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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "The previous 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." While Dow Jones did try to
maintain its positive mood last Monday, it was quickly overcome by the Bear
and sold down throughout the week! This had shown that the Bulls have not
much conviction under current market condition. We also said that, "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."
Again, STI did try to rally on Monday, but was pulled down by Dow Jones on
subsequent Tuesday and Wednesday before the Chinese New Year holidays. The
sold down had caught many by surprise! So, what could we expect next week?
Is the Bear going to start another sell off from here?
While last week was a bad week for
US stock market, with Dow Jones dropped a further 4% for the week.
Surprisingly the technical picture did not indicate that a fierce sell down
will follow suit! Indeed Dow Jones Industrial index is now in its cross
road. A further sell down will trigger a potential impulsive wave 3 that
will bring the index much lower than 11000. However, if it manages to hold
on at current level and starts to move up, it could still be in its wave c
of (b) bounced. So, the next two weeks are very important for confirmation
of wave structure, which in term will give us a clearer picture for the
intermediate market direction. A series of economic data such as Wednesday's
Retail Sales, Thursday's Jobless Claims and Friday's Consumer Sentiment will
probably provide a clue for the intermediate market direction. As for STI,
we could expect a weak opening on Monday with support at 2850 and 2750. The
index will continue its volatile movement until USA market provides a
clearer direction. As such, if you are intermediate term investor who would
like to bottom fish the market. You may consider buying now at bargain
hunting price, however, if STI breaks below 2746, you should mentally
prepare to cut loss. As for traders, the volatility will provide good
trading environment, however, you should follow the wind and trade NOT to
have much conviction on the market direction. For STI, the first
resistance will be at 3100 follow by 3168. Support are at 2850 follow by
2746.
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
25250 13900
Support 11940
23000 12600
As for STI the resistances and supports
are as follow:
Resistance: 2960, 3000, 3050, 3100, 3168,
3200, 3250
Support:
2930, 2850, 2746
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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