Another view on Dow

This chart from asiachart.com with an opinion of a double top possibility. For double top to form it will have to break through 7500 with high volume, with or without a technical rebound to touch 7500 for one last time, the first target is 4000 in semilog scale. I have quite a different view on the double top proposal. The first top mentioned Dow was at 11,908 on 14 January 2000 and the second was at 14,279 on 11 Oct 2007. The difference in Dow is 2371 points, the difference is almost 20%. My view is that the difference is too big for a double top classification. Go back to my ABCDE formation, in the last four sessions, Dow has put on 1174 points for a 15.5% rebound, very encouraging indeed. It is very crucial now as it approches 8750, the upper level of the downward channel. A breakout is a further confirmation that the 7392 intra day low on 21 Nov is the end of wave A. What if it fails to break out of the downward channel? Well we will have to wait a little bit longer for Wave A to complete, because the so call end of A at 7392 will become a subwave 1 of 5, the rebound so far is subwave 2 of 5. It is what I call a diagonal 5 formation with 3 of 5 at 7300, 4 of 5 at 8100 and 5 of 5 most probably at 7000 for end of Wave A, easily another 10 to 15 days from now. I hope I don't have to go through all these. If it does happen, a possitive view is, God is so kind, he give you another chance to pick up your favarite stock at a cheaper level.

A little bit Crucial For Commodity and Dow

COMMODITY :

Refer to the Commodity Chart from Bloomberg, Roger INTL has reached -40. Last night it has rebounded 6.29% and CRB has rebounded 5.36%. With a robound of this magnitude, wave 7 has ended. The next question is whether the comming uptrend is wave 8 one week rebound or a major wave B bound? My bet is "The wave B uptrend has started". I have to buy back IOI, KLK, Boustead, Kulim, U Malacca and Batu Kawan.

STOCK MARKET :

Refer to Dow Jones Chart I copied from "Dogs of the Dow" website, the chart has yet to be updated, but if we insert the intraday low of 7464 on 21/11/08, it could mark the end of Wave A (from 14,279 on 11/10/07 to 7464 on 21/11/08). A pull back of 47.72% over a period of 13 months. Since I am expecting a 4 to 5 years long term side way consolidation of ABCDE formation. The up comming Wave B can last for a minimun 10 months period until August 2009 or more. The index may regain a minimum of 50% to 11,200. Let's see if I am right.

A little bit on Commodity

The above Chart was imported from Bloomberg.

Red line is UBS Bloomberg CMCI

Orange line is S&P GSCI

Green line is RJ/CRB Commodity

Light blue is Rogers INTL

Navy blue is Brookshire INTL

The patterns are more or less the same. I usually follow the CRB commodity index.

A popular question is "how low can the commodity goes ?"

When crude oil touched US $146.00 a barrel 4 months ago, some analyst was projecting the price to reach US $200.00 by 2009. 4 months ago, the belief was that, "even if there is a price pull back, it will not drop below US $100.00 a barrel". On 13 November, the Brent Crude Future closed at US $51.75. The trend and speed of dropping is the same for other commodities. So, how low can it goes?

Refer to the chart above, from the peak in July 08, using Elliott wave count, we are at wave 7. If 7 has the same magnitude as wave 3, since wave 5 is an extended wave, wave 7 may end at -40.

From the point of -40, a bearish possibility is a wave 8 rebound follows by a wave 9 down south to-50 or -60. A bullish possibility is -40 is the bottom of current down trend, in the next few months, it can recoup at least 50% of its losses. My bet is on the bullish version. I hope I am right.

A little bit on Elliot Wave Principle

Good observation by Ralph N. Elliott on historical data on Dow Jones averages and its behaviour, he discovered the same repetitious phenomena in Dow's movement. Basically the priciple is an empirical equation on human behaviour in stock market. The greed, the fear and the herd instinct. Thank you Mr. Elliott, you gave me a simple tool to identify the direction and location of the stock movement. The only problem is, sometimes at crucial junction, there are two to three possibilities in the stock movement. One may assign probability to each of the possibilities, sometimes it is well behaved but sometimes the least probable option was the correct one. Either I am not good enough or the stock market has to be like that or else the market cannot exist. I always tell my friend, whichever option the market ultimately adopts, it can fit into one of Elliott's principle. Elliott is always right, it is the interpretor that get it wrong, sometimes.

Looking at the Dow last night, I think it is on its last journey south to complete its Wave A from its peak of 14,164 set on 9 October 2007.