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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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."
True enough, after a brief sell down last Tuesday, Dow Industrial had been
slowly moving up throughout the week! We also said that, "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." Again, we were right to the dot!
STI did sell down briefly on Monday, but had since been creping up everyday
for the week! So, what could happen next week? Will the Bulls over power the
Bears?
The continue inching up on Dow Jones
Industrial index last week, had pushed the index very near to its resistance
level. In fact, most of the global indexes are now almost reaching their
respective important resistance levels. It means that something important is
going to happen next week, which will then determine the next two months
market direction. What is the main event that will trigger that? Well, my
guess is likely to be the Friday's non-farm payroll data. However, we could
expect some tale tale signs to appear by middle of the week for an
indication on near term direction. My gut is telling me that, it could be
some negative news that trigger some selling by mid week, so do watch out
carefully. For Dow Jones Industrial, a break below 12400 will be the first
sign that a selling power is developing. Only a push above 13000 will force
us to re-look at our wave counts. The current rally is likely to be capped
below 12730 for the Dow. 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 selling may start
by middle of the week and carry till end of the week. Do take note, if Dow
breaks below 12400, the selling pressure may increase! As for STI, we could expect
a bit of rally on Monday, but should be capped below 3267 while waiting for
Dow to give a clearer short term direction. If STI breaks below 3070, a
fierce selling may start. So for short term investors, my advise is to wait
for a rebound to near 3250 level and start trading on the short side. As for medium term
investors you should take this opportunity to off load some of your
investment.
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
25700 14750
Support 12400
23600 13660
As for STI the resistances and supports
are as follow:
Resistance: 3200, 3250, 3270, 3300, 3350
Support:
3140, 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, Monday's Construction Spending, Tuesday's Factory Orders
and Friday's Non-farm Payroll.
-
The remaining corporate earning reports.
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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