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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "The closing of Dow Jones Industrial
index at 13057 last Friday, has two significant meaning. First, it has
finally closed above 13000 psychological level, second, it has for the first
time in five months managed to close above the 200 days moving average. This
is definitely a big bonus to the Bulls! However, as Dow only managed to
close a mere 48 pts up last Friday, it has shown some signs of tiredness.
Hence I would not be surprised if the index goes for some mid correction in
early part of the week. However, in general I believe Dow should continue to
charge up for another month or so! Technically most of the global stock
indexes have demonstrated that the Bulls should continue, therefore I do not
see there is much pull back in the card! Expect Dow Jones Industrial to have
a mild pull back on Monday and Tuesday before another big surge by end of
the week." Well, while we did expect some pull back in Dow Jones last week,
we did not expect the pull back to last for a whole week and deeper than
what we would like to see! We also said that, "As for STI, we could expect
it to continue charging upward towards 3300 in early part of the week and
may have a small pull back by middle of the week. However, as a whole the
market should be good and that rotating play may kick start! Expect blue
chips will continue to charge forward and then follow by China related
stocks and second liners." Again, STI did try to charge up in the early part
of the week and that it started with the blue chips and spilled over to
China related stocks. However the run up was short lifted by the sentiment
in USA market, and by end of the week STI was forced to sell down. So, what
could we expect next week? Is the up move since March'08 over by now? What
could we expect the market direction in the coming month?
The closing of Dow Jones Industrial
index at 12745 was just above its uptrend line support at 12730! So, the
index is now right at the make or break situation. Last week, although Dow
did break above 13000, but was more or less halted by its 200 days moving
average and make a reverse. In fact some of the global indexes had also make
a reverse somewhere near their respective 200 days moving average. These
could have some long term implication and may indicate that the current run
up is near to over. Next week may be very critical to the market mid term
direction and could test the old wisdom of " Sell in May and go away" on
whether is workable this year. There are a few economic data to be released
next week, and these data could be the pivot for deciding the market near
term direction. Especially the CPI data that will be released on Wednesday,
which could give the market an early clue on the impact by oil price and
commodities surge on the inflation. Expect Dow Jones to try a rebound in
early part of the week. Watch out for the 12600 support level, if by mid to
end of the week the index breaks below this level, than sorry folks we are
in for a down trend ride again! As for STI, we could expect it to open on
the negative territory on Monday, how much it will drop and how bad is its
closing, will give us a clue as to whether there is a rebound or not.
However, giving what had happened in Dow Jones last week, the best hope for
STI is probably to stay within the trading range of 3100- 3200 next week.
However, if Dow get worsen, STI may drop to 3045 next week. So stay tune and
remain cautious. For short term investors, you may want to take a risk to
buy when market gaps down on Monday and sell fast when the rebound comes. As for medium term
investors you may wait till market calms down, then reassess your new
investment strategy. The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 13000
26380 14208
Support 12600
24680 13400
As for STI the resistances and supports
are as follow:
Resistance: 3182, 3200, 3250, 3300, 3350
Support:
3147, 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.
- The
economic data, Tuesday's Retail Sales and Import Price data. Wednesday's
CPI, Thursday's Home Builders' Index and Friday's Consumer Sentiment.
-
The corporate earning reports include Monday's Sprint Nextel, MBIA
Insurer, Tuesday's Wal-Mart, Wednesday Freddie Mac and Macy's Inc,
Thursday's Hewlett-Packard.
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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