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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "With Dow Jones Industries dropping
more than 300 pts last Friday, we could expect a big sell down in Asia on
Monday opening. The question now is how much further the sell down will be,
before a rebound emerge. Giving that last Friday was the first time the
market breaks the trading range, we could expect the selling to continue for
at least a few more days. We expect market will only begin to rebound near
18th March (the next Fed meeting), so for short term the market remains
bearish. Especially there are some important economic data to be release
this week, which are likely to be bad and could bring the index down
further. However, we had not witnessed any four consecutive months of
selling down since the beginning of the Bulls run in Oct'02. This is the
first time we have seen such thing happened. Hence a potential rebound is
really there, giving that the Fed meeting is only two weeks from now. Expect
market to continue selling down in the beginning of the week and may start
to rebound by end of the week." True enough, market continued to sell down
through the week, with a brief rally on Thursday, but was quick to turn down
again on Friday after the release of Non-farm payroll data. We also said
that, "As for STI, we could expect a gap down on Monday opening. However, so
long as the support at 2859 did not break, there still have chance for the
Bull to fight back." Again we were right to the dot, STI did gap down and
continued to fall till Friday when it hit the support at 2859 before making
a slight rebound and closed at 2866. So, what could we expect next week? Is
the selling going to continue or a rebound is going to happen soon?
On Friday we had witnessed a sell
off during opening time after the release of worst than expected Non-farm
payroll data, Dow Jones Industrial then make a rebound into positive
territory before closing down -146 pts again. This had indicated to us that
market remains very weak and that there is no conviction in buying. In other
word, we have not seen the bottom yet! And that market is likely to continue
heading lower and possibly breaking the previous low at 11634. One of the
leading indicator, S&P 100 index had already broken into new low on Friday,
Citi group is another leading indicator saying that we should be heading to
new low. As such, we believe the 11634 low on Dow Jones Industrial will
likely to give way by next week. We expect market to go down on Monday
with a brief rebound on Tuesday and Wednesday before another big sell off by
end of the week. The sell off by end of the week will likely to be a severe
one just before the FOMC meeting on 18th March. The reasons for a big sell
off towards end of the week could be due to Thursday Retail Sales and
Friday's CPI data. However, we had not witnessed any four consecutive months of
selling down since the beginning of the Bulls run in Oct'02. This is the
first time we have seen such thing happened. Hence a potential rebound is
really there, giving that the Fed meeting is only one weeks from now. Expect
market to continue selling down in the beginning of the week and may start
to rebound by mid week before another selling by end of the week. We need to see the momentum of the current
selling down, before understand their wave structure. The
reason that I am particularly interested 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 Thursday's Retail
Sales and Jobless Claim, Friday's CPI. These data is likely to move the
market. As for STI,
we could expect a gap down on Monday opening and that STI may test the
recent low of 2746 this week. However, so long as the
support at 2746 did not break, there still have chance for the Bull to fight
back. So do stay tune and wait for the result on this battle between the
Bull and the Bear. At this juncture, if you are long term investor you may
want to start buying some shares, giving that there are plenty of good value
shares available in the market. As for traders, you may have to stay
short until some technical divergence emerge. For STI, the 2746 will likely
be tested this week.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12350
23615 13365
Support 11630
21700 12572
As for STI the resistances and supports
are as follow:
Resistance: 2930, 2950, 3020, 3050, 3100, 3130
Support:
2850, 2746, 2650, 2580
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 Retail Sales and Jobless Claim,
Friday's CPI.
-
The
FOMC meeting on 18th March..
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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