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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." Well Dow Jones did go down to test the 12077 level before
making a strong rebound on Friday. The 12000 level was indeed a strong
support, for it is a trendline drawn over past 34 years. We also said that,
"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!" STI did
attempt to stay above 3000 most of the time last week, except to give way on
the final hour on Friday trading. With the Dow surged up 165 points last
Friday, what will STI react from here? Are we going to see a reverse from
here, or just a pure death cat bounced?
Last week market was negative most
of the time, except on Friday where a better than expected CPI figure couple
with weaken oil price and stronger dollar, sent the index up towards
closing. From technical point of view, the action on Friday looked more like
a technical rebound on the down trend than the complete reverse for the
index. A check from global indexes also suggested that the global markets
remain on the down trend. This is especially so, in Hang Seng and Shanghai
indexes, where they have demonstrated that there are still more room to go
on the down side. The rebound in USA market may carry till Monday or
Tuesday, however this rebound should be capped below 12500. Once it has
completed another fierce selling should be on the way. The index needs to
break below 12000 for the Bears to have full control. This may happen late
next week or a week after. The crucial data to watch next week is Tuesday's
PPI and the week after (24/6) Fed meeting. As for STI, we could expect
a rally on Monday and possibly carry until Tuesday. However the rally will
be capped at 3100 and that after this rebound it will continue to sell down
by the end of the week. So for short term investors, my advise is to
stay short once the index reaches 3100. As for medium term
investors I would assume you have gotten out most of your long positions. If
not, this may be the golden opportunity to sell on rally.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12500
24250 14600
Support 12070
22980 13650
As for STI the resistances and supports
are as follow:
Resistance: 3030, 3080, 3100, 3140, 3200
Support:
2930, 2850, 2780, 2700
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 the Empire State Index, Tuesday's PPI, Housing
Starts, Wednesday's the Accounting of crude oil supplies from EIA,
Thursday's Philadephia Fed Index.
-
The development on G8 meeting.
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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