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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, " 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." Indeed we were
right to the dot! DJIA did continue to plunge and even dropped below the
21st Nov'08 low on Friday before some short covering emerged. We also said
that, "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." True
enough, after breaking the 1677 level, STI took a dive and closed below 1600
last Friday. So, what could we expect from here, will the markets collapse
from here? Or a bottom is very near?
Global markets are certainly very
jitter now, with no clue as to how Mr. Tim Garnett is going to announce the
banks rescue plan. Couple with the option expired last Friday, the indexes
were badly beaten in the early to mid part of Friday and only saw some
recovery towards the closing. With USA market closing negative on 6 out of
the past 7 days, the market is certainly very much over sold in the short
term. Plus the rumor that Mr. Tim Garnett may announce the rescue plan next
week, the market is ripped for some form of rebound. But how strong is the
rebound will be very much depend on the plan itself. If the market finds
that the plan is just another so so as per before, than another big sell
down is likely. There are another 51 S&P 500 companies report their results
next week, including Dow component Home Depot on Thursday. Plus a series of
economic data, such as Tuesday's Case-Shiller Home Price index, Consumer
Confidence, Bernanke semiannual report to the Senate Banking Committee on
monetary policy and the state of economy. Wednesday's January Home sales,
Thursday's New Home sales, Durable goods orders and weekly jobless claims
and on Friday Chicago manufacturing survey. All these could make next week
market even more volatile. Expect market to have some rebound in early to
mid next week, however such rebound may not sustainable if there is no
concrete and good rescue plan comes out from Mr. Tim Garnett. As such market
may end up facing another big sell off by end of the week. As for STI there
could be a rebound in early to mid of the week, however the rebound should
cap below 1677 and the index is likely to face another sell off by end of
the week. As
such, for mid term
investors, if you still holding short with good profit margin, you may
consider holding them even if there is a rebound. As for short
term traders, you may want to consider covering your short and perhaps
re-initiate shorts again when STI rebound near 1677 level.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 7600
13055 7890
Support 7250
12440 7406
As for STI the resistances and supports
are as follow:
Resistance: 1630, 1677, 1700, 1717, 1750, 1780
Support:
1570, 1550, 1473, 1350, 1200
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 Home Depot.
-
The economic data such as Tuesday's Case-Shiller Home Price index,
Consumer Confidence, Bernanke semiannual report to the Senate Banking
Committee on monetary policy and the state of economy. Wednesday's
January Home sales, Thursday's New Home sales, Durable goods orders and
weekly jobless claims and on Friday Chicago manufacturing survey.
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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