 |
N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." True enough market
continued to drift lower and each time there was a rebound it would quickly
be erased and followed by a wave of selling. The market had indeed forgotten
how to rally now. We also said that, "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." Again we were right to the
dot! STI had been trading below 1570 for the whole week and closed near its
weekly low. So what could happen next week, are we going to see the revisit
of last year low of 1475? When will the bottom come?
Like we said last week, we are
expecting a test of 1475 in STI very soon. We had witnessed a new low in
S&P, DJIA, Dow Transport, NASDAQ etc, so there is no reason why STI won't
drop below that level. In fact market is now very oversold, DJIA has been
down 11 weeks out of 12 weeks this year and the market seems have forgotten
how to rally now! The extreme oversold scenario seems to call for some form
of rebound, but then so far never happened! So are we seeing some rebound
soon? Is the bottom coming? Well, picking bottom is always a very painful
process and if not careful the falling knife may just cut through the hands!
In term of wave structure, we have not even seen a wave 4 of Wave 5 small
rebound, not to mention the wave 5 of Wave 5, so the trend remains bearish.
However, there is a chance that wave 4 and wave 5 of Wave 5 may all happen
this week! The news from Washington, especially on the discussion of
changing accounting format for corporations this Thursday, may be the key
event for the market. For if banks do not required to value their assets by
mark to market, it will have great impact on its balance sheet and in turn
could have great impact to the market. Another economics data that worth
looking at is the Retail Sales figure to be announced on Thursday. Other
than that, market will likely to respond on news coming from Fed and
Washington plus the auction results on T-Bonds. Cycle wise, there is a high
chance that a bottom may be formed some time between 10th to 18th of March,
so with all these combine events, there is a good chance we may see a
rebound by mid of the week and follow by the final sell down by end of the
week. As for STI it may break
below 1475 in early part of the week. Ideally STI should reach 1350 of which
it would represent Wave1 equal to Wave 5. We will continue to monitor and
let you know if we think the bottom is formed (by sending the email to you,
if you are my customers). Of course this is just an idea target, we do not
rule out other possible targets such as 1300 and 1200. We will only be
certain when the wave structure has confirmed and will inform you asap. 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.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 7000
12000 7200
Support 6300
10670 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:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, oil and commodities price.
-
The development on Europe for their financial rescue plans.
-
The economic data such as Tuesday Wholesale Inventories, Thursday
Jobless Claims and Retail Sales and Friday Consumer Sentiment.
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 |