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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "While Dow did close on a positive
week, it did not provide a convincing move that could trigger a sustainable
rally. Similarly, there were no evidences from global markets that
suggesting we are out of the wood now. The global markets including USA,
have merely told us that the Bulls and Bears are now in its equilibrium and
that we may see a clearer direction in the next one to two weeks time.
Perhaps after Monday holiday, the corporate results from Wal-Mart Stores and
Hewlett-Packard, plus the coming CPI economic data will provide a clue to us
on the intermediate market direction. Right now, especially for Monday and
Tuesday, we could only expect some range trading, while waiting for a more
definite direction in later part of the week." Indeed we were right on the
direction, the Bulls and the Bears continued to battle over last week, with
wild daily trading range. We also said that, "As for STI, we could expect a
slight weakness on Monday opening follow by some rally, but should be stuck
within the range of 2950- 3100 in the early part of the week, before having
a clearer direction by end of the week if Dow Jones does provide the
direction." Again, we were right to the dot! STI did attempt to rally and
stay above 3100 in the first two days of last week, but was forced to sell
down subsequently. So, has the market decided which direction to go now? Who
won the battle, the Bulls or the Bears? What should we do in the coming
week?
While last week did provide good
daily trading range in stock markets, there was no clear direction as to
where the market is heading to. Last Friday trading was full of surprised.
Just when Asia markets like Hongkong, Singapore ... etc about to break down
their critical supports levels, Nikkei came in to rescue in the afternoon
and caused some rebounds in Hongkong and Singapore to stay above their
respective important support. Similarly in USA, Dow Jones Industrial did
sell down to a low of -120 pts, but again managed to rally back to +96 pts
towards closing on the news that a plan by several banks to bail out
struggling bond insurer Ambac Financial could be unveiled early next week.
So, is this a conspiracy or pure coincident? I don't know. All I know is the
battle between the Bulls and the Bears shall continue this week and may be
extended to next week too. However, we are very near to a deciding point for
both Bulls and Bears can no longer hold this equilibrium point forever. The
reason that I am particularly interest in this juncture, is because the
winner will basically decide whether we are heading for a mild recession or
a deep depression! In technical term, it will provide a clearer picture as
to whether we are heading for a WAVE 4 of bigger degree before another bull
run OR we are heading for an A-B-C bigger degree melt down. I am confident
market will tell us a clearer direction in the next two weeks, and by then
we have plenty of time to decide our future investment strategy. Right now
the wiser choice is to stay sideline and wait for market to tell us the
direction! There are a series of economic data such as Monday's Existing
home sales, Tuesday's PPI, Thursday's Durable goods order and Fed Chairman
Bernanke testify on the US economy to the Senate Banking committee, all
these may lead to a clearer future market direction. As for STI,
we could expect a stronger opening on Monday with support at 3019 and
resistance at 3130. The
index will continue its range movement until USA market provides a clearer
direction. As such, if you are intermediate term investor you should stay
sideline waiting for market to tell you the direction. As for traders, you may have to sell on
rally and buy on dip during this range trading period. For STI, the first
resistance will be at 3100 follow by 3130. Support are at 3020 follow by
2950.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12767
24400 13900
Support 12069
22569 12900
As for STI the resistances and supports
are as follow:
Resistance: 3050, 3100, 3130, 3168,
3200, 3250
Support:
3020, 2950, 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 Existing home sales, Tuesday's PPI,
Thursday's Personal Income & Spending, Durable Goods orders.
-
Fed chairman Bernanke testify on the US economy to the Senate Banking
committee on Thursday.
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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