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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Although for the week, Dow
Industrials rose 1.9%, S&P 500 rose 2.7% and NASDAQ 3.4%, the closing of Dow Jones Industrial
index last Friday at 12986 (-5.8 pts) merely put Dow Jones near to the top
of the trading range. The Dow Jones Industrial remains trap below its 200
days moving average and that next week will be extreme crucial for the
Bulls. For if the up trend going to continue, the Bulls must charge up by
next week and push Dow Jones Industrial way above 13000 on good volume to
state their authority. Failing which, a short term top may be formed. With
more and more investors thinking that the Dow will continue to surge up, I
have no choice but to turn cautious. The fact that Dow was unable to push
above 13000 on good volume over the past two weeks, has make me very
uncomfortable. If Dow Jones Industrial continues to trade below 13000 next
week, the odd will shift towards the Bears and that a big degree correction
may be imminent! For Dow Jones Industrial continue to monitor the resistance
at 13130 and support at 12715. A break on either side will have long
implication for the short to medium term market trend. Perhaps the PPI to be
released next Tuesday will give us the clue." Well, I was amazed that last
week action on Wall Street was exactly as per our prediction. On Tuesday,
after the inflationary PPI data, Dow was badly beaten up. Follow by
Wednesday Fed minute report and the continued surging in Oil price, the Dow
was completely given up and slide down without much resistance, which was
exactly as per our expectation! We also said that, "As for STI, we could expect a
slight positive opening on Tuesday, but do not expect any break out until
the USA market make the move. The crucial resistance for STI is 3270 and the
support is at 3140. Again, a break on either side will provide clue for the
near term market direction." Again our prediction was to the dot! STI did
open up but was quick to sell down. And on Friday it had broken the 3140
support (thought it was a mistake created on wrong keying to sell UOB
counter), but then the index could not be reversed and could be an omen to
the Bulls! So, what could we expect next week? Will the stock market
continue to sell down?
With USA having a memorial holiday
this Monday, we could expect a relatively quite market in Asia on Monday.
Nevertheless, some selling should be expected but I do not think a big sell
off may occur. Contrary to many investors, I believe the first phase of
selling down is near to the end. In other words, I believe when USA market
re-open on Tuesday, it may face an initial selling but may soon start the
rebound. However, believe me this rebound is going to be short lifted and
should not move above 12735 in Dow Jones Industrial. Indeed, it should be
treated as the golden opportunity for the Bulls to get out of their
positions before turning into stale Bulls. We believe the rebound may start
by middle of the week and carry till end of the week. However, once the
rebound is over, the next phase will be a fierce sell down that may cause
the Bulls to run for cover! A break below 12200 will see the Dow drops
quickly to test the 12000 and lower. Although there are some economics data
to be released next week, they are not the very important data hence the
impact may not be as great as the CPI and PPI data released last two weeks. As for STI, we could expect
some selling on Monday, however the wrong quote in UOB counter may readjust
itself and resulting in not much drop in the STI as compared to Friday's
closing. Expect STI to eventually test the support at 3070 and may be capped
by the resistance at 3140 for the week. The trend in the next one to two
months is basically down. So for short term investors, my advise is to wait
for a rebound and start trading on the short side. As for medium term
investors you may want to take some short positions using CFD or to wait at
the sideline until the selling is over before re-entering the market. The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12735
25555 14400
Support 12270
23610 13650
As for STI the resistances and supports
are as follow:
Resistance: 3140, 3200, 3250, 3270, 3300, 3350
Support:
3070, 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, Wednesday's Durable Goods, Jobless Claims, Friday's
Chicago Manufacturing activity.
-
The remaining corporate earning reports, such as Dell report to be
announced after Thursday closed.
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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