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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "We had finally witnessed a final big
flush on global indices and a strong rebound aftermath last week. In fact
the rebound was so strong that it lasted three days! It is still too
premature to say that the bottom had formed. However, we could safely say
that the recent bottom may at least last for a few weeks from now. Next week
will have a series of economic data, corporate earning and Fed meeting in
the pipeline. Again, we could expect the market continues to be volatile. We
expect the New-home sales data to be released on Monday will be weak and
that will force the market to continue selling down, which at the same time
forcing Fed to cut rate further after the meeting. These will put additional
fuels to the market and push the indices higher by end of the week. The
rally will then continue till mid February before another big sell off
emerge." Indeed our prediction was right to the dot! Fed did cut additional
0.5% on Interest rate and that Dow Jones continued to move up till end of
the week! We also said that, "As for STI, it had rebound on trend support at
2776 (as per the weekly chart above), which indicated that a few weeks of
rally should be on its way. Whether the 2776 will eventually be the low for
the year is still argumentative, however we could expect a few weeks of
rally from here, even though volatility will continue. Expect some profit
taking to set in on Monday and Tuesday before another rally emerge and carry
till end of the week." True enough, STI did continue to move up, even though
the magnitude was not as high as its USA counterpart. So, with Chine New
Year coming next week and that we only have two and a half trading days next
week, what could the market react? What should be the best strategy to adopt
during this short trading week?
Last week was the first week in
January that most of Asia and Europe stock market indices closed on the
positive week. Indeed it is very significant for global market, for it could
indicate the much awaited rebounce is now in progress. For USA market, there
is no important economic data to be released next week, hence focus will be
centred in corporate results and a slew of speeches by Federal Reserve
officials, hoping to gain more insight into the thinking of central bankers
after the Fed slashed its key interest rate by 125 basis points, down to 3%,
in just 10 days. Technically we believe global market has just entered into
its rebounce phase, which may last for several weeks. And that, Dow Jones
could have just started its wave (a) rebounce, which will follow by a wave
(b) correction and another wave (c) up in the next few weeks to months. As
such, it may be wise to start buying some undervalue stocks and wait for the
market to recover. The
rally will continue till mid February before some correction emerge and then
another spike up. As for STI,
it should have some good rally towards Chine New Year eve. The rally could
even carry over till mid February and reaches the level between 3200- 3300.
So, for investors who can hold, you may want to consider buying come Monday.
As for traders, perhaps you can also consider taking a position to carry the
trade over Chine New Year! Technically we still
favor a rally to continue for a few weeks till STI reaches 3300 level. If
you are a medium term investor and had followed my two weeks ago advise to
purchase shares, you should continue to hold on your position. If you are a
short term trader, you should take a position this Monday and hold till
after Chine New Year. As for STI, the first
resistance will be at 3200 follow by 3300. Support are at 3000 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
25250 13900
Support 12250
23000 13085
As for STI the resistances and supports
are as follow:
Resistance: 3050, 3150, 3200, 3250, 3300,
3380
Support:
3000, 2960, 2930, 2850
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 Monday's Factory orders and Thursday's Jobless
Claims.
-
Earning reports and a series of Fed officials speeches.
The following are two
possible wave counts on STI as at to-date:
- Preferred Count (60% 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 2770, as the wave (a) of ((4)). The
index will then continue to develop the (a)-(b)-(c)-(d)-(e) triangle
formation.
- Alternate Count (40% probability)--
bearish 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 2666 in May 2006. The index had
then entered into wave ((5)) that ended on 3906 in October'07. We are
now in the downtrend bear market, which will last for a few years!
Although this count remains as the least chance as compare to my
preferred count. If the index breaks below 2776 convincingly on very
high volume, the odd on bear market will significantly increase.
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