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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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."
While we did not expect Fed to allow primary dealers to pledge sub-prime
mortgage for short term financing, we did correctly pointing out last week
direction, ie. moved down on Monday followed by mid week rally before
another sold down by end of the week. We also said that," 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." Again, we
were right to the dot that STI did go down early last week before a strong
rebound in mid week and a sold down by end of the week. So what could we
expect next week, giving that USA market is now in its seesawing mood?
With Dow Jones Industries dropping
almost 200 pts last Friday, we could expect another sell off in Asia market
on Monday. However, that does not mean the end of the Bulls, rather I am
seeing the final battle between the Bulls and the Bears should come to the
final stage by end of next week! At current stage, many analysts including
some famous one like Richard Russell (of Dow Theory) are predicting that the
end of the current wave may be coming soon or had already happened. Of
course there are some long term Bears like Bob Precther (of Elliot Wave
International) are seeing another big sell off coming soon. For me, I
believe come next week we will have a clear picture on the mid term
direction of the market. With Bear Stern and some broking firms results to
be announced early next week, the FOMC meeting on Tuesday and some important
economic data to be announced next week , such as Monday's National
Association of Home Builder index for March, Tuesday's New Residential
Construction in February, Wednesday's PPI, Thursday's weekly jobless claims
and leading indicators for February, we could expect a very volatile market
next week. Nevertheless, this will be a final battle between the Bulls and
the Bears. The winner will determine the intermediate market direction in
the next few months. So, ladies and gentlemen do stay tight and wait for the
final show down. Expect
market to continue selling down on Monday and may start to move up by
Tuesday. For Dow Jones Industrial index, it needs to clear above 12300 to
resume its bullishness. However, if it breaks below 11730 a further sell
down may start. 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 12300
24850 13365
Support 11730
21700 12000
As for STI the resistances and supports
are as follow:
Resistance: 2850, 2930, 2950, 3020, 3050, 3100, 3130
Support:
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 Monday's National Association of Home Builder
index for March, Tuesday's new residential construction in February,
Wednesday PPI, Thursday's weekly jobless claims and leading indicators
for February.
-
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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