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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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."
True enough, Dow did hit the March'08 low last week and continued to fall
below it last Thursday and Friday. We also said that, "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." While STI did continue to fall last week,
it was to our surprised that it was holding pretty well as compare to the
Dow Jones Industrial. So, what could happen next week, giving that Dow Jones
Industrial had already broken its Mar'08 low? Will our STI continue to fall
into a low below Mar'08 low or a rebound is on the card, giving that market
is now deeply oversold?
Last Thursday and Friday plunged by
a total of 400+ pts in Dow Jones Industrial index was certainly a huge
amount in numeric term. Although market has not shown sign of bottoming
soon, the deep oversold situation plus Monday been the last day of
June'08 trading (the last day for half year financial report), open up a
high possibility that a rebound is on its way. We believe Dow may be due to
a rebound in early to mid next week. However, once the oversold situation
has been corrected it is likely to go down further. If you may have noticed,
this is a very first time that Dow Jones Industrial had hit a new low (below
Mar'08 low), while almost all global indexes remain above their Mar'08 low.
What does that mean to us? To me it means the big corporations in USA are
now doing badly, and that this is really not a very good sign. I believe
from next week onwards, the other global indexes (including S&P and Nasdaq)
will start doing a catching up to Dow Jones Industrial on the down side. It
means Dow may be trading between 11600- 11000 in the coming two weeks, while
other indexes start to head lower to catch up for the lost time, which is
bad for the small to medium size stocks. With next week Friday is a holiday
in USA, I would expect some short covering by middle of the week before a
sell off again by end of the week, where the all important Job data is
released on Thursday. As for STI, I would expect a half year window dressing
to continue on Monday and may even drive the index to near 3000 by then.
However, come mid to end next week, it will start another sell off and this
time could be on a bigger magnitude, giving that it has been lagged behind
the Dow on the down side. So for short term investors, my advise is to
try and buy on Monday opening for a quick rebound on window dressing, but
begin to turn short again by middle of the week. As for medium term
investors, continue to stay sideline and wait for the market to signal its
bottom. If you are my customers, 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 11640
22900 13950
Support 11000
21000 12875
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 Chicago PMI, Tuesday ISM, Wednesday Factory Orders
and Thursday Non-farm payrolls.
-
The last day of half yearly trading on Monday 30th June..
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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