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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Market has finally decided to trade lower after a long waiting
period. Is this going to be a big one or just a few days correction?
Traditionally the month of August and September are not very kind to the
market. By coincident, our Chinese 7th month is also starting soon. These
cycle events could have some impact to the market. We believe market will be
very tricky for the month of August and September, while the main trend is
down, the market may zig saw up and down, which is not good for contra
trading. In our opinion, the USA market
had started its correction since last Thursday and could carry on for about
a month. How low the correction can be and in what form we do not
have a clue. However, judging from the bullishness in current market
condition, I would not be surprised to see a sharp drop to shack away the
weak Bulls before the market resumes its upward surge. For next week, the
focus will be on economic data, we have on Tuesday PPI and housing starts,
Thursday Jobless claims and the index of Leading Economic Indicators and
Friday Existing home sales. Traders will be watching for sign of economic
weakness to find excuse for selling down. With corporate results
announcement near the end and time cycle favoring down move, it would be a
surprised if a strong rally emerge. We believe DJIA will continue drifting
lower towards 9000 or may even touch on support at 8800 in the coming
weeks." Well, market did have some correction in the beginning of last week,
but had been consistently going up since Tuesday. We also said that," As for STI,
expect it to continue its correction towards 2480 level, and may even go as
low as 2424." STI did continue to consolidate and had gone down to a low of
2521, but did not plunge at a magnitude that we would like to see. So, with
DJIA surged over 155 points last Friday, will it turn the market around and
start another bull run? What is the best strategy to adopt at this juncture?
While the
market has been way over stretch since Mar'09 rally, any correction had been
relatively shallow and was quick to follow by another rally. Last Friday
surged could be another catalyst that fit in well to the recent rally's
character. However, we would rather take a cautious stand at this juncture,
for it may be a bull trap giving that the month of August and September are
traditionally negative to stock market. However, if USA market continues to
rally over the next few days without any big pull back, the market may
indeed kick start another bull run! As such, it is worth paying extreme
attention for the next few days movement to decide whether the pull back
correction is over! Perhaps the string of economic data releasing next week
will determine the near term market direction. On Tuesday we have Shiller
home price index and Conference Board's Consumer Confidence. On Wednesday,
we have July durable goods orders and New home sales data for July. On
Thursday we have jobless claims and on Friday we have personal income
and consumer sentiment. A continue rally over the next few days may
eventually force any short sellers to cover short and push the market for
another bull run. However, if DJIA breaks below 9400, the consolidation
period may be lengthen for a few more weeks. As for STI, expect it to
test the trend line resistance around 2580 in the early part of the week.
Whether it can break above it and continues for another bull run will be
very much dependent on the USA market. The 2580- 2620 is now posted as major
resistance, a break above this level will kick start another bull run. On
the other hand 2520 is now an important support, a break below this level
will definitely push the index much lower and could lengthen the correction
for a few more weeks. For Intermediate investors, you may want to monitor
the above resistance and support levels before making your move. As for short term traders,
perhaps it would be better if you wait until a break out on either side
before taking any action.
Dow Jones Hang Seng
Nikkei
Resistance 9653
21196 10400
Support 9267
19800 10140
As for STI the resistances and supports
are as follow:
Resistance: 2580, 2604, 2680, 2700, 2750
Support: 2521, 2500, 2465, 2424, 2371
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 corporate result announcements.
-
The economic data include Tuesday Shiller home price index and
Conference Board's Consumer Confidence. On Wednesday July durable goods
orders and New home sales data for July. On Thursday jobless claims and
on Friday personal income 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.
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