Week Beginning 06/02/2012.

Value 12862.23

The bulls are still very much in control of the market at present, although the feeling is that the bears are waiting in the shadows with baited breath. Volume has been gradually decreasing signifying an increasing number of market participants waiting to see what happens next. When the move occurs, it is likely to be significant.

With the market having closed above the aforementioned Fibonacci 78.6% level, it is probable that significant falls in the short term are unlikely and instead testing of the 13000 level is still possible although looking less likely.

The MACD Histogram (Figure 1) appears to be flattening foretelling of a possible reversal in market momentum occurring in the medium-term. This combined with the size of the market movements and their associated levels of volume indicate that a short period of continued flirting with recent highs will then be followed by a sizeable drop in value as market participants consolidate their positions.

Figure 1