Summary for Week Ending 4th March 2006
More bullishness on the Oil front this week went a long way towards keeping things subdued for yet another week.
Last week...
Last week I said that with the way the market was behaving, a double top was not a good option but a false break was very much on the radar. Well... we may have had our false break this week with the market having an up day on Monday and then sliding backwards on Tuesday with a sickening slump. If we look at the price chart we can see that the market made a slight move above the high set on 11 Jan and I can only imagine the number of stops that would have been sitting just above this level. When these fired off that would have provided all the buying on Short Covering with the amateurs getting stopped out and the professional money taking advantage of the liquidity. With the vacuum in buying left after this event we then see what happened on Tuesday with the market cratering quite heavily. the rest of the week however is a mystery to me.
If the market was to take a hint off the false break then we would have (should have) seen continued weakness but we didn't. instead we had compression set in with two consecutive inside days followed by an upside breakout on Friday which petered out halfway through the day and finished around its lows.
So what's happening ?
To be honest I'm very uncertain as to what is going on at the moment and when I'm like this I prefer to sit back and watch to see how this mess is going to sort itself out. We are getting a lot of volatile sideways activity and I suspect that the stops are sitting close which is adding to the volatility. There is no clear direction and there doesn't appear to be any clear directional markers on the horizon either. When things are like this, the general reaction is to run, which means sell which means it goes down, but until everyone comes to the same conclusion I suspect we are going to see more volatility.. and for those who like this (such as Option Sellers) they can keep it. I'll wait.
So where to...
I've removed the March 7 high as this has a snowballs chance in hell of coming off. A few weeks back I said that if we don't see a run upwards then we may see a low for March. This is looking more reasonable as each day passes. I'm on the sidelines at the moment to see if this false break is indeed a false break. On the other side we've had 3 attempts now at the old high and if we see a 4th one I'd expect it to break though. Its a big if though.
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