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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, " While
we would like to start to new year with a bang! Unfortunately the market is
rather uncertain and many signs have indicated to us that we will be heading
to a very volatile year! With the worst than expected job data last Friday,
we expect more storm to come this week, as investors digest dismal news on
employment and oil at $100 a barrel, while trying to assess whether the
Federal Reserve can cut interest rates more forcefully in an attempt to
prevent the economy from sliding into recession. Indeed, technically we are
very near to the FINAL BATTLE between the BULLS and the BEARS!" We also said
that, "Technically, we are indeed very worry. For global indices are now all in
their respective cross road. For example a break down on Dow Jones
Industrial at 12500, STI at 3300, Hang Seng at 26000 and Nikkei at 14000
will invite big trouble to the market, which will mean a possible beginning
of Bear Market! Plus the fact that the only cylinder that is power up over
the last two months (I mean the NASDAQ index) has begun to show sign of
weakening, we are indeed at a very dangerous position now." Indeed, we were
right to the dot! Dow Jones continued to plunge towards 12500 level despite
some friendly comments from Fed Chairman Benanke on the rate cut prospect.
On Singapore front, we said that "As for STI,
the recent high of 3482 will become a strong resistance and that it is
likely to test a strong support at 3300 this week. We could expect some
rebound once the index hits 3300, but whether it will become a bottom is yet
to be seen. The
development next two to three weeks will be very crucial for the near term movement in STI,
and could also identify the exact wave structure for the next few months."
True enough, STI did test the 3300 on Wednesday and was quick to make a
rebound from there. Unfortunately it was just a short rebound and STI was
quick to move down and had broken the main support at 3300 last Friday. So
what could happen next? Are we in the Bear Market now? What strategy should
we impost in this volatile market?
Last week we had finally seen the true color of the market. Despite the
assurance made by Fed Chairman on the possible of aggressive rate cut,
markets had ignored his words and sold off fiercely on Friday. This is the
first indication that we are indeed in the recession period! But wait, is it
the end of the world? The answer is probably NO. However, we are likely to
see at least two quarter of negative growth in economy, which is what
technically classified as recession. A string of important economic data
such as Tuesday's Retail Sales, Wednesday's CPI, Thursday's Housing Start
and Friday's Leading Indicator and Consumer Sentiment are likely to be
negative to the market. Plus a series of earning reports especially the
banks results to be announced next week, will likely to push the index into
further south. Technically most of the global indices are showing bearish
now, of which we believe Dow Jones is likely to break 12500 and heading
towards 12000 soon. Hang Seng and Nikkei should break their important
supports at 26000 and 14000 this week too. So, stay tight and wait for the
storm to go over! As for STI,
it had broken its important support at 3300 last Friday, which mean it shall
continue going down and may eventually test the major support at 2930 level!
The key question is not whether it will hit the target but is whether how
soon it will reach there! With the major economic data and important earning
reports to be announced next week, there is a high chance that the storm may
be very severe and the target may reach sooner than later. The
development next two to three weeks will be very crucial for the near term movement in STI,
and could also identify the exact wave structure for the next few months. So do trade
carefully and pay attention to the market development. If you are an investor, my advise is to stay away from the market
until the wave structure is confirmed.
However, if you are a trader, this could be the best market you are longing
for, but do be careful and do not overtrade. As for STI, the first
resistance will be at 3300 follow by 3482. Support are at 3179 follow by
2930.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12930
27625 14670
Support 12500
26000 14000
As for STI the resistances and supports
are as follow:
Resistance: 3300, 3380, 3400, 3462, 3550,
3622
Support:
3250, 3200, 3179, 2930
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The movement in
currencies, oil and
commodities price.
- The
economics data, such as Tuesday's Retail Sales, PPI, Wednesday's CPI,
Thursday's Housing Start, Friday's Leading Indicator and Consumer
Sentiment.
-
Important earning reports from financial industry.
The following are two
possible wave counts on STI as at to-date:
- Preferred Count (70% probability)-- bullish count
My preferred count calling for a
top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two year
sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 3906. We are now in the
development of wave ((4)), of which we expect it to be a big triangle
formation that take about one to two years to complete. The recent sell
down is the first leg of wave ((4)), which will take a form of a-b-c and
reaches the potential target of 2930, as the wave (a) of ((4)). The
index will then continue to develop the (a)-(b)-(c)-(d)-(e) triangle
formation.
- Alternate Count (30% probability)--
bullish count
My alternate count calling
for a top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two
year sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 3688. The index has
then entered into an irregular (a)-(b)-(c) wave ((4)) correction, of
which wave (c) may be ended near 2930 in year 2008. A clearer picture can only be seen after the
index reaches 2930 and the subsequent development from there.
I do not place a high
hope in this count, for it seems to be too short in time frame for
wave ((4)) development.
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