 |
N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." True enough, Dow Jones Industrial was trapped within the
trading range of 11600- 11000 last week, even though there did have some
100+ to 200+ movement a day. It was also true that Nasdaq and S&P were
continued to get weaker while Dow Jones stayed at trading range. We also
said that, "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." Again, we were right to the dot, STI did attempt to move upwards
in the early part of the week and traded to a high of 2947, before succumbed
to some selling pressure. So, what would happen next week giving that the
USA market had a big sold down on Friday and that financial sector remains
very uncertain and Oil price remains near all time high?
Last Friday closing had certainly
make Investors very nervous. The development on the retail bank IndyMac that
was shut down by regulators, the news as to whether Treasury and Federal
Reserve will come to rescue the near collapse Fannie Mae and Freddie Mac.,
the tension on development between Iran and Israel, the surging on Crude Oil
prices, the testimony of Fed Chairman on Tuesday, and the earning reports
from some major banks will definitely create the volatility to the market.
Will the market collapse by then? Or will the market have a final flushing
down and make its bottom? It is certainly a billion dollar question and that
no one can give a definite answer. However, I believe the market is likely
to have a big sell off climax and that a near term bottom may be formed. As
to whether it will eventually turn out to be the bottom for the next Bull
run is yet to be confirmed. For I think, after fighting so hard to rescue
Bear Stearns, the financial sectors and the economy, the Fed and Treasury
have no choice but to continue fighting on, which mean they are likely to
come out with a plan to rescue the fails Fannie and Freddie, which will then
create a similar rally in March when Fed stepped in to rescue Bear Stearns.
Plus the fact that market is very oversold, any good news will likely spark
a big rally. The key support for Dow Jones Industrial is at 10800- 10700
range and for the Bulls to have a chance for a run, this level should not be
broken. As such, I would expect a test in this level in the early part of
the week before a bottom is formed and kick start a rally that will last for
multi weeks. As for STI, I do not foresee a serious sell down in the market,
if Dow Jones Industrial is going for a sharp drop on Monday to 10800- 10700
level, then STI is likely to just test the support at 2850 level. However,
if the Dow takes a few days to reach 10800- 10700 level, then STI may
eventually test the March'08 low at 2745. Whatever it is, we are indeed very
close to a bottom. I would expect a sell down in STI towards 2850 on Monday,
if there is no rescue plan announced by the Fed on Monday night, then STI
could continue to come down and eventually test the 2745 level. 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, you could either continue to stay sideline and wait for the market to signal its
bottom or start to accumulate China related stocks ahead of the Olympic. 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 11400
22730 13800
Support 10750
20570 12875
As for STI the resistances and supports
are as follow:
Resistance: 2947, 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 plus tension from Iran and Israel.
- The
economic data, Monday June retail sales and producer prices index,
Tuesday Bernanke's testimony and CPI, Wednesday Industrial production
and capacity and the minutes of the Fed's last meeting on interest
rates.
-
The start of major report earnings. Tuesday Intel Corp, Wednesday EBay
Inc, Thursday Merrill Lynch, JP Morgan, Friday Citigroup, Google, IBM
and Microsoft.
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.
previous | next |