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Summary for Week Ending 29th May 2004
After a quiet start on Monday, the Market decided to lift off. The
basing formation I mentioned last week where we had the two higher lows
in place, did indeed provide a strong platform for the market to move
off from. The market has moved beyond the 1107 level and we now have a
tightening of the swing pattern as the 'air' gap between downside swings
has now been closed. The week managed to work out quite well, but Friday showed the attention was more on the long weekend than on more important things like Oil, Iraq etc.
Looking at how this market how shaped up so far, we now have a strong
move to the upside, going towrads confirmng that we have a strong low in
place, and also going towards confirming the 3 wave Elliot zigzag
corrective pattern. The performance during the week has been impressive
enough to indicate that there is some intent behind the buying, and I'm
sure there are some relieved bulls out there who held on during all the
bearishness of the last 2 months. Resistance to the upside should be
located at the primary retracement levels and most notable at the 50/61.8%
level, although I noticed that there has been little or no reaction so
far.
Looking ahead, the principal target is of course a new high beyond the
previous on 6th April and should this be cleared easily then the next obvious target is the March high. Should the market make it to this level, I will be interested in how long it takes to get there. If we do not see new
highs within the timeframe of the last decline ( 6th April - 12 May - 36 days ) then I would be
expecting another lower high around an equal time period. Patterns such as 50/61.8%
retracement in 100% of the time are usually very good, but as we are
already passed this point, the time reaction becomes weaker. The worst
possible scenario here is for the markets to track sideways, simply
failing to trend strongly and generating a lot of chop, which is great
for option sellers but poor territory for trend traders using swing
patterns. We had a good strong week this week with barely any sign of resting to consolidate the move, so a little corrective behavior is to be expected in the coming week.
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