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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "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."
Well the market was trading in a tight range in the early to middle of last
week and only make a surge on Friday due to slightly better unemployment
data. We also said that, "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." STI also traded within
a tight range last week but managed to close high at 2792 on Friday, thought
it is still below the critical 2850 resistance. So, could last Friday surged
begin another bull run? OR could it turn out to be a buy climax that
eventually created the high for the coming months?
Well, judging from last Friday's
closed in USA market, it certainly showed that the Bull has the upper hand
now. But wait a minute, last Friday's Unemployment data was seemed to be
manipulated by the Bulls. Started on last Sunday, Mr Summer had actually
come out to say that the data may be distorted due to cold weather, and
since then the piece of news had been used by the Bulls to ensure after the
announcement of data, no matter what figure it was, should be in favor to
the market. In fact last Friday closing, although showed more than 90%
up, the volume was low. Also the VIX is now near its January low (the point
that cause the sold down from the top) and that the AAll survey had showed
that only 26% were bearish, almost the same as the peak in January. So,
unless over the next few days, the Bulls can continue to push up the market
with good volume, I tend to believe that a top is in the process of forming
and that could turn out to be the top for the next few months! With most of
the global indexes are now near or at the January top, the market is now
overbought and is likely subjected to at least a meaningful pull back. It is
on the coming pull back that we would be able to see if the market is into
forming a top or just a pull back before the next surge. In any case, there
are no important economic data in the early to middle of next week, only
Thursday Jobless claim and Friday Retail Sales and Consumer sentiment are
market movers. The other possible market mover next week, could be from
Obama's Healthcare program development, Vocker's plan on Financial reform,
EC banks meeting on possible CDS control and financial reform and the
development in Greece sovereign debts. So, the market could be on sideway in
the early part of the week before making a move by end of the week. I tend
to believe a top is in the process of forming and market could start turning
down by middle of the week. However, only a break below 10186 in DJIA, will
confirm the top is formed and that market is on its way down. As for STI,
the announcement on HDB new rules was done after Friday market close, so the
impact will only be seen on Monday. On the other hand the strong closed last
Friday in USA market will also have impact to STI. As a whole, properties
and banks will have negative impact due to HDB new rules, but commodities
and marine counters should have positive impact from last Friday's USA
market performance. As such, we believe STI will be rather mixed in the
early to middle part of next week. A clearer picture can only be seen by end
of the week, and that could be the trend setter for the coming months. As
such, for Intermediate investors, you
should continue to hold your short positions. As for short term traders,
perhaps it would be better to wait for a clearer direction before jumping
in.
Dow Jones Hang Seng
Nikkei
Resistance 10729
21056
10450
Support 10186
20575
10134
As for STI the resistances and supports
are as follow:
Resistance: 2810, 2850, 2890, 2900
Support:
2772, 2760, 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 Thursday Jobless claim and Friday Retail Sales
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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