 (Updated 26/09/99)  N.B. Above Chart is abstracted from Metastock Program Last week, we said that "We think the market is about to enter its impulsive wave 3 of wave (5). If this is true, it needs to satisfy two conditions next week. First, STI must break above 2160 convincingly with high volume. Second, Sesdeq index must break and stay above 160 by Friday. If all these conditions fulfill, we could expect STI to trade into new high very soon and in an impulsive manner. Having say that, if the rally could not sustain into next Tuesday, we may trap in the triangle consolidation phase again, with extended sideways correction." STI did not break above 2160 and the rally started on Friday (the week before last) did not even carry through Tuesday. At the same time, Sesdeq had never broken above 160 and instead came down and closed at 142. All these signal a very negative picture and that we could be heading for more troubles! Indeed last week, the market had given us full of information. Starting on Monday, the rally had fizzled out in the morning after touching 2150 resistance with average volume that provided us a first alert. On Tuesday, STI continued to drift lower with no interest in the market, which suggested to us that our bullish view may be wrong. On Wednesday, both STI and SES All Shares indices broke their up-trend channel (since Sep'98) support, indicating that something was going wrong in the market. Although, on Thursday STI managed to open low but closed unchanged, given hope that it may be a reversal day. The hope was beaten completely by Dow Jones that night, with Dow dropped more than 200 points. The picture suddenly turned very negative by then, with Dow Jones, S&P and NASDAQ all broke their critical supports at 10450, 1300 and 2413 respectively. These had created a fear that US stock markets may be experiencing a crash and a black Friday looked set to be in the card! Friday was indeed a bloodshed for Asia markets, with Nikkei broke its critical support at 17000 and Hang Seng barely stayed above its 13000 support, our Singapore market looked very jitter. It closed at 2019, below its critical support at 2040. With all these negative news in the cards, we are wondering what would happen next week? Are we about to see another crash with a magnitude equal to 1987 or the 1929 Great Depression? While Dow Jones did not crash last Friday (which gave us some space of relief), it failed to make a rally and stayed in negative territory on close. This had suggested to us that more trouble in the US market are expected. The next two months will probably decide whether Greenspan can manage a soft landing for US stock market or not. If he succeed (assume Dow Jones will correct up to 9,000 max), we may have a good chance to return back into our bull market mode again. However, if he fail then the whole world markets will be in trouble (a crash may bring Dow Jones to 5,000 or lower!) Currently, all the Asia stock markets had only experienced a three wave up-move and had not seen any fifth wave in the making. These had suggested to us that the rally since September may turn out to be a corrective move then an up-trend rally. If this is the case, then we could be heading for a new low in the entire Asia markets, which is really a disaster to us! While we would like to stay away from the Doom Sayers, such negative thoughts that we had throw into the dust bin few months ago, may have to pick back and re-exam again. As such the coming two months will be very crucial to us and shall determine our market's medium to long term perspective. Now, let's move back to what will happen next week. Are we going to see a Crash? We believe the markets will continue to move lower in the early part of next week, but may experience some technical rebound towards middle or end next week. STI should hold its support at 1936 and experience a bound towards 2040 by end of the week. However, judging from the big uncertainty in world markets, especially the US stock market, we would rather stay sideline and await the market to take its course. We may have to wait until October 5, the Fed meeting, to decide the next move in the stock markets. As such, the risk/ reward ratio may be too high for us to remain in the market. We will review our stand again in our next week commentary. Technically, we are in a critical juncture for the medium to long term. As we are unable to identify wave 5, the market had left us in two possible long term scenarios. One is that we are still in wave 4 correction mode and that eventually wave 5 will emerge. On the other hand, so long as we are unable to identify wave 5, the up-move since September 1998 remains as a three wave move, which could turn out to be a corrective rally, hence a bigger wave C will bring STI into a new low below 800! (please refer to our alternate B scenario in our Long Term Perspective site). We need to be patience for the market to tell us its possible direction.
Events To Watch For The Coming Weeks/Month
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