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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." True enough, DJIA had experienced the best rally this year with a
consecutive of 3 days rally in a row. The market has also given us hope that
an intermediate bottom may have reached. We also said that, "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." Again we were right to the dot,
STI did go down to 1455 (below previous low of 1475) before bouncing back by
mid to end of the week. So, the question now is .. have we seen the bottom?
Will market start moving up from here?
Well while the past three days
strong rally could really make a case that we may have seen the bottom,
under strict technical rule the bottom has not been confirmed. At this
juncture I would say we have 50%- 50% chance that an intermediate bottom may
have formed. The key resistance to watch for respective global indexes are
DJIA 7450, S&P 800, Hang Seng 13000, Nikkei 8000 and STI 1600. If all or
some of the above indexes could convincingly closed above their respective
resistance level, an intermediate bottom may have been formed and that we
will start seeing some rally for the next 3- 6 months. Failing which, the
global indexes are still likely to test their new low in the coming weeks.
For this week, the likely events that could have impact to the market
include Fed meeting and their decision on the purchase of Treasuries note in
the open market, results of Fed Ex, Nike and Oracle. On Thursday GE will
brief their investors on activities of its financing arm GE Capital. Finally
Tim Garnett may announce the long awaited bank rescue plan. Congress hearing
on the remaining $350 bn TARF funds and on AIG. Plus economic data such as
Industrial production, Consumer price and Housing start. All these will have
great impact to the market. As a whole we believe DJIA will have at
least a correction in the early to middle of the week. The clue may come in
the coming correction as to whether the intermediate bottom has formed OR we
are still heading to a new low in search for bottom. If you are my customers
we will up date you as soon as we sported the clue. As for STI, we are
expecting some sort of correction that may happen in early to middle part of
the week. In order for the index to push further up, any correction will
have to be supported above 1500. Failing which we may be revisit the low
again. As
such, for mid term
investors, you may want to wait till a clearer picture before jumping in. As for short
term traders, you may want to consider buy on dip and sell on rally
strategy.
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
13000 8000
Support 6870
12500 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 Fed meeting and the news on bank rescue plan, Congress hearing on
TARF program and AIG etc..
-
The economic data such as Industrial production, Consume price and
Housing Start. Plus corporate results on Fed Ex, Nike and Oracle.
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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