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Summary for Week Ending 28th August 2004
We saw some softening in the price of oil this week which perhaps provided some relief for punters and may have contributed to some of the rises this week. When taken in a wider context this is of course a little nonsensical when we saw market rises last week when the price of Oil was on the gallop. When looking for correlations to support market move conjectures, it is a difficult exercise when we see markets behave as they have done in the past two weeks. We did see some continuation of the bullish sentiment of the previous week, and this may have simply been an overflow of the previous weeks enthusiasm.
Looking at the week a little closer we can see that as mentioned we began the week well, with another rise on Monday. This was followed on Tuesday with a slight decline, and market the first decline in this run. Surprisingly it only lasted a day when on Wednesday we saw another movement upwards which was also followed up on Thursday and Friday. Ordinarily we would be looking at the 1 day counter trend decline (Tuesday) being taken out again within a day as a signal of strength. however in this instance we have to look at the accompanying volume. Looking closely at this weeks chart we can see that on Thursday and Friday the market managed to record new highs for the swing, yet the volume has declined precipitously, indicating that there are a lot less punters interested in trying to push this market forwards. Whist this is not an 'in the bag' indicator', it is a good one to signal caution. It is also worth noting that there are plenty of others out there who would also be watching this, so it can be a self fulfilling prophesy.
Whist we wait for this to sort itself out, I am expecting some consolidation to come in. The market has had a very good run upwards, and managed to clear the previous major swing high (Aug 2). Volume is saying that this has run out of steam for the moment and so it should take a breather as energy is rebuilt into the system. This will also allow for sentiment to also work itself out which may provide an indicator if we are still in a bear market or we are witnessing the beginning of a new change in trend. When we see this bullish run come off, we will be able to see how it recovers. If the recovery is strong, and we see volume coming in ( not dissipating) then we can begin to make some solid assumptions, but until then we are in bear mode with a weak reactive rally apparently out of energy,
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