Sunday, May 17, 2020

Dow - Wave B ?

Dow (23,685)

If the wave (ii) of B is a simple a-b-c, Dow has started its wave (iii) of B.



But it is also possible that wave (ii) may take the form of an a-b-c-d-e formation.



For the other optimistic option of mega wave (3) formation that I mentioned previously, I would prefer to leave it aside for a while until Dow can have a powerful and dynamic wave (iii) with a very huge volume.


Tuesday, May 12, 2020

Dow (23,764) - Still on its B wave

Dow dropped 457 points (-1.89%) on Tuesday to take the course of an a-b-c for its wave (ii) formation. Wave c is likely to end around 23000 level.

Based on the current social, economic and political situation especially the tension between China and the US, Dow is more in favor for a wave B formation. The next wave (iii) climb is going to be a weak run-up with low volume for this wave B formation. It is likely to end somewhere between its previous high of 24,764 and 25,500 before the damaging wave C of super wave VIII starts.


Another seemed to be impossible option at this moment is the mega wave (3) of the super wave VII formation for Dow that I have mentioned before. Very very unlikely but technically possible.  


Stock market is always full of surprises. Who can foresee the Covid-19 black swan before it arrival. Exactly 3 months ago on February 12 when Dow set an intraday historical high of 29,568, who can expect to see in the US the Covid-19 infected cases can reach 1.4 millions with 83,400 deaths by May, and unemployment rate exceeding 20% with 26.5 millions job lost.

Who would expect Warren Buffett, who told Yahoo Finance editor-in-chief Andy Serwer in March, "I won't be selling airlines stock," (after Berkshire Hathaway purchased an additional 976,000 shares of Delta Airlines at about $46 a share on February 27), told Berkshire Hathaway shareholders on May 2 that he had sold all of the company's airlines stocks (Delta, Southwest, United and American Airlines).

This is why the market can survive for more than 100 years. At anytime under any condition whether the sentiment is bearish or bullish, there is always a buyer and a seller to complete a transaction.

  

Monday, May 11, 2020

Crude Oil (WTI) (US$24.30)

It appeared to me that crude oil (WTI) has completed its wave E on 20th April when it recorded an intraday low of negative US$-40.32 a barrel. The current rebound is likely to be the wave X of its waves ABCDE-X-ABC or waves ABCDE-X-ABCDE formation in view of the long-term bearish demand for crude oil.


It is close to impossible that wave E is the end of the major wave (2) corrective wave because it is impossible that demand can drive the price of crude oil to above US$200 or more a barrel unless the USD has started its slow long-term decline when it slowly loosing its status as the world reserve currency. But the US will not allow that to happen to take away its privilege of printing USD freely to finance its spending. The easy way out to prevent the USD from declining is to start a war with any nation that poses threat to the US interest.


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Saturday, May 9, 2020

Dow - Dead Cat Rebound about to end

Dow (24,331)

Dow moved up strongly on Friday but with the lowest volume recorded since March 23, the starting of the current up trend from 18,213 level.


Dow is likely to complete its wave B within next week.


It is also possible that Dow may take a slightly longer time to complete its wave B as shown below.




The shrinking volume so far is indicating that Dow is heading for the wave B of its super wave VIII formation. If wave C were to have the same magnitude as wave A that dropped 38.4%, super wave VIII might end somewhere near the 15,600 level.

Ray Dalio, an American billionaire hedge fund manager that founded 'Bridgewater Associates' said on Wednesday, "This is not a recession, this is a breakdown. You're seeing the same thing that happened in the 1930s".

During the '1930s great recession' Dow dropped 89%. From Dow's February record high pf 29,568, a 89% drop means it will drop to around 3,250 level!!! But personally I don't think it can happen during a super wave VIII correction. It is more likely to take place after the completion of the super wave IX when Dow goes for its grand super wave (IV) correction.


No doubt that last Friday volume is the lowest during the current up trend, but for wave b of (ii), it is perfectly alright to have the lowest volume. But if the volume continues to shrink during the wave (iii) run-up, then Dow is forming its wave B as mentioned above.

But if the coming wave (iii) run-up can turn into a dynamic surge with very powerful and unmistakable volume, then the seemingly impossible option of a mega wave (3) formation can become possible.


But it need volume, big big volume, failure which, look for another 38.4% down.

Saturday, May 2, 2020

Dow (23,723) - Wave B rebound is ending

Dow dropped sharply on Friday on Donald Trump threat to impose tariffs on China in retaliation for the Covid-19 pandemic. Investor sentiment was also affected by the unemployment figure that reached 30 millions. Dow dropped a total of 910 points (-3.69%) in two days to end its sub-wave iii in a timid way.

Next week, if there is any run-up with average or lower volume and if Dow is unable to cross the 25,000 level, we may witness the end of the wave B or the end of the 'dead cat rebound' or the end of the 'sucker wave'.

If the following wave C were to follow wave A with a 38.4% drop, wave C is likely to end somewhere near the 15,300 level for a close to 10,000 points drop.


Another possible outcome as shown below will give the Dow slightly longer time to complete its wave B. The wave (iii) in this case is likely to be a weak run-up with average or below average volume, a 'half-dead' run-up to end the wave B.


But if the wave (iii) run-up is dynamic with very very high volume, then the mega wave (3) scenario will remain alive. It all depends on how successful is the reopening of the economic activities, how well is the Covid-19 being controlled and how well is Donald Trump behaved.



If Trump were to continue with his war cry against China in order to create a common enemy for the American to hide his weakness in his handling of Covid-19 and to improve his popularity in his run up to the presidential election, mega wave (3) scenario looked very unlikely at this moment.

Watch out for Trump unpredictable action, escalating trade war and tension at South China Sea and a possible Covid-19 second wave caused by the reopening of economic activities.

Ultimately sometimes in the future, I expect the Dow to collapse due to the high US national debts and the ultimate breaking down of the US dollar (no more unlimited printing of USD). But I expect that to happen only after Dow has completed its super wave IX that also marked the end of the grand super wave (III). The grand super wave (IV)'s correction/pullback is going to be of the magnitude of that for the grand super wave (II) of 89% during the 1929-1933 Great Depression.



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Wednesday, April 29, 2020

Dow (24,633) - Wave B continues

Dow added 532 points (+2.21%) on Wednesday to show that its wave B has not been completed yet. The breakout from its April 17 high also ruled out its possibility as the possible end of wave B.

If the current run-up is the sub-wave iii of wave B, it will end within the next one or two days. If the next sub-wave iv pullback is around 5%, very likely the sub-wave v will mark the end of wave (iii) as well as the end of wave B.


However if Dow can continue to run up strongly with very high volume then the seemed to be impossible option of a mega wave (3) for the Dow can become a reality.

If the next surge is indeed the mini wave 3 of the sub-wave iii of wave (iii) of Dow, then it has to be an unmistakable dynamic run-up with strong, very strong unmistakable volume.


If these thing can happen, then the last low at 18,213 on March 23 with 38.4% drop from its peak of 29,568 is the end of mega wave (2).

Pray hard for a very strong run-up with a very very strong volume in the next 5 trading days. Failure which, a timid run-up will end up as a B wave.

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Saturday, April 25, 2020

Dow (23,775) - Has the wave B rebound ended?

Dow rebounded 260 points (1.11%) on Friday after the US House approved the $484 billion coronavirus rescue package on Thursday night and President Trump signed into law the package on Friday. The rebound in oil price is another positive factor.

Dow reached an intraday high of 24,268 on April 17, gaining 6055 points or 33.2% from its low of 18213 recorded on March 23. If Dow instead of moving higher, it starts to move lower next week and break the top of wave (i) the 22,595 level, then very likely Dow has completed its wave B.


But if Dow can hold above the 22,595 level and can move higher, it is possible that the current correction is the wave (iv). Dow has another 3 waves to go, wave (v), (vi) and (vii) before ending its wave B.


But if Dow can continue with its Friday's rebound on Monday, then it has 3 more sub-waves to go, the sub-wave iii, iv and v to complete the wave (iii) as well as the wave B before turning south.


But at the back of my head I still have this seemed to be impossible alternative at this moment as the world economy is heading for recession with possibility of great depression further ahead, the mega wave (3) scenario.


China is able to contain its Covid-19 and has started to rebuild its virus-battered economy ahead of all other nations. With cheap oil, close to zero interest rate with and economy stimulus packages on the table, the Chinese economy should be improving and consumption should be picking up. Hopefully this is the starting of the next up cycle of China to be followed by all other countries, one by one that are lagging behind in the fight against the virus.

The following charts show the current situation of Covid-19 in some of the countries. In each chart I plotted the cumulative virus cases (blue line), the 10-day moving average of cases (red line) and the rate of increase of cases (green line).

China is out of trouble water with South Korea following closely


France will be next to recover as the 'cumulative cases' and the '10-day moving average' have started to converge and the 'rate of increase' is approaching zero. Germany is following closely behind France.



For Italy and Spain, 'rate of increase' are 1.68% and 2.32% respectively. They will take another 2 weeks to reach 1%. The blue and red lines are expected to converge after that.


US and UK need more time as the 'rate of increase' is still above 4%.


Malaysia looks promising with the 'rate of increase' at 1.24% and the blue and red lines start to converge. Singapore is bad due to the foreign workers cluster. But things appeared to be under control now as the 'rate of increase' has started to drop again.


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