Summary for Week Ending 27th May 2006
Again it was the improved violence in the markets this week that was grabbing most of the headlines. George and Tony doing the mea culpa over Iraq was fun to watch but it really didn't do anything other that convince the more skeptical that they knew all along... Finance news was all hot..who's going to jail (Enron) and whats falling and how far...
Last week...
In last weeks report I mentioned that I expected the market to find support around the 1246 level and then bounce and that any weakness at this level would have been very bearish indeed. Dutifully the market hit the 1246 level and did find support. Of primary note for the day was the level of volume which was enormous and closely matched by the level of six days prior. This double spiking of volume is sometimes a useful marker with the second spike being the capitulation level spurt if the market has declined well below the level of the initial volume blowout day. In this case we saw this blowout at an important level of support so it would give one some confidence that we may see the market exist beyond this level in the short term. If we do see a down day then the swing pattern is very bearish, however the volume would say that things are done for at least another week, that is, the market should take a little break now and consolidate what has been happening over the past 3 weeks.
Where to ?
Looking at this weeks chart I have added the next level of technical ( non-obvious) support as well as the next dimension level in declines that is yet to be surpassed (93 points). As an added curiosity I have added a price retracement level from the Oct 2005 low. Notice how the 50% retracement is close to the first line of support and that the 61.8% retracement is right on the second level of major support. I always find it curious when things look this way, but its another thing all together for the market to unfold this way. I'm expecting consolidation this week and if we are to get another bearish rush we can see the 93 point decline line touches the lower channel around 11th June. This a a curiosity only and I personally have zero faith in this, but its just too beautiful to ignore...Again wait and see.
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