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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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!" We were hoping Dow Jones Industrial to break
above 12800 last week, unfortunately it did not materialized. After a rally
last Monday, Dow had been trading lower over the last three days. We also
said that, "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!" Well STI did break above 2915 and had been moving up over the
past five days. So, while US market continued to sell down and that Asia
market went up continually last week, who is right? What are we supposed to
do next week?
While we in Asia were having a good
run up last week, US market continued to suffer. This has left us wonder who
is right? The true answer is, I really don't know. What I know is, Dow Jones
is still the big brother in global financial market and that we have not out
of the long term down trend yet! It is like someone who has just recovered
from severe sickness and started learning how to walk. Will he get sick
again or can he recover from here? I think doctor will say, let wait for a
few weeks to see if his strength can improve. I think this is exactly what
is happening in the market right now. Like I mention last week, we need to
see Dow Jones Industrial climbs above 12800 to declare a strong rebound,
failing which anything can happen. This week, I have to add one more phrase,
i.e.. do not let Dow Jones fall below 12000, otherwise the Bear shall
resume! There are a few forces in the market for the next two weeks, that
may detect the intermediate direction of the market. Starting with the
action by Treasury Secretary Paulson to call for total revamp of U.S.
regulatory system, follow by a string of economic data to be released next
week (with the all important unemployment data to be released on Friday),
plus the coming earning report season. All these shall decide where the
market will be heading in the next few months. At this junction, we may have
to scale down the exposure in the market, be it the Bear of the Bull, until
a more confirming direction is defined. To sum up in technical term, we need
to see Dow Jones Industrial to break either 12800 or 12000 to confirm the
intermediate direction, As for STI,
we could expect it to trade within the range of 3130 to 2930 next week until
a clearer direction is defined in US market. At this juncture, if you are long term investor you may want to
continue buying some more value shares, giving that the prospect of immediate
rally has improved. As for traders, you may have to scale down your exposure
until a clearer direction is defined. For STI, the 2930 is an important
support and the resistance is now at 3130. The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12620
23800 13370
Support 12090
22200 12570
As for STI the resistances and supports
are as follow:
Resistance: 3050, 3100, 3130, 3150
Support:
3020, 2930, 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 Monday's Key manufacturing data from the Chicago
PMI survey, Tuesday's the ISM index and February construction spending.
Wednesday's ADP private sector monthly survey, Thursday's jobless claims
and Friday's the all important Unemployment data.
-
The
development of regulation revolution by US Treasury secretary Paulson.
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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