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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." Well, we were
right, indeed the broke up on last 15 min on Friday was real and DJIA
finally did manage to surge up to a high of 8839 last Friday after the
non-farm payroll data. We also said that, "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." Again, we
were right. STI did continue to move up but on a much slower pace towards
2424. So, what could we expect next week? Is the Bull going to continue
charging up? Will the long awaited correction finally arrive?
Well market has certainly reached a
very over bought situation right now. Despite many analysts calling for a
correction over the past one month, the market continued to charge forward.
This has made investors wonder if the correction will ever come. Last Friday
unemployment data could be the first indication of the market weakness.
Despite a much better than expectation data, the market failed to rally. In
the past weeks, the not so bad news will push up the market, but last
Friday's good news had no impact to the market at all. This could mean the
market has run out of buyers, or rather the market has started to request
for more good news before making any move. In any case, I can see the first
sign of cracking now. Couple with the reversal in US$, the bond and
potentially oil & commodity, the environment is indeed ripped for some form
of correction now. Technically DJIA is now hovering around its 200 days
moving average, some global indexes are now hanging at their respective
0.382 retracement level too, all these are indication that a reversal may
soon happen, OR may have already started last Friday! This week will have
relatively light economic data. On Wednesday's we have Fed Beige Book and
trade report. Thursday's Retail Sales and Friday Consumer sentiment. Other
than these economic data, the only piece of news need to monitor is on the
banks proposal to return the TARF funds to Treasury. My hunch has told me
that, perhaps by end of this week a correction may arrive. The other sign to
look at is if DJIA breaks below 8600, S&P below 923 and STI below 2350, all
these will provide an early warning to the market. But until then, we have
to respect the intermediate trend, which is still up. As for STI,
it may continue to rally on Monday towards the important resistance at 2424,
however if it fails to penetrate through again, then it will become a triple
tops and will likely to turn down from there. A break below 2350 will
confirm the change of trend and bring in more downside in the coming weeks. 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 be completely out of
your long by now.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 8840
19000 10000
Support 8600
18100 9654
As for STI the resistances and supports
are as follow:
Resistance: 2424, 2465, 2500
Support:
2371, 2350, 2300, 2230, 2150, 1960
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, bond, oil and commodities price.
-
The development on banks that propose to return some TARF funds to
Treasury.
-
The economic data include Wednesday's Fed Beige Book and trade report.
Thursday's 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.
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