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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Well
if my reading is correct, the global markets were going through a
distribution process over the past one month, where most of the funds that
invested in early March'09 were happily taking profit ahead of their
financial report. Leaving those late comers and retail investors holding the
babies. Will the end June window dressing come into play? I am not very
sure, for the more people expect it to be, the less chance it will be
happened. Remember when thing becomes obvious, it is obviously wrong! For
this week, the economic data are relatively light. We only have on Tuesday
Existing home sales, Wednesday Durable goods and New home sales, Thursday
Jobless claims and Friday Consumer sentiment. These data may not create any
big movement for the market. We also have Fed meeting on Wednesday and the
bond auctions, which may have some impact to the market, but may not be
substantial. As such some window dressing during this quite period is still
possible, but I would expect to be very brief and if any, could be on
selective stocks only. However, once investors sense that there are no big
window dressing activities, a bigger degree sell down may occur. We believe
USA market has completed its top on 11th June and is now in the process of
coming down. The only thing that we are not sure is, whether it will drop
from here or it will have a small rally on month end window dressing before
selling down." Well, the market was rather sideway over the past one week,
with DJIA stuck within a tight range. This is a typical window dressing
period! We also said that, " As for STI, if there is a short term rally, it
will likely be capped at 2320 and should start to come down from there."
Well, STI did close below 2320 last Friday!
Well the past one week was rather
choppy, with some window dressing on rotating counters everyday. While we
still believe the market will eventually work its way down, we are not sure
how the near term movement will be. The reason been that during the window
dressing period, sometime the movement could be quite distorted. However, we
believe for the Bear to continue holding its foothold, DJIA should not move
above 8550 in the coming week. A break below 8250 will basically form a Head
and Shoulder formation that point the DJIA index to 7500! For next week
economic data, we have on Tuesday Chicago PMI and Consumer Confidence,
Wednesday ADP Employment and Motor vehicle sales, Thursday Jobless Claims
and Nonfarm Payrolls. These are rather important data that may move the
market. Traditionally, market will also make its big move after Independent
day in USA, as such we believe a big move is going to happen soon. Judging
from the market performance, we believe the odd is in favor of the downside.
The first sign will be when DJIA break below 8400, then the all important
support at 8250. If all the supports fail, DJIA is likely to make a big
plunge towards 7500! However, if DJIA managed to rally above 8550, we will
need to re-exam the wave counts again for the scenario may be changing. if
you are an aggressive
trader, you can start shorting when DJIA breaks below 8400. As for STI,
if there is a short term rally, it will likely be capped at 2350 and should
start to come down from there. A break below 2280 will be the first sign the
market is turning down. Once the index breaks below 2200, there is likely a
big plunge to 1960 soon. However, if STI managed to close above 2350 on
strong volume then the scenario may change. As such, we remain short since
two weeks ago when STI broke below
2350 and kept our stop loss just above STI high at 2424. If STI breaks below
2200 we will add more short positions. As for mid term
customers, I would assume you have squared all your positions by now. You
may also try to add more short positions when STI breaks below 2200.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 8550
19200 10000
Support 8400
17900 9650
As for STI the resistances and supports
are as follow:
Resistance: 2320, 2350, 2371, 2424, 2465, 2500
Support:
2270, 2150, 2100, 2050, 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 Wednesday Fed's meeting.
-
The economic data include Tuesday Chicago PMI and Consumer Confidence,
Wednesday ADP Employment and Motor vehicle sales, Thursday Jobless
Claims and Nonfarm Payrolls.
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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