Reply #1: WrapUp by Ike Iossif [View All]

[ozymandius]

lots of information - especially for people who like charts.

Summary for Trading Week Ending 12-5-03

The indices broke support marginally three weeks ago, and subsequently they have spent the last 12-15 trading days rallying back up to the support line that they violated 3 weeks ago. After making contact with the previous support line--which now represents resistance--they pulled back, but only modestly. As it can be easily seen from the price charts, the indices are still "coiling." In other words, they are building energy for their next move, which should be either a break-out or a break-down. Unfortunately, there is plenty of evidence that can objectively support both scenarios almost equally. On one hand we have outlandish bullish sentiment (AAII had 69% bulls, and the Consensus Inc., 72% bulls this past week) deteriorating liquidity, ample signs of distribution, risk premiums at multi-year lows, several non-confirmations, and geopolitical uncertainty. On the other hand, we have strong breadth, exceptionally strong 52 week highs/lows ratio favoring the highs, and a chart pattern that in several occasions in the past, has resulted in upside break-outs. Take a look at the charts below for example:

Notice that a similar chart pattern for the NDX, accompanied with similar investor psychology, going into the end of 1999, resulted in the blow off top in March of 2000. Do the similarities "guarantee" a repetition? Of course, not. However, because the similarities are there, as long as price continues to hold above support, one can not dismiss the possibility of a break-out.

US Dollar: If it can't get above 91, it it will go to 88, and then 85.