Summary for Week Ending 15th January 2005
Its been a few weeks since the last report back in December and a lot has certainly happened. The compression pattern that was forming in the S&P failed to break to the upside and instead initiated a very swift and devastating decline. The price of oil has moved a little and the awaited 'January effect' has certainly failed to materialise as yet..
Late last year I was running with a scenario that would see the market take a rush up towards the 1260 level around the 23 January, that date being the 90 day mark for this particular cycle. This does not look like happening at present with the market struggling to get out of the mire that its in at the moment. Looking at the chart we can see that there has been some sort of consolidation since the initial decline, yet we can see that there was a rally on the 10th Jan but it only lasted one day before continuing the decline. There has been little evidence of strength, and this sliding consoldiation pattern is one that can be expected to precede a major thump downwards. The essence of this is simple... everytime there is an attempt to go forwards it is defated. After a few of these attempts, everyone who was looking long suddenly starts looking short and everyones a seller. When this happens, the effects are very sudden and very deadly. It can mark the end of a downwards movement, however this is more dependent upon volume.
The points to watch is the extent of the previous decline, being 52 points. So far we have not seen this yet, so there is some hope, but any extension of the decline past the 52 point dimension mark should point to a change in attitude for the market as a whole. If we do recover from this decline within the 52 point range, I would be expecting the market to drift around for a while till its works itself out and the troops can marshall for another assault at going forwards.
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