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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Well last week we had an outside
range bar for the week compare to previous week and these had happened
within the down trend line as shown on the STI weekly chart above. It
certainly indicates that market is rather uncertain right now. However since
it has happened near an important resistance level, it also means that a
possible top is forming in the process. Last Friday movement in USA
market was rather weak too, with DJIA attempted to rally into its resistance
line but failed to penetrate through and fall back towards closing. This has
indicated to us that there could be more down side in the next couple of
weeks. While we do not rule out completely a possible of small rally on
Tuesday after the Monday holiday, unless DJIA breaks above 8400, we remain
bearish near term. A break below 8221 will confirm the down trend and will
bring more down side to the market, with a possible initial target of 8050
and a secondary target around 7800. If this is going to happen, it will
likely achieve within the next two weeks." Well market was rather choppy
last week, with DJIA opened near the low and tried to test the 8221 support
on Tuesday, but was quick to reversed and closed near day high. However, it
was subsequently sold down on Wednesday, but rebound on Thursday plus
attempted to break above its 8200- 8500 trading range by closing on Friday.
These type of volatility had certainly created a big puzzle to the market
participants. We also said that, "As for STI,
since there is no USA market on Monday, it will likely stay range bound
while the selective second liner may try to rally up. However, STI should
start turning weaker by Tuesday ahead of USA market opening. Once it breaks
below 2190, STI will drop quickly towards 1960 and below." We were wrong in
this uncertain market. While the early part of the week was close to what we
were expecting, the stimulus package announced in Hongkong and the
subsequent strong rally had caught us completely wrong footed. So, the
closing in Asia plus a last 15 minutes rally in DJIA on Friday, are there
constitute a beginning of another bull rally? What could we expect next
week, giving that markets are very overbought, but yet Asia markets
especially Hongkong, remain very strong!
First, let's look at last Friday's
action in USA market. For the whole day, the market seemed directionless and
had not decided where is the best to move for the coming month of June. This
could be due to month end window dressing and some switching of portfolio.
However, the last 15 min of rally, did create some distortion in the market.
The chart of some major indexes have suddenly turned bullish short term due
to the last 15 min action. So, the key question is that, is the last 15 min
movement reliable or purely due to month end decoration and some short
covering. I have no answer to it, perhaps by Monday USA market action, will
tell us the full story. If Friday last 15 minutes action turn out to
be reliable, then DJIA could continue rally to its 200 days moving average
around 8800 as the next target to look for. Otherwise DJIA has to come down
by Monday to below 8500 to keep the index within the trading range of 8200 -
8500 before we can make the next assessment. On next week, we have quite
heavy economic data in the pipeline. Starting from Monday ISM, Wednesday ADP
Employment service report and the all important Non-farm payroll on Friday.
We also have GM potential filing for bankrupt on Monday and the decision on
Chrysler bankruptcy on Monday. All these will add up the volatility to the
market, and perhaps will decide the fate on the index movement for the moth
of June! With the immediate trend remain up, the odd is certainly favoring
the upside. However, most of the indexes are either reaching their 200 days
moving average or their 0.382% retracement from the bear trend that started
in October'07, which may act as important resistance or even a turning point
for this counter trend rally. As such, extreme cautious is necessary even
thought we have no confident on the immediate market direction. Perhaps we
could see a clearer picture by end of the week, when the non-farm payroll
been announced. For next week, if DJIA manages to continue staying above
8500 it is bullish. However, if it drops to below 8500 and subsequently
breaks below 8200, a big degree correction may be starting. As for STI,
it may continue to rally towards its 0.382% retracement point at 2390 since
it is only 60 points away. As to whether it will continue to rally by then,
a lot will be dependent on Hang Seng movement and the USA market. While
majority of the blue chips stocks have experienced tiredness for the upside,
it does not indicated that a trend must change by now. Hence, we have to be
more patient waiting for the market to give us the next signal. As such, we remain cautious short term
and rather stay sideline to wait for indication. As for mid term
customers who had followed my email advise to purchase on 3rd March, and
subsequently added some stocks on 6th April, you should take profit and stay
sideline now for the market could be moving either way from here.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 8600
19300 9650
Support 8400
18000 9350
As for STI the resistances and supports
are as follow:
Resistance: 2350, 2380, 2400
Support:
2300, 2230, 2150, 1960, 1885, 1850, 1830
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, oil and commodities price.
-
The faith of General Motor on whether it will end up in bankruptcy on
Monday and the court decision on the faith of Chrysler on Monday.
-
The economic data include Monday ISM, Wednesday ADP Employment service
report and the all important Non-farm payroll on Friday.
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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