Summary for Week Ending 14th January 2006
Since the last report 4 weeks ago, the market has continued to perform as expected, with the added bonus of the market halting its movement on the 11th January, in line with the 90 day forecast. More on this later.
Recapping the last four weeks: Around December 17th we left the market is a bullish, although weak position with the market struggling to get any kind of momentum going. We already had a swing low above the previous major high of 1246 (August 2005) so that point had been slated as the level of major support. The 2005 year finished by resting on this line of support and January saw the market bounce off this level with considerable vigor, rising continuously to the forecast 11th January.. and this is where we are up to now.
When we are expecting a market capitulation around a forecast time zone, what we are looking for is the market to rush into the date. Price levels are important, but so is the action that gets the market there in the first place. If the market creeps into a date then confidence is not as strong, as there is no impression of 'Time Running Out'. If we see a rush into the date, then the overall impression is of a panicked crowd bolting for the door before it shuts... and this is capitulation. On Jan 11th it wasn't a creeping movement into the date, but it wasn't a mad rush either. The 1 day correction on the 10th was a signal to me that this will not be a major correction, and the two days since the 11th has so far confirmed this thought as we haven't seen anything dramatic as far as declines are concerned.
Looking ahead, I'm expecting a soft corrective phase and then a final run into March and then a correction. The fly in the ointment at the moment is OIL and its continued resilience. A strong rally in equities in incongruous with a rising OIL price so this corrective phase may be taken up with a counter trend movement in Oil. Once complete a falling Oil price should be the trigger to provide a strong impetus to a very strong rally into March. I do expect this final rally to be very strong, as there is considerable tension that has been built up over the past few years with the rising compression that we have seen. If the market does see blue sky, I expect that there will be an enormous rush for it. Lets see what happens.
What can we look forward to in 2006 ?
Looking backwards in time we can look at the 6th year of a decade : 1966, 1976, 1986 and 1996. All were up years, except 1966 which saw a 22% decline in prices for the first 9 months of the year before recovering. Following on from that, and seeing that the major upwards trend is still in place from 2005, there is no reason thus far to suggest otherwise for 2006.
Research Note ... Regarding the month of March, have a look at its significance as a major/minor turning point over the past 5 years .
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