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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." Well, the market did
perform as per our expectation and the decision by Fed to purchase T-bond
from market did provide additional boost to the market. We also said that,
"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." Again we were right.
STI did go thru' some correction, but mainly on intra-day basis and remained
strong. So, have we seen the bottom? Where is the market heading to?
Well the market has certainly caught
many by surprise on its strength to go up, but not for us. In fact we were
expecting market to move last week! The Fed action on purchase of T-Bond was
the key on the market moving and of course short covering did play an
important part. The nature of price movement last week had suggested to us
that the bear market rally had started and indeed we may have hit an
intermediate bottom. The intra-day correction in USA and Asia market last
week was also very healthy and pointed to a possible of further gain next
week. For next week, the main focus will be on Mr. Tim Geither. On
Monday he is likely to present the details on Public-private joint venture
to purchase the toxic assets, which will be very crucial for the market.
Subsequently, on Tuesday for the bail out of AIG and Thursday on bank
regulation. Mr. Geither certainly has a chance to rebuild his reputation
this week, should his action cause the market to rally further! On economic
front, the data are relatively light. We have Existing home sales on Monday,
Wednesday New home sales, Thursday Jobless claims and Friday Consumer
sentiment. We believe current rally is a bear market rally on a bigger
scale, as such it may last for couple of months. And since this is a bear
market rally I would expect the rally to be very sharp and may continue to
go up and catch many by surprise. Expect DJIA to eventually test the 8000
level soon before any meaningful correction emerge. As for STI it will
probably test the 1680 level before any possible of correction. This bear
market rally got a potential of carrying STI to 1950- 2050 level within two
months time. As
such, for mid term
investors, you may want to start buying whenever there is a pull back. 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
13800 8250
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 announcement by Tim Geithner on purchasing of toxic assets
etc...
-
The economic data such as Existing home sales on Monday, Wednesday New
home sales, Thursday Jobless claims 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.
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