Summary for Week Ending 18th November 2006
The news this week is more of a follow-on from the previous week, where we are seeing some limited jockeying for position in the newly constructed political scene in the US. The impact on the markets appears to be negligible so far however we really don't know what may be in store coming into xmas. As with almost all political inanities, its best not to think about it too much. It hurts.
Last few weeks...
Last week I said that we were looking to see if the market was going to put in more than a 3 day counter trend decline, and if so things may have been in trouble. Whilst the market does appear to have gone too far too fast, as always the best play is to follow the strength, no matter how crazy it can look. This rally, which has been on since early July, has been on of the most consistent we have seen in a very long time which is probably why it caught so many off guard, myself amongst them. The market did nothing spectacular this week but did maintain the upwards momentum towards the upper trend line of the parallel channel which goes back to 2004. I'm not a big fan of upper trend lines as they pander to the weaker side of market movements with the expectations of a decline. Not a very positive thought that. Lower trend lines in a channel are generally optimistic as there is an expectation of a rally, something everyone wants to see.
Next Week...
As we approach the upper edge of the channel, we'll just have to wait an see what happens. It may bounce off the line, and if so, then we have to keep a watch on the dimension of any decline surpassing the 27/28 point level as an indicator of worse to come. If the bounce is weak, then we can assume that the move against the line was purely technical and we can sit back and keep watching the market rise. The trend is up, and nothing so far indicates that its over.
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