 |
N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Well, there certainly had a
disparity between Asia stock markets and USA market. With Dow Jones
continued to show sign of improvement, Asia markets had tumbling down last
week. The sell down was accelerated on Friday, after investors disappointed
that China did not support the stock market during Olympic time. On one
hand, it could be interpreted that funds were selling Asia and bought USA
market, on the other hand the tumbling on crude oil, commodities and the
strengthen in US$, could be the main reasons that caused the sell down in
Asia and the rallied in USA market. So, what would happen next week? Will
the sell Asia and buy USA continue OR will Asia finally agree with US market
and start to rally soon? I believe this rally in USA market is still a
counter rally in nature and is likely to stop between 12200- 12000 level.
Another sell down may start by end of August. As for Asia market we could
see some form of rally early next week, but do not expect a big one, cause
most of the Asia indexes are not geared for big rally yet! We expect after
some rally in early next week, markets are likely to face another sell down
by end of the week. The cause of sell down could be due to the release
of July Retail Sales figures and weekly crude oil inventories data on
Wednesday OR the release of CPI data on Thursday." Indeed we were right! Dow
did make a strong rally last Monday but was quick to turn around and started
to come down. It was only managed to pull back some by end of the week. We
also said that, "As for STI, I expect some
rally early next week to challenge the 2900 level again, but again it will fail and drop
by end of the week. The negative sentiment in China stocks will continue to
rule the market and will affect STI in the coming week." Again we were right
to the dot. STI did attempt to move up in the early part of the week, but
was too weak to challenge the 2900 level and stayed negative in most of the
week. So, what could happen next week, giving that the corporate result
season is almost over, and that crude oil plus commodities had been tumbling
in the past weeks? Will the market rally or we will see another big sell
off?
The typical Summer time slow market
has certainly started and look set to continue. While the weak crude oil and
commodities price may fuel some more rally in USA stock market, the momentum
seems to have slow down over the past one week and that the 12000 level may
not be challenged in Dow before market turning down again! With corporate
results announcement almost come to the end, the main focus next week will
be crude oil and commodities movement. Giving that crude oil has been down
for nearly two weeks there is a possibility that some sort of rebound may
occur and that will give pressure to the stock market. We believe Dow Jones
Industrial is about to turn down soon and a break below 11450 will
accelerate the sell off, so do exercise cautious. Only a strong move above
11800 will raise hope that Dow will continue to rally and challenge the
resistance at 12000. As for STI, I expect a small rally on Monday but will
stay quite throughout the week with a likely chance of continue drifting
lower to the support at 2745. I do hope that you had got out your long
positions by now after my warning in the past two weeks. If you have not,
you may need to lower down your expectation and consider cutting loss ahead
of a potential big sell off in the coming weeks. Indeed we are now entering into a very difficult
market, unless you are very sharp in your entry level, it is not easy to
make money on short term trade. So, may be you want to scale down your
trading positions and do act quick in your enter and exit strategy. As for medium term investors,
my suggestion is to stay sideline and wait for good opportunity to come.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 11870
22300 13550
Support 11450
20570 12670
As for STI the resistances and supports
are as follow:
Resistance: 2820, 2850, 2900, 2947, 3000
Support:
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
Russia and Georgia.
- The
economic data, Monday Housing start, Tuesday weekly jobless claims,
Thursday Leading economic indicators for July.
-
The continue of major report earnings. Tuesday Hewlett Packard.
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 |