Summary for Week Ending 17th June 2006
The Fed appears to be dominating with rumors and backwash regarding interest rates. Oil is still on the radar but is failing to trend in either direction and this is also making things even more cloudy. An apparent trend in either direction in Oil would at least allow for some 'finger in air' economic forecasting regarding the cost base of production and distribution.
Last week...
Last week I said I thought that technically, the run down was over. There's nothing like a fresh slump to new lows to break the confidence. Looking back over the week we needed Monday to be up as follow through for the supposed bounce that I was certain was there, however instead we saw the market slide down virtually all the way back to the low that was put in on the previous Thursday. From a swing perspective this was signaled as soon as the market dropped below the low on Friday, signaling a new swing downwards was in play. Tuesday saw a further decline and then finally on Wednesday we got a timid reversal signal and then the market rallied on Thursday with a very impressive wide range day, the largest we have seen in some time. Based on the Thursday move, an inside day on Friday was not unexpected however if we are seeing the end then I would like to see Monday open higher and give us a new higher high, higher low bar for the day.
Where to ?
The range down is now at 107 points which ellipses the previous decline range going back to Mar-Aug 2004. The current low is resting just above the jan 2005 high and we've had a solid bounce ( or appear to have !?). I'd like to see the market take out the previous swing highs of 1263 and 1272 before we will see any clearance in what is happening but as things stand at present we know we are in a current down trend and this range down is the greatest we have seen since Dec 2002 - Mar 2003 (165 points) which marked the first decline from the rally that ended the bear market in 2002. Bearing these factors in mind my preference is for a lower double top as the market has set itself up very nicely at present for this pattern. A weak rally up to the 1290 area would provide a great spot to stop moving and the resultant lower double top would be a bearish enough signal to have everyone rushing for the exit. Its just an idea but we'll see how things unfold over the next week or two. Of note was the equally impressive volume on Wednesday, although slightly lower that the previous weeks spike down, its still a signal that cannot be ignored.
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