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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." True enough, both Hang Seng and Shanghai index
continued to sell down over the week. As for Dow Jones, it did manage to
move up till 12322 before another sell off started and brought the index to
below 12000 on Friday. We also said that, "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." Well, we were right to the dot again! STI did manage
to trade up to 3047 but had failed to go up further and started dropping.
So, what would happen next week, giving that Dow Jones has now broken below
12000? Will STI follow Dow and continue to sell down?
Last Friday's 200+ pts dropped in
Dow Jones Industrial was certainly very serious. We could expect the global
indexes to follow Dow and sell down this coming Monday. The key question now
is not whether Dow will touch the March low. It is rather will Dow Jones
hold its slide after touching its Mar'08 low. Before we draw our conclusion,
we could expect a fierce fighting between the Bulls and the Bears next week,
where there are two underlying current fighting with each others. First we
have a Fed meeting coming up on Tuesday and Wednesday. Second we have a
string of economic data in the pipeline. Starting on Monday the
S&P/Case-Shiller Home Price Index, Tuesday's June consume confidence,
Wednesday's Durable goods, Thursday's Final first-quarter GDP and Friday's
May personal income and consumer sentiment. Third, we have meeting between
all Oil producing countries this weekend and Fourth, the 2nd quarter
financial closing for some corporations. All these will add to the
volatility in the market. Personally, I believe Dow will hit the 11740
March'08 low next week and that it should have some rebound from there. As
to whether it will become a double bottom for Dow, is yet to been seen. I
would prefer to monitor closely on the market and let the market tell me its
story than to jump into the conclusion now. Of course, as my customers you
will have the privilege to be informed by me as soon as I think the bottom
is formed. Right now I would rather sit tight and wait for the outcome. As for STI, we could expect
it to continue dropping and goes lower, with a possible of reaching 2745
(March'08 low) by mid week. So for short term investors, my advise is to
try and buy when STI reaches 2745. For even if the March'08 low can not
hold, it will at least have a meaningful rebound. As for medium term
investors, do stay alert and I shall inform you as soon as I think the
bottom is confirmed.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 12330
23740 14500
Support 11730
21700 13660
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 the S&P/Case-Shiller Home Price Index, Tuesday's
June consume confidence, Wednesday's Durable goods, Thursday's Final
first-quarter GDP and Friday's May personal income and consumer
sentiment.
-
The Fed meeting on Tuesday and Wednesday..
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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