Anonymous (Oct 28) has pointed out that the bottom to the 2008 bear run was set on October 2008 and not on March 2009. A check on the daily chart (instead of the weekly chart that I have been using) has clearly shown that the bottom is indeed set on October 27 of 2008 at 11,015. The wave count has been revised based on October 2008's low.
(Click on the chart to enlarge)
Until the November 2010 high, Hang Seng has indeed completed 5 waves as pointed by Anonymous
With this revised wave count, there are 2 likely options for Hang Seng at this moment. A very bullish wave count as shown below, a wave (3) of major wave (III) on the run. This run-up is usually very dynamic with very high volume.
OR Hang Seng has yet to complete its major wave B. there will be a short-term run up to complete the wave (3) as shown below before the starting of major wave C.
To enable Hang Seng to have a strong run-up, Dow is likely to extend its current run-up from 5 waves to 9 waves. Hang Seng won't be able to run if Dow started to move lower rapidly.
Some experts are simply calling this European debt crisis solution as little more than convoluted. Rather than solve an ongoing crisis, it may only get the European markets through the holidays, prolonging "its day of reckoning" - by Brittany Stepniak
The surge in stock prices in the last few days has brought Dow nearer to its April high of 12,810. In fact, it is possible for wave 2 to have a 100% retracement to 12,810 to form a 'double tops' reversal pattern.
Looking at the chart below, in the last 2 weeks, Dow has completed 5 mini waves i-ii-iii-iv-v. Wave 2 will end at this level if it has only 5 mini waves.
However, if it has 9 mini waves, it will continue with its current run-up to form its mini waves vi-vii-viii-ix, that may bring the index to the 12,810 level.
Next week's development will tell whether wave 2 has been completed.
On the problem of leveraging up the European Financial Stability Facility (EFSF) I like the analogy given by Cullen Roche.
"This is like having 10 mortally wounded gunshot victims rushed into the ER and using the 9 to transfuse new blood into the 1 victim on his/her deathbed. And when you realize he/she can't be save you use the 8 to help the 1. So on and so forth until you recognize that the victims need is an outside blood transfusion".
The next question is whether Europe is able to entice Asian and Middle East investors to put money into investments that are linked to the bailout fund.
European leaders managed to finalize a deal that they hope will mark a turning point in their debt crisis.
After more than 8 hours of tense negotiations on Wednesday night, the leaders were able to close a deal with banks and insurers, requiring them to accept a 50% losses on the Greek bonds when they swap their bonds in January 2012. This is practically a default on its debts by Greece. In addition to this, Greece will be given another new euro 100 billion loan.
To cushion the losses, banks and insurers were asked to raise euro 106 billions by June 2012.
The last measure is to reinforced the bailout fund to effectively put up a euro one trillion firewall to prevent Italy and Spain from being dragged into the crisis.
It is hard for an engineer like me to understand why stocks should rally because:-
1) Greece is allowed to default on its debts 2) More money is given to Greece 3) To standby one trillion euro to bailout Italy and Spain when need arises.
I prefer to look at the chart to gauge what is the most probable outcome.
The French CAC40 shows that the higher degree 500 points wave 2 of the major C rebound is almost there. This surge can be the last kick to end the wave 2.
German DAX is telling the same story. The down trend since the April peak has great similarity to that of the decline from 2007's peak.
FTSE 100's wave 4 rebound has reach an acceptable magnitude for a rebound wave. Watch out for a 'Head and Shoulders' formation.
Even with the latest surge in the indices, the major wave C formation remains intact. However, once the magnitude of the current run-up becomes too big to be a wave 2 or wave 4, I will really have to look for alternative wave counts.
One of my favorite movie. The first time I watched the movie was in 1972, that was 39 years ago.
The story centers on Tevye, a poor milkman, the father of five daughters, and his attempts to maintain his family and Jewish religious traditions while outside influences encroach upon their lives.
He must cope with both the strong-willed actions of his three older daughters and with the edict of the Tsar that evicts the Jews from their village.
The story took place in the Jewish village of Anatevka in westernmost Tsarist Russia in 1905.
Hang Seng Index gained 746 points (4.14%) today to close at 18,771. This is a big gain and it gave me an uneasy feeling. Am I too bearish? Can the worst be over? It prompted me to recount the waves for Hang Seng.
The run up from March 2009's low has only 3 waves, it has to be the major wave B. The down trend since the 8th November 2010's high of 24,964 has to be the major wave C. Everything looked OK, Hang Seng remains in its major wave C formation. the current rebound is the wave 4 of C. This wave 4 rebound can even go to as high as 22,000 before the starting of wave 5 that can have a 10,000 points drop to 12,000.
Amazing Grace by II Divo
II Divo ("divine male performer" in Italian) is a multinational operatic pop vocal group created by Simon Cowell (one of the judges for American Idol)
Con te Partiro (Time to Say Goodbye) by Andrea Bocelli
After completing its sub-wave (v) on 3rd October at 10,655, Dow has put on 10% so far to close at 11,808 on last Friday.
Dow is about to complete its wave 2 rebound. I am expecting the next wave 3 down trend to lose at least 3,500 points (1.618 times of wave 1) to below 8,500 level. Major wave C remains intact so far.
Bursa Malaysia
There is a possibility that the Bursa Malaysia industrial Index is forming a 'head & shoulders' pattern as shown above. Hopefully the major wave C can be completed in 2012.
My friend emailed me the following article said to be written by a Londoner.
The Bird Feeder
I bought a bird feeder.. I hung it on my patio and filled it lovingly with seed... It was indeed a beautiful bird feeder. Within a week we had hundreds of birds taking advantage of the Continuous flow of free and easily accessible food.
But then the birds started building nests in the boards of the patio, above the table, and next to the barbecue..Then came the bird sh*t. It was everywhere; on the patio tiles, the chairs, the table ...everywhere!
Then some of the birds turned mean. They would dive bomb me and try to peck me even though I had fed them out of my own pocket. And other birds were boisterous and loud. They sat on the feeder and squawked and screamed at all hours of the day and night and demanded that I fill it when it got low on food.
After a while, I couldn't even sit on my own back porch anymore. So I took down the bird feeder and in three days the birds were gone. I cleaned up their mess and took down the many nests they had built all over the patio.
Soon, the back yard was like it used to be ... quiet, serene and no one demanding their rights to a free meal.
Now let's see ....... our government give out free food, subsidised housing, free medical care, and free education and allows anyone born here to be an automatic citizen. Then the illegals came by the millions.
Suddenly our taxes went up to pay for the free services; small flats are housing 5 or more families; you have to wait 6 hours to be seen by a doctor in an emergency surgery because it is filled with illegal non tax payers; your child's year 12 class is behind other schools because over half the class doesn't speak English.
Corn Flakes now come in a bilingual box; I have to 'press one' to hear my bank talk to me in English, and people waving flags other than 'The Union Jack' are squawking and screaming in the streets, demanding more rights and free liberties.
Its just my opinion but maybe, just maybe, it's time for the government to take down the damn bird feeder.
US Market gave up about 1.1% after 90 minutes of trading
It is likely that sub-wave a of wave 2 ofmajor waveChas completed. Sub-wave b pullback may not exceed 500 points for Dow.
I prefer to maintain that the Bursa Malaysia Industrial Index is forming the major wave C as shown below. A normalA-B-Ccorrective wave will bring the index to 1,800 level.
However, a contracting A-B-C as shown below will end the major wave (II) at around 2,200 level. If Dow is expected to head for 5,000, it is unlikely that Bursa Malaysia Industrial index can bottom around 2,200 level. It is too early to draw any conclusion at this moment.
But one thing is for sure, whatever surge is only a technical correction to the downtrend. It is still a long way to go to the ultimate bottom. Looking at problems in US and Europe, I don't think a bull is out there ready to run.
'Occupy Wall Street movement' has entered its fifth week. The protests and demonstrations have expanded across Europe, Asia and Australia.
Protesting against social and economic inequality, corporate greed, corruption, unemployment, high food price, etc. Some have considered the movement as the American variant of the Arab's Jasmine Revolution.
On October 15, similar demonstration were held in London, Berlin, Rome, Paris, Madrid, Sydney, Hong Kong, Taipei, seoul, Mumbai, Cairo and many other cities around the world. It was reported that the movement involved people in 951 cities across 82 countries. In the US the movement has spread over 100 cities.
The violence in Rome was particularly bad. 200,000 people took to the streets clashing with riot police.
The protests in Asia drew only modest numbers, the largest crowd was in Sydney, Australia with about 800 demonstrators.
"The financial system benefits a handful of banks at the expense of everyday people," said Spyro Van Leemnen, "The same people who are responsible for the recession are getting away with big bonuses."
Dow dropped about 100 points on Thursday morning session
The unlikely option that I mentioned three days ago turned out to be the one. Since the last low of 10,655 on October 3, Dow has moved up about 900 points. Last August high of 11,613 can be the resistance to the current sub-wave a run-up. The next sub-wave b pullback may not go below 11,000 before the sub-wave c surge to complete the wave 2 by early November, if wave 2 is a simple a-b-c corrective wave.
I still like to maintain that the Bursa Malaysia Industrial Index is in the major wave C pullback. A normal A-B-C will bring the Index to around 1,800 level. However a contracting A-B-C will end the major C at around 2,200 level.
Based on the above wave count, the Bursa Malaysia Industrial Index is currently on its sub-wave iv of wave 3 rebound. Technically sub-wave iv should not go higher than the sub-wave i'slow of 2660. Since wave 2 is a complex expanding a-b-c-d-e wave, wave 4 can be a simple sharp a-b-c pullback. To pave the way for a sharp wave 4 rebound, it is likely that the coming sub-wave v pullback can be quite sharp.
US market rose sharply higher on Monday. Dow rose 2.5% after 2 hours of trading.
If Dow is unable to break the 11,500 level it is like that Dow remains in sub-wave v of wave 1 as shown above.
However if Dow is able to move above 11,500 level, the possibility that wave 1 of major C has ended as shown as Option 2 above. I personally feel that Option 2 has a lower probability if the European markets have yet to complete their respective wave 1.
German DAX is currently having its sub-wave iv rebound.
French CAC 40 is similar to DAX, it is having its sub-wave iv rebound.
