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updated 1st Mar 2010  

N.B. Above Chart is abstracted from NextView Program

Last week we said that, "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." DJIA did break below 10339 last week, but was unable to follow through and broke the 10150, instead it came back strongly after the sell down, so the fighting still going on between the Bull and the Bear. We also said that, "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." Again, STI did come down last week, but was unable to break below 2727. So, what could happen next week, giving that the fighting last week was a draw between the Bull and the Bear?

The oversold situation after the three weeks rebound has been completely corrected and that market is now at its neutral state now. Forget about the Bulls and the Bears market reports for non can provide a definite advice going to next week. On Technical perspective, most of the global indexes are now at their respective neutral state waiting for next direction. Under such situation, it is very difficult to make a correct call for immediate direction, however one thing we are very sure, that is once the direction has been determine, the next move will be a big one! We are not sure what will cause the big move, it could be yesterday Earthquake in Chile and its aftermath, it could be the Greece and PIGS sovereign debts problem, it could be the healthcare negotiation in Washington, it could be the development on Vocker's plan on banks future or it could be due to some important economic data that are coming next week! Next week, we have Monday ISM and Consumer spending, Tuesday Motor vehicle sales, Wednesday ADP employment, Thursday Jobless claims and most important Friday Non farm payroll. We believe after next week, we will be able to see a clearer short to medium term direction for the market. If I have to make a stand right now, I would still favoring market coming down in the coming weeks/ months, for there are so many uncertainties and events waiting to be explored. For DJIA, if it breaks below 10186 last week low, the down trend is basically confirmed. Only a break above 10500 will cause us uneasy and could extend the recent rally for a few weeks before the next sell down. As for STI, 2727 remains the key point to watch, a break will confirm the beginning of next down trend. Only a break above 2850 will delay the next sell down for a few more weeks. 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           21000            10200
Support            10186           20120            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:

  1. The movement in Dow Jones Industry and NASDAQ..
  2. The movement in currencies, bond, oil and commodities price.
  3. The corporate result announcements.
  4. 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:

  1. 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.
     
  2. 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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