(Updated: 23/01/2000)

N.B. Above Chart is abstracted from Metastock Program

Last week was another bloodshed in our market. It was especially so for the blue chips such as banks and properties shares. Although  we did expect STI to drop towards 2280, we were rather surprised by the speed and magnitude of its fall. A subsequent fall through our target of 2280, had suggested to us that the correction was not yet over and that it should continue to fall for the coming week. As compare to STI, Sesdaq seemed to perform better and remained within the consolidating band between 140-155 level. So long as it remains within the range, it will not poise any danger to our retail investors. So, what can we expect next week? Is the bull market coming to the end? If not, when can we expect the correction to be completed? Is the Chinese New Year rally still on? These are the questions we will try to answer in this week commentary.

Like we had mentioned in our last week commentary, if Dow Jones broke below 11700, its correction should continue. Dow Jones did break below 11700 last week and closed at 11252, which suggested that it may continue to go south and test its major support at 11000. If this is the case, we are likely to see STI dropping towards 2200 in the early part of next week. It is now a 180 degree change as compare to three weeks ago, when every one was talking of STI target of 3000. Suddenly, indices of the whole world seem to move in the same direction and heading towards their respective MAJOR supports. The bear is now slowly gaining its ground and may try to over run the bull! As such, next week is very important to the markets. If Dow Jones manages to hold its support at 11000, STI  will have a good chance holding its major support at 2200. However, if Dow Jones and STI fail in their respective support and that Nikkei and Hang Seng break below 18000 and 14000 respectively, then we  could be heading for serious trouble and may kick start a new bear market. Having said that, we believe the current probability is still favor the Bull, and that 2200 should hold in this slide. If that is the case, aggressive investors should now look for opportunity to buy, and that if STI hold at 2200 and start to move up, our Chinese New Year rally may still be possible (a break above 2400 will kick start another rally towards 2750). As for Sesdaq, it will probably trade within the range of 148-142 in the early part of the week. However, if it can break above 148, it will test its resistance at 153. A break above 153 will kick start the long awaited bull run for small counters. As the Dragon Year approach, let's hope that  investors will become a dragon to welcome the New Year, and not to become a small worm that may be killed in no time. At this juncture, if you are prepared to take risk and pick bottom, we would suggest you to consider buying either Manufacturing or Electronic counters, for they remain the strongest among the sectors. And that, should there is a rally, it would probably lead by these shares. Expect STI to move down towards 2200 in the early part of the week and may stage a rebound by mid to end of next week.

The following are resistance and support to watch for Dow Jones, Hang Seng and Nikkei next week:

Any break-out on these levels, will certainly affect our STI movement.

Technically, we are now in 5th wave. If we are right, the market has just completed the 5th of the 1st of the wave (5) and is now in its abc 2nd wave. In this case, we may have seen a short term top at 2582.90. Alternatively, we may have just completed the 5th of wave (5). If this is so, we may be experiencing a big correction soon. We shall let the market tell us the story next week. 

Events To Watch For The Coming Weeks/Month

1. The corporate results in US (especially the 13 Dow's component stocks).
2. Greenspan speaks before Senate committee on Tuesday and Wednesday. And 4th quater employment cost index to be released on Thursday.
3. The political development in Indonesia.
4. The movement of US stock market and T-bond.
5. The movement of Dollar vs Yen.
6. The stability of Regional and Singapore currencies
7. Regional stock markets movement.
8. Singapore 3 months Inter-bank rate.