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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, " 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." We were right to
the dot! True enough markets continued to plunge like a free fall knife
without a sign of rebound. We also said that, "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." Again, we were right to
the dot! After broken the support at 3300, STI had dropped rapidly and
almost reached the major support at 2950 level. So, with everywhere having
blood shed, will there be any hope in the stock markets? What could happen
next week? What strategy should we adopt in order to benefit current
volatility?
Next Monday will be a holiday in USA
market, hence we believe market will be relatively calm. However, come
Tuesday onwards there will be a string of corporate earning coming into the
pipeline. Important earning from tech stocks will play a major role next
week. For example Tuesday's earning report from Apple, Texas Instruments,
Wednesday's Motorola and eBay, Thursday's Microsoft Corp and Sun
Microsystems. With no major economic data next week, these corporate results
will likely to move the market. Plus the fact that most of the major indices
are now very oversold and near their important support, and that we are only
one week before the Fed meeting, we believe market is ripe for a strong
rebound. Whether this will eventually be the bottom for many months to come
has yet to be confirmed, however we believe at least a meaningful rebound
should be coming soon. Technically, although most of the indices are now
turning bearish, they are not too far from their respective strong support
levels, which usually will have at least a good rebound from those levels.
As such, we believe next week could be the first positive week for the year
2008! As for STI,
after broken the support at 3300 level last week, it had plunged to a low of
3008 on Thursday, this level is indeed very near to the major support around
2930- 2960 level. The target may be considered filled at this stage. We
expect STI will be relatively calm on Monday and will start to rebound after
USA market opens on Tuesday. Although we have no confirmation on the exact
wave development at this stage, we believe it is time for investors to buy
stocks. The risk/ reward ratio is now favoring your investment. And that
whether this level will turn out to be the low for the year or just a
rebound before another selling off, the probability of moving up now is
relatively high and that investors who have spare cash should not miss the
boat! For traders, you may want to trade more on the long side and that the
volatility shall continue to favor your short term trading style. As for STI, the first
resistance will be at 3300 follow by 3482. Support are at 3008 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 12500
25850 14500
Support 12000
23500 13365
As for STI the resistances and supports
are as follow:
Resistance: 3150, 3200, 3250, 3300, 3380,
3400, 3462, 3550
Support:
3050, 3008, 2960, 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 Thursday's Jobless Claim and Existing Home
Sales.
-
Important earning reports from technology sector..
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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