Summary for Week Ending 26th February 2006
Some late strength in Crude Oil on the back of an attempt to blow up a Saudi oil refinery put a dampener on what was already a slow week for the S&P.
Last week...
Mondays holiday seems to have taken all the energy out of the market since I was expecting a lot more that what was offered up. A little Outside reversal on Tuesday didn't look to good but it was recovered by Wednesday and then an inside day and another inside day to finish the week. The market has now traded the same price for the past 6 sessions and this compression has to lead somewhere. From a basic technical point of view its tempting to conclude the possibility of a double top formation against the highs of Jan 11th, excepting that market runs hardly ever end in a double top.
A false break however is very much on the cards if this cannot get on with it and start running upwards. If we do see a break to the downside out of this compression then I would expect it to be short lived and another attempt would be made to the old highs in fairly short order, but therein lies the problem. The overall expectation has been an explosive run out of the range and a strong gallop past the Jan 11 high and we haven't seen it yet. The longer this market keeps treading water then the greater the likelihood that we arent going to see a strong rally in this cycle. Oil of course will play a major role in this as it has the economy by the throat and just about everyone realizes that now, so I would be expecting a weak inverse correlation between the market and the price of Oil whilst it remains the principal focus.
So where to....
Whilst this is stuffing around there is little to go on as to direction. I'm still convinced of the upside potential but not convinced of the Mar 7th date for an end to the run and then a decline as time is running out fairly swiftly. I'll be keeping the time frame up there but I may also add the 21st March area as well once I've done a little more figuring.
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