Summary for Week Ending 26th March 2005
A tiny rise in interest rates appears to be all that is required to spook investors. The fact that high Oil prices have a greater capacity to destroy an economy just goes to show that if you are looking for logic, financial markets is the last place you should be looking.
Lat week we were discussing the likelihood of the set scenario playing itself out, that is the market taking a rally before heading south again. As we have seen this week this did not play out, and the alternate scenario played out whereby the market held its ground for almost 5 days ( it traded the same price for 5 bars ) until the 5th day which saw the market sink dramatically. Looking at this weeks chart we can see the market is headed towards the next area of 'obvious' support, that being the Jan low, and we can also see the market is currently trading very close to the trend line from the March 2003 low.
As we can also see on this weeks chart, there is a cluster of support areas hovering around the abovementioned point. We have a 50% retracement level from one range and a 38.2% retracement level from another . Compounding this we have the obvious support level and the trend line also offering support, so we are left with watching and waiting to see if the market will make any observance of these levels. Looking briefly into time, we can see that the last major decline took up 21 calendar days, and Monday 28th marks the 21st Calendar day of this decline. We saw the market attempt a rally on Friday only to close on its lows ( who wants to be long going into the Holiday weekend !?) so should we get an exhaustion style movement on Monday this may market the end of this decline in the short term and we will see the market make a rally of some strength. Remember its the strength of the exhaustion that goes towards the strength of the corresponding rally ( think of a rubber band stretched to the point of breaking ). Conversely, a weak finish would imply a weak counter response.
Regarding the All Ords, last week I mentioned that it was compressing and behaving very weakly, and should be watched very closely. As it turned out, the market had 1 gasp left in it on Monday and then sunk like a stone for the rest of the week, trading through a number of logical and obvious support levels like a knife through butter. As it stands, things do not look too good as the decline has now surpassed the largest decline in this rally since the Nov 2003 decline. If we surpass this then from a technical perspective ( forget everything else ) we have a primary marker that the great Aussie stock market rally is over and we can expect a period of either consolidation or bearishness.
Just as a curiosity... In 1987 the market reached its peak in 1987 on 21st September. This was the Sept Equinox. As it stands the market has hit its high on March 21st...the March Equinox ! Does this mean it was predicatble...no, not from this point of view, but it does go to serve why Gann considered the Solstice and Equinox dates so important.
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