Summary for Week Ending 10th March 2007
The market has yet to show its true colors at the moment. last week I said some of the decline may be absorbed, but not too much, andthats exactly what we have got...so far.
From start to finish, the market has declined for 7 trading days, in this time, taking out 88 points in the S&P500, or about 6% in market value from the high on 22nd Feb. On monday just past we had 1 more stab downwards and then the market rallied for the rest of the week, although the rally was fairly wet and didn't inspire any confidence whatsoever.
On this weeks chart I've highlighted the likely areas of resistance should the rally continue on. As we are down 88 points then the most likely point of resistance is the 50% retracement level around the 1420 mark.
Also, the largest decline we have seen recently is the 107 level. If we were to create a scenario of weave equality (green arrows) , then we can calculate backwards what the level would be from the 107 level and we get around 1442. All of this is of course premised upon the assumption that the current decline is over. If the market rallies on Monday and then declines then we were in a weak counter trend rally and I would expect the low to be taken out before the end of the week.
One other scenario worth considering is of course a re-test of the lows. generally we would get one of these if the market rallied strongly off the low, which it hasn't yet, however a retest is always a consideration.
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