Summary for Week Ending 23rd April 2005
After last weeks entertainment, this week things were much more reserved. Essentially we saw consolidation for the week, which in itself is not uncommon since we had such sharp movements recorded in the previous week. Last week I mentioned that the market was poised on a NON-OBVIOUS support level, and this failed to hold past the previous Friday and was breeched on Monday. Last week I also said it was worth watching the 45-49 time range. As it stands now the market stopped on Wednesday which is 44 days, although I'm not convinced that we have seen the end of this. Looking at the wave counts we have 3 clear cut waves making up 2 drives down and an intermediate counter trend retracement. Under Elliott, a 3 wave decline is a valid pattern, however I prefer to see 5 waves (at least) before I become convinced that a drive may be slowing. Remember the more waves that you see, the close you are to termination. If we look at the scenario that there may be one more wave to go down before we see a rally, for a little while at least, then we can look at this weeks chart. I have drawn the price ranges for the current decline, showing the waves of 65 points. If we extend the current push to 65 points as well we can see that it lines up with a total range of 102 points, which was the range of the decline from March to August 2004. A curiosity.
In the longer term we can make the assumption that the March high was the top of a wave 5 in an Elliott based 5 wave sequence. Under Elliott, a correction of this dimension would see the market drop down to the area of the wave 4 terminus, in this case that would be the August 2004 lows, but don't expect it to be there within the next week. Depending upon when and how this current decline ends, we could be looking at a period of congestion that could take up to 60-90 days before resuming the decline, which would give a complete 3 wave decline down to the 1060 level. But this is while off yet.
Looking at the All Ords we can see that we came very close to wave equality. This week did see some strength after Mondays follow-through of the New York close of the previous week. We did see a 1 day decline recovered on Friday, although this too was unconvincing. If we have put in a low, be it intermediate or not, I would expect to see the low re-tested before we see some kind of recovery. It should also be noted that I would expect that this recovery will be a true bear market rally, that will suck in all the mad punters looking for a buck at any price... but judgment day will come soon enough ....
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