Summary for Week Ending 29th April 2006
Another quiet week on all fronts this week as the announcement by the Fed was digested with more detail, as I pointed out last week. Overall its been yet another week of boredom with little reason to be watching the market as it continues on its merry way of generating not much at all. Oil slipped a little but that's not enough to have too much of an impact as the danger still lies on any massive upside movements. I've been reading reports of fuel prices getting high in the US and its only a matter of time before this added expense begins to bite into demand. This would see a softening in Retail and Manufacturing but it makes the resources sector (Energy mostly) look terrific so one can balance the other for a short time. A lessening in demand for domestic manufactured goods may only have a localized effect as demand may then shift to cheaper products from countries capable of low cost production. Funnily enough this source would be China, which is currently the prime culprit of the resources boom in the first place.
Last week...
Again we saw the market setting up for a rally o0nly to have it squashed in the week that follows. We had an orderly decline on Monday and Tuesday and then a slight rally on Wednesday giving a higher swing low and then to add to the confusion we had a monster outside day on Thursday which would have has the swing traders yet again being stopped out just before the market rallied strongly. This sort of behavior will burn a lot of weak hands in the market and more and more punters should be waiting for a strong confirmation of a trend developing, especially when the market is behaving like this. the constant churn is really only good for Option writers at present, and with the VIX still running slow, those options are cheap to buy, but aren't doing anything. As an example I added some time lines to highlight what has been going on (or not going on) lately. From Oct 2005 to Nov 18th 2005 the market rallied 77 points in 36 days. This is a good effort. Since Nov 2005 the markets best result is 73 points in 153 days, thus displaying just how vapid this market has become... absolute heaven for those selling options, but murder for those on the other side.
Where to ?
I still like the upside simply because the weekly chart is bullish, even though its been compressing for such a long time. If we where at the end of a long advance and we had this compression phase to finish off then I would say that it was bearish, however the market is still climbing out of the declines from the highs of 6 years ago and we haven't really seen a parabolic rally that would support a compressing termination. Markets being what they are I still like the swing bear move ( to wash out the mugs) followed by an equally swift bull move to complete the action. '6' years are suppose to be bullish but generally only for the first half of the year so we are running out of time for this thing to sort itself out in general terms. Just keep watching and try to avoid the sucker plays until this gets resolved. Timing of this has become a lottery so I wont even try.
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