Weekly Summary. Week ended 30/7/2010

This market has been up four weeks in a row.

Although not exactly the same, the past four weeks look a lot like the four weeks from mid-May into early June. That was followed by two weeks down – big downs. We can’t expect the same to happen – but a bit of easing can be expected. The market certainly looks extended.

Prospectively, the rising wedges seen in numerous charts and the negative divergences on MACD Histograms suggest a serious market fall is coming – but the market may have more time to run up before those forces play out.

The 50-Leaders information suggests a short term setback is coming.

Advancers/Decliners have been very strong.

All of that suggests to me that this market needs to pause for breath before another leg up. And that should bring us close to the danger month of September.

If in the next week the market moves down quickly through the uptrend line – then my prognostications will need revising. August, although usually fair-to-middling, can be a very ugly month in the U.S. - it has recorded some big down times: -9.9% in 1966, -10.4% in 1974, -12.5% in 1990 and -19% in 1998. And all of those occurred in the Second Year of the Four Year Presidential Cycle. We are now in the Second Year of the Four Year Presidential Cycle.

We must always be mindful of Mark Twain’s words:

OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.