Summary for Week Ending 19th March 2005
The market has so far played out to my preferred scenario, sinking slowly to the area of obvious support around the Feb low level.
After the previous Fridays wide range outside day, Monday and Tuesday was spent playing around this wide range whilst deciding what to do. By Wednesday, the bears where back in control once more and we saw the market push down towards the low as highlighted as Scenario (1) in last weeks report, As far as excitement goes, there wasn't too much in the past week and as such there is very little to report. On Friday the market sunk slightly below the area of obvious support (Feb 22 low) before rallying back on the day. This is not unexpected behavior, as the slight push below the line would have the 'range breakout' punters dumping long and piling in short and once this emotion is expended, there is no one left to sell... and as we all know, if there are no sellers, then prices must rise. As the price does begin to rise, there is always some jittery short covering that will also provide some amplifying momentum.
Judging from last weeks report we are in Scenario (1) at present so I would be expecting the market to rally a little at this point. We are currently in 9 days of decline, so a corresponding 9 day rally to a lower high may be in order to complete the pattern. It should be remembered of course that this is pure speculation, and the market can also simply plummet from where it is right now ( in fact it can do all sorts of things!), but the purpose of constructing scenarios is to allow us to be prepared to act should the scenario break apart.
Looking at the All Ords, the previous week we saw a 2 day decline of a much shortened rally, further indicating compression. The market spent most of this week crawling back up to a new high, but it is less than convincing when compared to the exuberant jumping from the blocks we are accustomed to seeing. Still worth keeping a very close what on this.
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