Outlook for Selected Markets. DJIA - S&P 500 November 20/04
by Bill Voeten
November 20/04
Summary for Week Ending 20th November 2004
The market slowed down this week, and this is not unexpected,
bearing in mind what we have seen in the past two weeks. Oil is still
having some bearing, but since it came off its highs it is only providing
a reason to react and is not seen a primary driver for concern..at the
moment. The US dollar seems to be copping a hiding in international currency
markets and this is not a good thing for an economy that is importing
from every third world producer on the planet. Its good for exporting,
but that only works if you are producing value added goods for export.
This is the sort of thing that is weighing on the market at the moment.
These two factors have a direct impact on the overall health of the economy,
and as such are reflected in the share price and the future is always
discounted. We are never looking at what shares are worth now, we are
always looking at what the consensus is of what people believe they will
be worth in the future.
Looking closer at the week, as said previously, it was a slow week. The
market didn't do too much, and I was watching the price time square due
in on Wednesday ( see previous weeks reports). For a spike top I would
have expected the market to close below the open and for good measure
I would have like to have seen the close well down below the open, but
this was not the case. With a spike top you are usually looking for evidence
of exhaustion, in this case the absence of buying pressure which allows
a market to collapse. So far the market has turned on the designated date,
but the depth, strength and eventual duration of this top is a little
suspect at present. It should be remembered that we use Ganns methods
for looking forward into time for the probability of a change in trend,
What is never known is the strength of it, should it occur. Friday showed
a good strong day down with average volume, so there may be more in it
at the moment. Looking at the current movement, the best run against the
trend is 52 points, so a movement larger than this would become a marker
of future intent, and we are not close to that level just yet, so at present
it is just a counter trend movement that appears to have come in on the
designated date forecast.
Should the decline continue we are looking at two areas of support. The
most recent was where the market held up around the 1163 level. Should
this be surpassed then the next is the previous high for the movement
being 1142 level. If the latter is the level of support then the likelihood
of a rally to a lower top is increased and it increases the importance
of the correctly forecast Nov 17 high. If the market maintains a shallow
correction over a longer time period, then this would be a signal of continued
underlying strength and I would expect the Nov 17 high to be taken out
fairly quickly and the market resume its march to the previously mentioned
1260 area of resistance
In the coming week I will be looking to see how the Nov 17 high works
itself out. Keep an eye on the number of days in correction and its relative
depth to previous declines.
Charts
S&P 500 See Chart
Bill Voeten
gannalyst.com