 |
N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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!" Well, DJIA did make a false break up to 8580 last
Wednesday prior to a big sell down on Thursday. As a whole the market was
behaved within our expectation. We also said that, " 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." Again, we were right, STI did manage to rally briefly
to 2361 (11 pts above our target price) before selling down again last
Friday. So, with non-farm payroll data much worst that market expected, will
this data become the catalyst for market to turn down from here? How could
we expect the market movement for the next few weeks?
Well last Thursday big sell down in
USA market had certainly done some big damage to the market. The market has
finally realized that real economy may still in recession despite a rosy
rally in financial market. This will likely lead to a convergence between
the financial and real economy in the next few months. What I am saying is
financial market will likely undergoing some correction while waiting for
the real economy to pick up. As such we believe DJIA will continue to
correct downward. A break below 8200 will confirm the down slide towards the
initial target of 7600. This may happen very fast, especially if there are
some profit warning prior to the corporate results announcement in two weeks
time. As such, we believe DJIA may stay at current level for one day or so,
before another big sell off emerge. For next week
economic data, we have on Monday ISM services, Wednesday Consumer Credit,
Thursday Jobless Claims, Friday Trade Balance and Consumer Sentiment. Among
all the data, perhaps Jobless Claims and Consumer Sentiment are the more
important one. In any case, current situation is now favoring sell on any
possible bad news, which is likely to happen especially when the corporate
results announcement is just right at the corner. For DJIA if it breaks
below 8200, it will drop quickly to 7800 before reaching 7600 level. As for STI,
the gap created at 2320 may be filled. However, if it breaks below 2280 then
it may continue to drop till 2200 support. A break below 2200 will likely
lead the index to the next main support at 1960. As such, we remain short
since three 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 8400
18400 9900
Support 8250
17800 9690
As for STI the resistances and supports
are as follow:
Resistance: 2320, 2350, 2371, 2424, 2465, 2500
Support:
2270, 2200, 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 possible profit warning by corporations prior to the reporting
season that starting in two weeks time.
-
The economic data include Monday ISM services, Wednesday Consumer
Credit, Thursday Jobless Claims, Friday Trade Balance and 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.
previous | next |