(Updated: 28/11/99)

N.B. Above Chart is abstracted from Metastock Program

We are very glad that our last week's prediction was right to the dot again. Last week, we said that, "While a break of a new high, usually will have a knee jerk pull back on its first attempt, it should quickly resume its bull mode if the rally is to continue. Expect STI to try and rally on Monday (due to a better than expected Trade data that released yesterday), but will meet with increase selling pressure from contra players on the due contracts. It will then correct towards 2150-2180 level, before finding a short term bottom and starting to move up again by end of the week." STI did try to rally in the early part of last Monday, but failed to sustain and began to move downward. It kicked start the correction and lasted for four days before hitting the low of 2179 on Thursday and started to move up. We were right not only on the direction of the market but to the exact point on the index (the correction actually hit the bottom at our expected target range of 2150-2180). This is probably just three time lucky or may be because we had seen some waves development that fitted nicely to the Elliot wave theory! Anyway, what can we expect next week? Is the correction over?

First, let us look at what was happening last week. The correction over the first three days of last week was pretty severe. It was especially so for the second liners and Sesdaq counters. If investors did not take profit during the previous week's rally, they may end up holding a loss position thought they may have bought it at a pretty good level. This was the first signal that showed us the market had corrected it over bought condition last week. The turning point in the market started on last Thursday, and was lead by blue chips, such as banks and SingTel. Indeed, we had seen a break up on MSCI index on Thursday before a follow up on STI last Friday. With blue chips indices started to break up last week, we would not be surprised if Sesdaq starts to catch up this week. There are quite a number of positive news that will support a rally in the early to middle part of next week. First, we have a better than expected October manufacturing data that released last Saturday. Second, Hu said "there is no bubble in our market and in fact most of the stocks are below the pre-crisis level!", this will definitely give some encouragement for investors. Third, we have China Prime Minister Zhu Rongji visiting Singapore between Monday to Wednesday. So, during his visit we may see a rally in some China related shares. Not to mention, some good business proposals may be in a pipeline. Last but not least, the re-weighting of banks and SIA in Morgan Stanley Index may be announced any time now, which will give a boost to our blue chips indices. However, having said all the good news, we must also aware of the following developments. First, the Malaysia's general election, which may produce some degree of surprises and uncertainties to the market. Second, there are full of economic data to be released next week in US. Any surprise  in the data may have a negative impact to our market.

The economic data that are going to be released are as follows:

Out of all these data, we think the most crucial one will be Thursday and Friday job data, for their the most closely watch data by the Fed.
Expect STI to continue its rally in the early to middle part of next week, and will probably test a new high by then. However, it should either slow down in its upwards momentum or begin a correction by end of the week. Although the Finance sector will remain firm, the big move may come from Internet, Manufacturing, Properties and China related shares. Whether we can see our target of 2350 by end of the year, will  depend very much on the performance of Dow Jones and the regional markets. We shall discuss this issue in detail next week. Watch out for the following resistance for Dow Jones, Hang Seng and Nikkei, at 11150, 15800 and 19200-19500. Any turn from these resistance, may signal a correction in our market.

Technically, it is increasing likely that we have just kicked start the long awaited 5th wave. If we are right, the market has just completed its 4th of the 1st of the wave (5). In this case, a rally towards 2280-2350 is quite likely. Alternatively, we may be at the beginning of the 5th of wave (5). If this is so, then when the 5th wave end, we may be experiencing a big correction by then. We shall let the market tell us the story next week. 

Events To Watch For The Coming Weeks/Month

1. The effect of last Saturday's announcement of October manufacturing figure.
2. Comments by Hu on Singapore stock market and possible tax incentive for some industries.
3. The visit of Mr Zhu Rongji to Singapore.
4. The Malaysia general election.
5. The effect of some economic data to US market.
6. The movement of US stock market and T-bond.
7. The movement of Dollar vs Yen.
8. The stability of Regional and Singapore currencies (especially Indonesia Ruppiah)
9. Regional stock markets movement.
10. Singapore 3 months Inter-bank rate.