Summary for Week Ending 29th January 2005
On last weeks chart I had a line running horizontally from the March 2004 high as a likely area of support, this being from one of Gann's tenets of old highs become areas of support in the future. The market did hold up on this line and managed to spend the week rallying or at least, trying to.
Looking a little closer we can see the market dropped down on Monday to hit the line and then started the weeks rally. If we look at the chart from the start of the decline we can count there were 4 days in decline from the 1196 high. From the low on Monday the market rallied for the next 3 days, at which point things were in trouble. After three days the best that could be offered was 14 points, this being against a 4 day decline of 32 points. When we look at the markets in this way we can easily make an assumption as to where the path of least resistance lies. If we count the waves in decline from the Jan 3rd high we can count that we are now in the 5th wave down, which is generally the last one before we can expect a decent rally. We could see 7 -11 waves in all, but I prefer to initially stick with a general expectation of 5.
If we are in the last wave down then the issue is where that could terminate. I would stay with the standard retracement levels as well as watch the Oct 2004 high as the next likely stopping point..if the market continues with its decline. As it stands at the moment its doing everything to be convincing that it wants to go down. Rally's are weak and declines are absorbing the range of the counter trend rally's very quickly.
Looking ahead I will be watching if this move accelerates or if we are simply going to see it melt slowly.
As an update on the All Ords here in Australia I have produced a chart showing what's has been happening. Last week I mentioned that its been dullsville since Xmas, but just when you feel like nodding off it takes off like a bandit and hits a new high. Last year I was looking at Jan 23 ( 90 days) as a likely end date to the rally. Seeing as this did not unfold its worth looking at the next time frames. We can see a small cluster around 12th Feb. On the whole this sort of predicting doesn't mean anything, but its always fun to watch what happens.
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