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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Last
year was indeed a very good year for investors and brokers. In fact, I would
say it was well exceed our expectation. Will this year continue to be like
what last year brought to us, personally I have some doubt of it. However, I
am pretty certain, we are heading to a very volatile year for the stock
market. So, prudent and cautious trading/ investment may be the key to
survive. As you may see from the above STI Weekly chart, we are again at a
crucial juncture and that for the next couple of weeks, the battle between
the Bull and the Bear may become more ugly and that a winner may emerge
soon! Starting next week, USA corporations will begin their 4th quarter
results announcement. Will this end up to be the turning point for market
direction? It is certainly possible. Considering that most of the cost
cutting measurement in the past year would have been build into the company
performance, the coming results will need to be solidly back by increase in
revenue to convince investors that the growth path remain strong. Failing
which, a sell on fact may sit in and that could be the trigger point for the
next big correction, considering that the market had not been seriously
corrected since the bottom in Mar'09. From technical perspective, the odd is
also favoring down side. First, despite a continue 5 days rally in S&P in
this new year, the breath and volume were not impressive. Second, both DJIA
and S&P are now at their major resistance (be it 50% retracement or hitting
major down trendline). Third, momentum indicators start to shown divergence
(some may be even triple divergence), which suggesting that a turn down may
be coming soon. Fourth, many Bears have been badly injure over the past few
months, for the market continued to rally and shorting was like killing
themselves. It has now reaching a point whereby the Bears have completely
lost faith in shorting and many of them have forgotten how to short!!
Another area worth taking note is on the major action for funds in January.
Last year was a tremendous good year for most of the funds, however most of
them may not liquidate their position to avoid heavy capital gain tax.
However, if market is unable to rally on good news for the next two weeks,
they may decide to sell down and take the profit first. After all the year
is still young, they can always buy back later at a lower price! For next
week, there are no major economic data, so may not have any surprise comes
out from there. However, starting from Monday we have Alcoa, follow by
Thursday's Intel, Friday's JP Morgan announcing their results. And then the
week after next will have more bigger corporations and banks announcing. We
would certainly expect a very volatile market, for most of the analysts are
beginning to demand better results. My hunch tell me that, this could be a
turning point for the market, so do be careful!" Indeed we were right to the
dot! The results announcement by Alcoa, Intel and JP Morgan were pretty
good, but all were facing a sell down after the result! We also said that,
"If Hang Seng index breaks below 22000 or
Shanghai index breaks below 3040, these could be another early sign of a
down turn. As for STI,
a break below 2890 will be the fist sign of turning." Again, some tail tail
signs had emerged, HSI broke 22000 last week! So, what could be happening
this week, will the global indexes continue to drop! Are we at the turning
point in stock market?
Last week was rather interesting.
Starting from the result announcement of Alcoa on Monday and subsequently
Intel on Thursday and JP Morgan on Friday, all were facing a sell off after
the announcement despite good results. Will this turn up to be the theme for
this corporate announcement period. It certainly looks like it for the time
being. The coming week and the week after will have big number of corporate
announcing their results. If the past does reflect the future, we will be
facing a big sell down in the stock market! However, if you have taken my
advise seriously last week after my self imposed resting for three months on
this column writing, you are certainly in good shape now! Best still if you
are my customer and have attended my seminar last Saturday, you would have
turned short last week and is now sitting on with good profit! There are not
many important economic data coming up next week, as such the big surprise
would not be from the economic data. However, there are plenty of big and
important corporate results to be announced next week. Starting on Monday's
Citi Group. Follow by corporations like Goldman Sachs, Morgan Stanley, IBM,
AMD, Google, and GE. It certainly has the power to rock the indexes. And
judging from past week performance, it is certainly favoring the downside if
everything remain unchanged! For Dow Jones Industrial and S&P, watch out for
the support at 10550 and 1120 respectively, a break will confirm the change
of trend and is likely to take the indexes much lower than current level. As
for Hang Seng Index it has already broken the 22000 level and led the global
market down last week. It would be interesting to see how the support at
21200 play out. An eventual break on 21200 will have strong bearish
implication to Hong Kong market. As for STI, we would expect a gap down on
Monday and test the support at 2850 next week. A break below this level will
probably change the intermediate direction of STI into down and could carry
for at least several weeks! For Intermediate investors, you would have
square your position last week if you had followed my advise. As such, you
may want to wait for some rebound before initiating your shorts. As for short term traders,
perhaps it would be better to switch into trading shorts for the coming
weeks, as long side may be more difficult and subject to possible trap on
your positions.
Dow Jones Hang Seng
Nikkei
Resistance 10723
22000 11000
Support 10550 21200
10880
As for STI the resistances and supports
are as follow:
Resistance: 2932, 2945, 2950, 3000
Support: 2900, 2883, 2850, 2800
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. Starting on Monday's Citi Group.
Follow by corporations like Goldman Sachs, Morgan Stanley, IBM, AMD,
Google, and GE.
-
The economic data include Tuesday's Home Builders, Wednesday's Housing
starts, PPI, Thursday's Jobless Claims, Leading Indicators.
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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