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N.B. Above Chart is abstracted from
NextView Program
Two weeks ago we said that, "Last week was a typical bear market
drop, whereby on the early part of the week the Bulls were attempting to
push up the market on oversold situation, unfortunately the rally was weak
and was eventually given way to another big sell off. The situation could be
the same for this coming week, whereby market will attempt to rally on the
basis that market is deeply oversold (actually is not very true, as early
last week the oversold had been corrected in some degree.) However, when
DJIA reaches the psychological level of 10,000 and S&P reaching its 200 EMA
support, a rebound is inevitable. Which explain why USA market had a last
hour rally last Friday. The question now is, will this rally be lasting or
just another one or two days affair, follow by another big sell off."
Indeed, we had witnessed some good rebound in global markets over the past
two weeks. However, most of the indexes are now reaching their respective
critical resistance, which indicated that the rebound may be over soon? OR
could it be the resume of Bull market?
The oversold situation since the
sell down in January'10 had certainly been neutralized, the question now is
whether the January sell down had completed the Bull market correction OR
the current rebound is a Bear market rally, that once is over the sell down
will continue. I believe the past two weeks rally is merely a bear market
rebound, once the rally is over the market will have another big sell down.
The raise of discount rate by Fed last Thursday is just the beginning of the
series of rates hike (even though the Fed had come out and denied it.
Historically Fed never take an action just for one rate hike, there usually
come with a few in the process). Last Friday action in Asia market was
normal, but when came to USA market, buyers just managed to hold on the
recent gain without giving up to the bear. Could this be just a delay
effect, of which the sell down will only start next week? I believe the
chance is pretty high! Most of the corporate results had been announced in
USA market, so the most likely market mover next week will be from economic
data. We have on Tuesday's Case-Shiller home prices, Consumer Confidence.
Wednesday's New home sales, Thursday's Jobless claims and Durable goods
orders and Friday's GDP revision, Chicago PMI and Existing home sales.
Market participants will start looking at possible of inflation acceleration
from these data instead of economic slow down. So any sign of possible
inflation will trigger a sell off in stock market. Technically, I must admit
most of the indexes are now sitting at neutral levels, waiting for a break
out on either sides. However, HSI and H shares indexes have shown sign of
weakness. These are the indexes that led to a sell down of global markets in
January'10, so I would not be surprised if they lead another sell down this
time. Whatever it is, we believe the market is about to make another big
move soon, and that the odd still favoring downside. For DJIA, if it breaks
below 10339, it could be the first sign of selling down. A break below 10150
will confirm a resume of down trend. As for STI, it
may go sideways consolidation for the early part of next week, a break below
2727 will start the next phase of selling down. As
such, for Intermediate investors, you
should continue to hold your short positions. As for short term traders,
perhaps it would be better to trade on the short side for the coming weeks,
for the long side may be more difficult and subject to possible trap on
your positions.
Dow Jones Hang Seng
Nikkei
Resistance 10438
20684
10350
Support 10339 19423
10000
As for STI the resistances and supports
are as follow:
Resistance: 2763, 2772, 2790, 2850
Support:
2727, 2700, 2680,
2630, 2600
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's Case-Shiller home prices, Consumer
Confidence. Wednesday's New home sales, Thursday's Jobless claims and
Durable goods orders and Friday's GDP revision, Chicago PMI and Existing
home sales.
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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