Last week my expectation were for US markets to continue higher, but I also modeled that there was a potential for a lower Weekly close before heading higher next week.
Whenever the market closes on it's highs on Friday (previous week), the expectation is that the following week will rotate down re-test support and then continue higher. This occured but the follow through further UP didn't eventuate.
This week saw the Weekly 50% levels support price for a number of days, before Friday moved down into a lower close, as this was expected after the 5-day 50% level became resistance on Friday.
Technically the market is weak:- it’s trading below all major 50% levels, the 3-week cycles are ‘sell’ and the 3-day cycles are ‘sell’
But next week the Weekly 50% level is going to continue to define the trend, and can easily become support and the market swings upwards next week. (lower weekly open closing higher on Friday)
Next Week traders should be trading March contracts, but the same levels should be used:- support is 1467, and the week of contract expiry normally tries to move higher
DOW:- is exactly the same, expected push lower next week but 13299 is trend guide for next week.
I’m trying to ‘forward model’ next week, and by looking at market dynamics and repeating patterns it favors higher prices or rotating price action.
Looking at global markets and the current price action, most would naturally think markets will continue down, and it can because of price below the higher timeframe December 50% levels, but repeating patterns often push prices upward next week from lower weekly opens.
The highest-probability pattern next week:- would be to see lower prices on Monday, break below the Weekly 50% levels, but the next day ‘hooks’ back inside. This then becomes support and prices rise higher into Friday.
The weekly 50% level next week is going to be the trend guide and support, just as it has been in down trends and up trends each and every week.
In conclusion:- My expectation is that markets are consolidating into the end of 2007, and if that is the case, it wouldn’t surprise me to see rotating UP week (closing higher than open), before having another down week after expiry.
By Analyzing the larger timeframes, the market looks like it’s consolidating for the rest of the 2007, closing out December to set up the major Primary levels for 2008:- 3week sideways pattern into the end of 2007 guided by the December 50% level.
The Yearly timeframe is the driving force for major global trends.
The potential of any major rally towards 1555 is now much less likely, because March 2008 contracts are now trading below the 3-week cycle highs. (1525)
Please refer to the Daily reports....
