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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." Well, we were right to the dot! After
some selling in early Monday, Dow Jones Industrial index began to surge
before another sold down on Wednesday and a strong rallied on Thursday to
close the week for Good Friday with a first weekly gain after four weeks. 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. So do stay
tune and wait for the result on this battle between the Bull and the Bear."
Again, we were right to the dot again! STI did go down to exactly 2746 last
Monday before a rebound occurred. So, have we seen the bottom? Had the Bulls
eventually won the game last week? What should we do now under such volatile
market?
First I must say that I am very
pleased to see a strong close in Dow last Thursday. This has at least given
a first positive step that we may have seen a bottom. Second, a strong rally
in US$ and a plunge in oil, commodities and gold last week, had further
supported the possibility that the worst in stock markets may be over.
Third, there is a rumor saying that Federal Reserve and some European
counterparts are in the mid of discussion using public money to buy
mortgage-backed assets. If this is true, there would be a strong boost to
the market in the coming week. Fourth, despite a news last Thursday that
commercial-finance CIT Group would need to tap its $7.3 billion credit line
to repay debt sent its shares plunging over 20% but didn't prevent the
stock market from rallying on Thursday. These have further supported our
view that we may have seen a bottom that will at least last for a few
months. Technically, markets are very oversold and there are some divergence
in indicators, suggesting that we may begin to see some day light soon.
Ideally if Dow Jones can break above 12800 next week, it will strongly
confirm that a medium term bottom has in place. There are series of economic
data coming in the pipeline next week. Starting on Monday's Existing home
sales for February and Chicago manufacturing survey for March. Tuesday's
consumer confidence number for March, Wednesday's new home sales for
February, Thursday's GDP and jobless claims and last but not least Friday's
consumer sentiment. All these will have influence to the market. Hopefully
by then we can see Dow Jones breaks above 12800 and that global market
starts its multi months rally! As for STI,
we could expect a rally this coming Monday to test its resistance at 2915.
If STI can manage to stay above 3000 by end of the week then we can safely
say that a mid term rebound has started, with a possible target of 3600 by
end July! At this juncture, if you are long term investor you may want to
continue buying some more shares, giving that the prospect of immediate
rally has improved. As for traders, you may have to switch from short
selling to going long for most of the trades, for the underlying sentiment
may have changed. For STI, the 2746 will remain very important support for
the Bulls and that if STI can break above 3000 the Bull run may begin. The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12460
23750 13070
Support 12000
20570 11690
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 Existing home sales for February and
Chicago manufacturing survey for March. Tuesday's consumer confidence
number for March, Wednesday's new home sales for February, Thursday's
GDP and jobless claims and last but not least Friday's consumer
sentiment.
-
The
rumor that Fed and some European counterparts said to be in discussion
using public money to buy mortgage-backed assets..
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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