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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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," Well true enough Dow Jones still stuck between
12800 and 12000 last week, but definitely more in favor of the Bull, for it
had gained 3.2% last week. We also said that, "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." Again, we were right to the dot! STI did
trade within the range, but managed to close above the upper range at 3155
last week. So, thus it means the Bull had won the battle and that we are now
heading north all the way? What is the best strategy to adopt next week?
While there was no clear winner last
week, for Dow Jones Industrial is still stuck in between 12800 and 12000,
there were some signs indicating that the underlying is strong. Despite a
bad unemployment date last Friday, Dow Jones only dropped by 16 points and
that the it had gained a total of 3.2% last week. This is a clear sign
saying that the bottom is in place. While technically we can only confirm a
strong rebound when Dow breaks above 12800, we can safely say that the worst
is over! Come next week, we will have a string of corporate results lying in
the pipe line. However, I believe the market is now pricing in a mild
recession, hence so long as there is no big surprise the market should be
able to weather through. Expect market continue to trade in a range bound
for some form of consolidation next week, i.e.. to say Dow Jones may be
trading within the range of 12800 to 12300 next week. Only a break above
12800 will it invite massive short covering and a rush by mutual funds to go
in and purchase shares. We expect market may only make its move above
12800 the week after, while some big corporations have announced their
earning. As for STI, we could expect it to trade within the range of 3160 to
3050 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 if market has a pull back, giving that the prospect of immediate
rally has improved. As for traders, you may have to wait for a pull back
before entering long positions. A short position is rather risky at this
stage. For STI, the 3046 is now an important
support and the resistance is now at 3350. The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12756
24840 14050
Support 12200
23300 12500
As for STI the resistances and supports
are as follow:
Resistance: 3180, 3200, 3250, 3350
Support:
3130, 3100, 3050, 3020, 2930
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The movement in
currencies, oil and
commodities price.
- There
are no major economic data next week.
-
The
corporate earning report season.
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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