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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Well I must say I do love and hate
this job. On one hand it gives us satisfaction when we see the market
behaves as per our expectation. On the other hand, it can fool you around
and make you wonder what is it going about? The movement on last Thursday
and Friday were rather surprised to me, but again market is always right and
we just have to respect it. The billion dollar question many would ask is,
is this a bottom? Is the market going to rally from here? Frankly speaking,
Dow failure to break below 7900 last week did disappoint us, but the past
two days rally had not change our bearish stand either. Perhaps the next two
days movement will give us better clue as to what the market direction would
be. On technical perspective, as long as DJIA does not break above 8405, we
believe wave 3 of WAVE 5 would kick in very quickly and bring the index into
new low. On the other hand if 8405 does break, than we may still in the
development of WAVE 4. In that case, it would probably take another week or
so, before WAVE 5 kick in. So, our stand remains unchanged, except we are
not sure how the near term is going to develop until probably middle of the
week. Perhaps investors are trying to buy on rumor and sell on news, of
which once the stimulus package and bank rescue plan are announced, market
will start to sell down. I think we may have a clearer picture by middle of
the week." Well, just when we thought the wave 3 of WAVE 5 had kicked in
nicely last week, the plunge on last Thursday was completely reversed on the
last one hour, on the rumour that there was some new package for existing
mortgage defaulters. The DJIA index was quick to reverse from -200+ pts to
just -7 pts on closed. Again the market had killed our expectation on a
starting of wave 3. We also said that, " As for STI, we believe its weakness
as compare to its Asia peers will remain, and that any rally will be
contained by 1780 before another sell down emerge." In this respect, I think
we were right, but then again STI was well supported at 1677 last week. So
what could happen next week, giving that Monday is a public holiday in USA,
Congress had approved the stimulus package and went for a week of holiday.
Will the market reverse from here?
Well market continued to torture
those who are involved, for it gave hope and false hope for both Bulls and
Bears last week. First the plunge on last Tuesday looked like a well
position for a big plunge that the Bears are looking for. After a pause on
Wednesday, the market began with a big sell down on Thursday (just liked
what the Bears would have expected), then came the last one hour short
covering and brought most of the major indexes into a flat or slight
positive on closed. The Bulls by then would have begun to celebrate, for it
looked like a day reversal and could be the bottom for the market if Friday
could gap up and continued to rally. However, last Friday was a non
event for the Bulls, instead it was traded on negative territory most of the
time and DJIA closed -86 pts. These had certainly disappointed the Bulls,
caused the odd is now returned back to the Bears! With Stimulus package been
passed by the Senate last Friday night (which was expected by the market),
Congress is now taking a rest for a week, and market is now ready to go back
and focus on the economic data and corporate results for the coming week.
The corporate results announcement season is more or less over, with
only three main results from Wal-Mart, JC Penny and Lowe's Co left to be
announced this week. This could be the last chance for the Bear to take the
ride on bad corporate results to push the market down! On economic front, on
Tuesday we have New York area manufacturers and the National Association of
Home Builders data, Wednesday the January Industrial output and Housing
starts plus Friday's January wholesale and consumer prices. In addition, we
may have some report on the G7 meeting over this weekend and Fed releases
minutes from its last meeting on Wednesday, All these could the the events
that trigger some movement in the stock market. Technically, most of the
major indexes are still short of one more leg down to complete the whole
down moved that started in Oct'07. Plus the fact that last Friday did not
create any strong upwards reversal, we believe the odd is still favoring
another sell down next week. There is still a high chance we will witness
another big sell down (like last week) in the coming week and bring DJIA to
7500 or lower. Remember, DJIA has three days of closing below 8000 this week
now and that the 8000 level is no longer a magic number. As for STI, we believe its weakness
will come once it breaks the strong support at 1677, of which it could
happen in the coming week. The strong resistance is now rest at 1780. As
such, for mid term
investors, if you still holding short with good profit margin, you may
consider holding them until a clearer direction is prevail. As for short
term traders, sell on rally will be a good strategy to adopt.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 7963
14000 8000
Support 7700
13170 7685
As for STI the resistances and supports
are as follow:
Resistance:
1717, 1750, 1780, 1820, 1843, 1900, 1933
Support:
1700, 1677, 1600, 1570, 1550
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, oil and commodities price.
-
The 4ht quarter corporate results announcement and their respective
forecast for the year 2009, such as Tuesday's Wal-Mart and also JC
Penney and Lowe's Co on later in the week.
-
The economic data such as Tuesday's New York area manufacturers and the
National Association of Home Builders index, Wednesday January
Industrial output and Hosing starts. Friday's January wholesale and
consumer price index.
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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