies to gauge how the market is
performing. In this time we have seen the market try and rally and at
best making it to about 3 days before succumbing to the downwards
pressure. This week we saw a continuation of this behavior with
Wednesday displaying a huge outside day which finished very weak. Based
on the size of this movement, we saw some attempt at a rally on Thursday
but still well within the bounds of of the previous days movement.
Looking at the chart we can see that the market stopped at the 75%
retracement level where it found some support. Volume was certainly impressive on Wednesday
but not what you would consider to be of a capitulation level. If we are
keeping with the pattern of a controlled and orderly decline then we
could have expected a 1-3 day counter trend movement against the Wednesday
decline except we saw Thursday and Friday. continue to push towards the May lows, which are the next logical level of support. This was highlighted in a Chart published on the 3rd July report.
In the coming week I would be expecting that the market will resume its
decline. We have seen a 5 wave movement to this level at present and a 7
- 9 wave movement is not out of the question.From an Elliott wave
respective a 5 wave count should be the end of it but as we know, it all
depends on how you count them, so it is good as a guide, but you wouldn't
bet the ranch on it. Picking tops and bottoms can be fun when you are
correct, but I prefer to look for evidence that a trend is wreakening,and
as of writing this, there is no real evidence in at the moment.
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