Summary for Week Ending 6th October 2007
After lasts weeks navel gazing, perhaps its time to return to the chart. At a basic technical level last week the market had formed a consolidation above a number of previous swings, which in itself is a very bullish signal. the market of course duly complied and we saw a week of a few strong rises which eventually led to a new high and managed to close at a new high as well.
All of this is very interesting as we have now eaten up all of the declines that occurred a little over a month ago, so its all happened very quickly. To put this into some kind of context, we can look at the rise from the 14th March 2007 to the high on 16th July. This was a rise of about 191 point and it took 124 calendar days. We recently saw a decline of 185 points in 31 days and its been covered in just 50 days. This change in pace cannot be ignored and says a lot about the recovery run we have just witnessed. Is it sustainable at this pace? It would be fair to say that the answer is no. A few weeks back I said I did not expect the market to make it to a new high (or I thought it was unlikely) and it just goes to prove the adage that its unwise to stand in front of a rampaging bull.
Looking ahead, what is holding me back is the fact that we had a 185 point decline. This should be a market that the end is either on now, or is very close. Since we are at a new high, the we know that the end isn't on right now, so we are left with 'its close'. Of course this raises the question of 'How Close?'. This is were forecasting becomes a little ragged as you may be right early and miss out on the best part of the rally, or you can ignore the forecasting ( or perhaps just keep an eye on it) and instead go with the flow. The danger ahead is that the previous decline came off a shallow false break, so for those playing this side of the market, the near future will be a nervous wait.
I've market up a possibility on the chart but this is pretty wild at the moment. We need to see more of the market unfold to perhaps gauge its longer term intentions.
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