Monday, January 7, 2013

Dow - No immediate danger

With the Federal Reserve pumping US$85 billions a month into the economy, the money will ultimately go into commodities, stocks and real estate, Dow should have little problem in completing its major wave (5) in 2013.

Dow has completed its sub-wave i-ii in December 2012 and is currently forming its sub-wave iii of wave (vii). Wave (vii) is projected to end around 13,800 level to be followed by a 6% wave (viii) pullback.

For 2013, the first three quarters is theoretically safe if the 6% wave (viii) pullback can be considered as not so damaging.

Upon completion of major wave (5) in the 4th quarter of 2013, the next question to ask is whether the mega wave 1 (inside the red box) has ended.

If mega wave 1 has only 5 waves, be prepared for Dow to plunge to its 2009's low of 6547 for a mega wave 2's 100% retracement, a possible worst case scenario.

However, if mega wave 1 has 9 waves, due to the positive outcome of the US$85 billions a month injection, Dow will go for a 13% to 15% correction for its major wave (6) pullback before continuing its major wave (7) run.

I always believe, when Dow can hold, the rest of the markets should be able to hold unless there is political unrest, state of emergency or other major financial disaster in a particular market.


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