So what will happen next week? With Dow Jones big jump last Friday, are we going to see a sustainable rally in Singapore market or could it be just another false hope for the investors? This is certainly a million dollar question to be answered! And I don't think any one can give a 100% assurance at this stage of the market. However, since this is a forward looking commentary site, we have no choice but to step forward and make a prediction. Before we go any further, let us look at the issues that cause the current drop in Singapore market. We think the main reasons behind the drop are two. First, the market is concerned about the interest rate movement in US and that whether Fed will hike interest rate in the coming 24th August FOMC meeting. Judging from our current market condition, we think that Singapore market has now built in the possible of 0.25% hike on Fed fund rate. As for US market, the T-bond, stock market and interest rate futures have also built in an expectation of such a percentage hike as well. So to us, whether Alan Greenspan will hike or not in this coming FOMC meeting, the impact has been well absorbed by the markets. If the coming CPI figure is within the acceptable range, we think market will continue to rally through the FOMC meeting from now. As such, this factor may slowly ease off in the coming week. Second, the market is concerned about the tension between China and Taiwan and that if the war erupt, Asia's markets will be badly affected. Basically there is no benefit for going into war, be it in the side of China, Taiwan or USA. The only possible benefit may be the political gain for Taiwan party prior to election next year. As for USA and China, this may eventually become part of a negotiable chip when making the decision for China to enter the WTO. As such, there should not be any immediate conflict between China and Taiwan, except some media attacking and word of mouth psychological warfare. The key to decide the faith on this conflict should be decided by the meeting between President Jing and Clinton in September. By then, a clearer picture should emerge. As such, markets will probably slow down on the respond of the media warfare between China and Taiwan for the time being.
Judging from the above fundamental, it seems to us that the August rally remain possible thought the magnitude of rally may not be as big as what we were expected early. They are a few factors need to monitor closely to see if the rally does occur. First, STI should turn up this coming Monday for it has just hit the important support line L (this is highly possible considering that Dow Jones did a huge rally last Friday and that OUB corporate result had come out to be better than expectation.) Second, for STI to remain in up-trend, it must close above 2030 and preferable above 2080 to make the market favorable. Third, Sesdeq must trade above 138 and preferable close above 140 by Friday to ensure the bull remains intact. If all these conditions fulfill next week, we may see a rally in Singapore market by end of August towards early September.

Technically, STI has either completed its wave (4) and is now entering into wave (5), or remained in wave (4). If our wave count is correct and that the bull market remain intact, then last Friday's close could end up to be either wave c of wave (4) (in this case we are expecting a triangle formation for wave (4)), or wave 2 of the wave (5). Perhaps next week's movement will give us a better picture in our wave count. However, if STI failed to remain above line L next week, than we will probably see the market drop towards 1850 as the minimum target before any possible rally. It is certainly a difficult market to trade for retail investors.

It seems that the preferred count in our "Long Term Perspective" site remains to be the most likely case that is going to happen.