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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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!" Well, we were right to the dot
again! Dow Jones did kick start its selling by mid last week and broken
below 12400. However, Thursday 200 pts rallied had caught many by surprise
and put the weak Bears into a surrender corner. However, just as per our
prediction the non-farm payroll released on Friday was the centre piece for
the week and that had triggered a near 400 pts sold down last Friday and
make the Bear as the weekly winner! We also said that, "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." Again we were
right, STI did a rally to 3215 and started to come down. So, with Dow losing
almost 400 pts last Friday, what could we expect next week? Are we in
another big sell down again?
Last week market was certainly very
volatile and was not suitable for the weak heart Investors. A big sold down
on Wednesday, followed by a big rally on Thursday and a melt down on Friday
had certainly knocked off all the weak Bulls and Bears, leaving only those
strong hearts to remain in the market. However, surprisingly after so much
volatility, Dow Jones is basically stuck within a big trading range between
13000- 12000. Except to say Dow is now near to the lower end of the range.
So, what will happen next? Will Dow bounce up from here in the coming days
and remains within the trading range? Or some big things are going to
happen? Well, we believe the next natural flow for Dow will be going down
further. A break below 12000 in Dow Jones, will send the index to test the
March'08 low. Will that happen? I think it will, giving that we have a
series of economic data need to be worried next week. Starting on Monday we
will have the Pending Home Sales, Tuesday's Trade Balance, Wednesday's
unveils of Beige Book of economic conditions by the Fed, Thursday's Retail
sales and Jobless Claim. Plus another big figure on CPI and Consumer
Sentiment to be released on Friday. These data are likely to push the index
lower. My gut is telling me that, by end June or early July we are likely to
see Dow Jones drops to its March'08 low. By then if Dow manages to hold
above the low, the long term Bull trend shall continue. Failing which we
will be entering into a multi years Bear market. So, stay prudent and wait
for the outcome. As for STI, we could expect
a sell down on Monday to test the 3085 support. A break below 3030 will more
or less confirm that STI will be heading to its March'08 low again! So for short term investors, my advise is to
stay short and continue to sell on any rally. As for medium term
investors I would assume you have gotten out most of your long positions. If
so, just wait for a bottoming signal to appear, before re-entering again. I
shall inform you as soon as I got the signal.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12600
25130 14700
Support 12000
23600 13650
As for STI the resistances and supports
are as follow:
Resistance: 3200, 3250, 3270, 3300, 3350
Support:
3140, 3070, 3050, 3030, 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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