Summary for Week Ending 10th June 2006
the big news for this week was the taking out of the bad guy in Iraq (who's name is impossible to spell). Perhaps this may lead to some positive sentiment overflowing after a week that saw the markets taking a bath in spectacular fashion.
Last week...
Last week I was in two minds as to the short term future direction. The issue was primarily that we already had a 3 wave counter trend movement but this was of a minor degree and that perhaps there was the possibility that the market may have thrown up a 3 wave advance of the next higher degree before attempting a retest of the May low. As it happened we had strong and immediate bearishness from the outset and the market headed south, straight towards the May low. It managed a 1 day counter trend movement on Wednesday before plumbing to a new low on the Thursday. Thursday was an interesting day as the low marked a 91 point move from the high, which was very close to the 93 point dimension that I've had marked up on the chart for the past few weeks. Also, the volume on the day was massive, with the next highest volume occurring on Sept 16 2005. The move itself sniffs of capitulation perhaps only in the short term but one would have to say that whatever energy was available to push prices lower, a vast majority of this energy was expended on the Thursday decline.
Where to ?
the fact that the market held at around the 93 point mark also says to me that we should have seen the last of the decline for a while. This is purely a technical point of view taking account that at any point in time the market is a boiling pot of competing energies and once one side has expended more that the other that is how markets move. Unfortunately once energy has appeared to have been spent, more can be added simply by external events carried on news wires etc. This is what makes this game so difficult. In the short term I am disinclined to fight any trend, however I think we have enough technical information to say that the decline is over, at least in the short term. This does not imply that we will see a return to bullish intent, rather we should see consolidation of the 91 point downwards. This may be expressed in a quick rally followed by up to 2-3 months of languid behaviour.. its impossible to say, but I believe we are in for an extended period of boredom.. When everyone is bearish..its over. Perhaps US based newspapers would be a good indicator of this sentiment.
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