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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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." Well, DJIA did continue to
move up after previous Friday's surge, however the magnitude were much
smaller and that Friday was a sell down too. This had shown that our worry
of a bull trap may be real. We also said that, "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." Indeed STI did break above 2580 and
went to a high of 2667 before coming down. So, are we going to see a
continue bull run OR is the rebound since Mar'09 coming to the end!
Well we do have quite a few
important economic data coming up next week, starting with Monday's Chicago
PMI, Tuesday's Construction spending and Vehicle sales, Wednesday's ADP
Employment and Factory Orders plus FOMC meeting minutes, Thursday's Jobless
claims and ISM nonmanufacturing data and finally on Friday the all
important Unemployment data. The market itself has reached a point that a
critical movement may be coming up soon, this move will likely set the
market direction in the next few weeks. The only question of uncertainty is
the direction. We believe if DJIA can break above 9650 next week, the chance
of continue rally to above 10,000 level is high. However, if DJIA breaks
below 9400 then the odd will be favoring the downside, of which the rally
since Mar'09 may be over! As such a close monitoring on market pulse is very
important. Perhaps the non-farm payroll on Friday couple with a long weekend
holidays in USA will set the tune for the next few weeks market direction. As for STI,
it needs to break above 2700 to continue the bull run. However, if it breaks
below 2521 the intermediate top may have formed. So, at this juncture I
would advise you to stay sideline waiting for clearer direction. For Intermediate investors, you may want to
square your long positions and wait for a break out on either direction
before taking a fresh position. 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 10668
Support 9400
19800 10140
As for STI the resistances and supports
are as follow:
Resistance: 2680, 2700, 2750
Support: 2600,
2580, 2521, 2500, 2465
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 Monday's Chicago PMI, Tuesday's Construction
spending and Vehicle sales, Wednesday's ADP Employment and Factory
Orders plus FOMC meeting minutes, Thursday's Jobless claims and ISM
nonmanufacturing data and finally on Friday the all important
Unemployment data
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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