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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "We are
expecting a low volume short trading week, with Wednesday to be half day
trading follow by holiday on Thursday. However, with some window dressing
and portfolio readjustment going on in the market, we would expect some
rally in the coming week. How far it can go will be very difficult to
predict for market is very thin and subject to manipulation. Although there
are some economic data to be released next week which may create volatility,
as a whole we believe a small rally could be emerging and carry till end of
the week." True enough we had a continued three days rally in Dow Jones
Industry and pushed the index above 9,000 level on close. We also said that,
"This is the same applying to Singapore market. If STI manages to break
above 1752, it will probably retest the 1800+ level again." Again we were
right to the dot! If it was not because of some index component adjustment
towards the close, STI would probably stay firmly above 1800 level. So, with
such a good start on the 1st day of 2009, are we going to have a small bull
run from here?
Well, past one week rally was
coupled with very thin volume for most of the big funds and traders were
having new year holidays. The market will return to its normal self come
next week. As such, we believe the actual color can only be seen next week.
Whether the past one week rally was a prelude of a bull run or just a death
cat bounce, we will probably have a clearer picture by end of the week! At
the moment I still believe we are at the wave 4 counter rally of Wave I of a
major down trend. Wave 4 is usually a very difficult wave to predict, for
the correction have about 11 types of possibilities. However, the current up
move seems to me more like a complex wave 4 counter trend rally than a
beginning of a bull run. And that, such counter trend rally could be
terminated at any time from now. Although there remains a possibility that
Dow could eventually reach 9600 and S&P 960 before another sell down emerge.
The past three days rally had basically satisfied the minimum required for a
counter rally top. As such, I would not be surprise to see the market turn
down next week. There will have a series of new corporate and economic news
coming every day next week and that could prove to much to chew for the
market. Items most likely to move stocks include minutes from the Fed
last meeting, two big tech conferences, returning lawmakers' effort on
another stimulus package and Friday's job report. The Friday's job report
would probably to be the most important data next week and could set the
market direction for the next few weeks to come. We believe market will
probably rally in early part of the week but will meet profit taking by mid
week and should close in negative territory by end of the week. As for STI
the immediate hurdle would be 1843, if it breaks above that level than it
will challenge 1933 major resistance, which will be hard to break. Watch out
for 1718, a break below this level will probably signal the end of the
counter rally since November'08. I would strongly advise
you to take this opportunity to sell your stock (if you still holding some),
for the market will likely face a big sell down by mid January'09. For mid term investors,
I would advise you to square your long positions soon and get ready to short
when market present the opportunity. As for short term traders,
perhaps sell on rally and buy on dip is the better strategy for the next two weeks.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 9653
15781 9521
Support 8364
13855 8087
As for STI the resistances and supports
are as follow:
Resistance: 1820, 1843, 1900, 1933
Support:
1750, 1717, 1700, 1570, 1550
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, oil and commodities price.
-
The minutes from Fed last meeting, the returning lawmakers' efforts on
another stimulus package.
-
The economic data such as Tuesday releases on the services sector,
pending home sales, Wednesday's ADP employment report, Thursday's
jobless claims and Friday's non-farm payroll.
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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