Summary for Week Ending 8th September 2007
The last report posted was 3 weeks ago (been moving interstate), just after the market had put in a solid low very close to the parallel line of support. At that point I had expected that the low 'would be in' for a while and that we would be faced with continued volatility. The significance of the support line has since proven out and the continued volatility has certainly come to bear. the ongoing turmoil in the mortgage market certainly isn't helping matters and anecdotal evidence would say that there is a lot more of this kind of news to come.
Last Friday we saw the DJIA take a slump off the jobs data report. It could be expected that in normal times this news would not have produced such a dramatic result however the punters are now gun shy and any bad news will produce a more magnified outcome. Good news may also produce an equally magnified outcome in the opposite direction but it would be worth watching the volume just to see who's actually climbing on board and the same can be said when falls are also dramatic. If volume is thin then is just the punters swapping losses with each other.
Looking at the chart we can see a very clear 3 wave advance followed by the decline that set in last Wednesday and continued with vigor on Friday. What we will be looking for is support and where that support comes in. If we are looking at a standard Elliot 3 wave counter trend advance then we may see a retest of the lows of mid August, I still think that the Low will hold and the retest is something that will get the Shorts on board only to squeeze them later.
Its difficult not to remain bullish in the face of all the bearish volatility, but the fact that the long term trend is still bullish cannot be ignored. Whilst all the volatility is on the sidelines appear to be the best place to sit until we get some more substantive information to work with.
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