Summary for Week Ending 12th February 2006
About the only newsworthy item this week was that LTCrude Oil futures dropped almost 5% for the week, passing a couple of important support levels along the the way. Although I didn't see it mentioned in conventional media reports, I'm certain that it will have some bearing upon what happened this week and what we can look forward to in the coming few weeks.
Lets look at the last week.
Last week I said that I was favoring the idea of time being soaked up taking us to this weekend to see where we stood, and that's pretty much what has happened. An inside day on Monday to give the market the chance to take a breathe and then another push South giving us the low for the week as well as the swing low. This terminus gave us a swing down movement of 6 days, and then we saw a strong 2 day rally taking us into Friday which was the most interesting of the week. If we look at the two day rally then we would expect in normal terms to be at new lows within 2 days, and the best expectation here would be one day. The day started out well but then we saw a fairly impressive rally with the market closing near the high for the day ..Interestingly, it was the highest close for the week ! We've been talking about an explosive rally being overdue, so perhaps this is the first signal of the pressure that is building up here.
So where to....
Looking at this weeks chart we can see that the market has basically been unfolding as per forecast for about 4 weeks now, so one has to think that their luck has to run out eventually. I know I have been looking for a low to come in on Monday, but this is a time based forecast, which at best is always probabilistic, and one must always look at price action first. I'm willing to stick with the Monday call, but its now not a case of being holistically correct as more an issue of being correct overall for the next month or so. If you are wildly bullish in the medium term, then Jun calls would look good right now, with the balance of expectation to the upside, however trying to get set at the base of a movement is always a dangerous move... better to see if the trend is indeed in place. As Jesse Livermore quoted " Its the First 20% and the Last 20% of a trend that has cost men millions".... Its a good quote !
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