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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." True enough, Dow Jones was stuck
in a trading range last week, while Nasdaq and S&P began to drop further. We
also said that, "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." Again, we were right to the dot! STI did try to
move up till 2986 on Monday before a big sell off began and dropped all the
way till Friday! So, what could we expect next week after traders come back
from holidays in USA? Will there be another big sell off OR a rebound is
coming?
Last Friday was a relatively quiet
day in Asia trading, primarily because of USA holiday. However, the Job data
released on Thursday did give some relieve to the market, thought was not
much. Come next week, we will be facing another hurdle in the market, ie.
the beginning of the 2nd quarter corporate earning report to be released in
the coming three weeks. While there are not many killer economic data to be
released next week, the continue of high Oil price and the worse than
expected corporate results may trigger another sell off in the market.
However, I would expect Dow Jones Industrial continues to trap within the
11600- 11000 trading range next week, while witnessing the continue weaken
in Nasdaq and S&P. Giving the deeply oversold situation, I would expect the
bottom to be formed soon, and once it reaches we will have at least a multi
weeks rally if not the mid term bottom. The major support in the Dow will be
10800 and STI at 2745. These are crucial levels that should not be broken in
order for the Bulls to continue stay alive! As for STI, I would expect a
small rally in the early part of the week, but may soon be taken over by the
Bears and sell off till end of the week. The support at 2745 will be
important in this sell down and should not be broken. So for short term investors, my advise is to
try and buy when STI reaches between 28500- 2745 levels and wait for a
rebound. 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 11600
22730 13800
Support 11000
20570 12875
As for STI the resistances and supports
are as follow:
Resistance: 2930, 3030, 3080, 3100, 3140, 3200
Support:
2850, 2780, 2745, 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, Tuesday Pending home sales, Thursday Jobless claims, and
Friday Consumer sentiment.
-
The start of the 2nd quarter corporate earning..
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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