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updated 2 March'09  

N.B. Above Chart is abstracted from NextView Program

Last week we said that, "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." True enough, we had a quick rebound in early part of the week but was eventually given way to another sell down by end of the week due to unsatisfactory actions by the USA government on the bank rescue plan. We also said that, "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." Again we were right to the dot, STI did attempt to rally in the early part of the week but was capped firmly below 1640 level and eventually gave way to another selling by end of the week. So, what could we expect from here, giving that market has been gradually melt down without any sign of rebound. Are we going to see another sell down next week? When will be the bottom?

The proposal of swapping preference shares to ordinary shares for Citi bank did not seem favorable from the market point of view, which result in another cross the board selling last Friday. This time the S&P 500 has given way to below its 21st Nov'08 low, which put it in line with DJIA and DJ Transport index for searching a new low. With major indexes now breaking below their respective 21 Nov'08 low, we would expect this situation to carry on for a while before a bottom is in place or rather a U turn may occur.  However, giving that the market is now very very oversold, a quick rebound could happen any time now. This does not mean a bottom is in place, rather a quick rebound then follow by another sell down may be the best case to happen. With corporate results season almost over, the focus is now shifting to economic data again. There are a string of economic data to be announced next week. On Monday we will have Personal Income and Spending, followed by February National manufacturing report. Tuesday January pending home sales and February Auto sales. Wednesday ADP monthly jobs survey for February, Fed's beige book of economic conditions. Thursday weekly jobless claims and January factory orders. Then finally, we have non-farm payroll to be announced on Friday. The string of economic data will certainly create volatility next week, of which Friday could be the great finale! Expect DJIA to have some rebound in early part of the week, however another sell down may start by middle of the week and carry till end of the week. Any rebound on DJIA will be capped by 7400 level and eventually may see DJIA drops to 6900 or below. As for STI it may break below 1570 in early part of the week and hold below that level on range trading for a couple of days before another sell down by end of the week. We do not rule out the possibility of STI testing below its 28th Oct'08 low of 1473 by end of the week if not the week after. This may sound very negative for the market, but on the contrary a bottom may be reaching soon, which we expect may come by middle of March. As such, for mid term investors, if you still holding short with good profit margin, you may consider taking profit if STI drops near its 28th Oct'08 low then stay sideline. As for short term traders, you may want to consider covering your short in early part of the week and perhaps re-initiate shorts again by end of the week..
The following are the support and resistance to watch for Dow Jones, Hang Seng and Nikkei next week.

                       Dow Jones   Hang Seng     Nikkei
Resistance       7400            13100            7700
Support             6950            12000            7000

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:

  1. The movement in Dow Jones Industry and NASDAQ..
  2. The movement in currencies, oil and commodities price.
  3. The development on Europe for their financial rescue plans.
  4. The economic data such as Monday we will have Personal Income and Spending, followed by February National manufacturing report. Tuesday January pending home sales and February Auto sales. Wednesday ADP monthly jobs survey for February, Fed's beige book of economic conditions. Thursday weekly jobless claims and January factory orders. Then finally, we have non-farm payroll to be announced on Friday.

The following are two possible wave counts on STI as at to-date:

  1. 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.
     
  2. 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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