Friday, July 31, 2009

IMF - GDP Report

In the latest IMF Report, GDP growth is expected to bottom in 2009 as shown above. IMF has projected a rebound by 2010 and the rate of growth to continue untill 2012. Please take note that the projection is subjected to modification based on latest known data. Hopefully we can have more positive data in the coming months and get the projected GDP figures for 2010.

Thursday, July 30, 2009

Dow closed with 83.74 points up July 30

Dow put on 83 points at the close to move out of its last 4 days of sideway movement. For the next two months Dow is likely to complete wave 2-3-4-5 of wave (III) of Major Wave B that started in March 2009.

While I was waiting for a bigger and longer correction, Dow breakout from the last 4 days correction with 83 points up. If Dow continues to move up from here then wave 1 of (III) is not yet completed, very bullish indeed. Last 4 days shallow sideway movement becomes one degree lower sub-wave ii as shown below. Dow has just started sub-wave iii of wave 1.

However if Dow will to move down in the next two days, the 83 points up is wave b of wave 2 as shown below. The next two days down will complete the wave c of wave 2.

Wednesday, July 29, 2009

Shanghai Composite SSEC

Today the Shanghai Composite SSEC finally gave way to sellers and came down sharply as shown by the daily chart above. At one stage it dropped 7.6% to 3174 before some buying to pushed it higher to close at 3266 for a 5% drop.

SSEC remained in an over-bought position since early June as shown by the two technical indicators below. As usual, the longer an index stayed in an over-bought or over-sold position the sharper would be the correction.

SSEC after hitting a peak of 6092 in October 2007, same as Dow, it dropped all the way to 1706 by November 2008 for a 72% drop, 18% more than Dow. From the low of 1706 to July 28 closing of 3438, that was a gain of 101%. Dow from March's low to July 27 height, gained only 39%.

Further drop by SSEC can trigger a meaningful correction to Hang Seng and Singapor STI. Dow may start to move lower to complete sub-wave 2 pullback of wave (III) of the major B as shown below. It is unlikely that SSEC, Hang Seng, STI and Dow will go all the way down from here because there are simply too much money at the sideline. Too much money has been printed in the last six months.

Monday, July 27, 2009

Dow - How high can major wave B go?

At this juncture I personally feel that Dow is likely in major wave B. As I have explained previously, statistically Dow can put on another 15% after a 10-day upward streak, that will bring Dow to 9093x1.15 = 10450. Refer to the chart below, if Dow can recoup 50% of its losses, major wave B can reach 10350.

Assuming the current wave B can reach 10400, Dow will have another 1300 points in front. The risk may be getting higher but we can always enjoy the ride with care.
As illustrated above, Dow is at the end of wave 1 of major wave (III). Wave 2 provides good entry point for those that wish to ride this last train with extreme care. Wave (III) of B can be quite unpredictable, it can fall short, it can also be extended. But looking at the economic environment at this moment and the reported increase in May's industrial output by China and Germany, wave (III) is unlikely to fall short but it is good to be careful, anything can happen in stock market. Who knows by September Dow's wave form has evolved into something else. So let's enjoy the ride tentatively to 10400 first before the Major C comes.

Sunday, July 26, 2009

Dow - A mega perspective

Many economists equate the current economic crisis to that of 1929 Great Depression. Barry Eichengreen stated in his June article that "today's crisis is at least as bad as the Great Depression". The statement was based on economic statistic such as world industrial output, world trade, etc. If we compare the stock market behavior during these two crisis as shown below, we will notice that the March 2009's low is only half of that of 1929 Great Depression in terms of duration and magnitude.

Is March 2009's low the bottom? Some would argue that it is possible because during the current crisis the actions taken by various Governments were fast and different from that of 1929, fiscal policy of the governments was very aggressive and the amount of money that was pumped into the economy was enormous. And there is this dynamic Chinese economy, third largest in the world, with strong demand.

Based on Elliott's wave count, my interpretation for Dow is as shown below.

Click for bigger chart

From October 2007 to March 2009 Dow has completed 5 waves, by Elliott's wave principles March's low can either be major wave A or major wave (I), no other possibility unless I have make a mistake in my wave count. If March's low is major wave A as shown below, Dow is currently at the last 30 to 40% (at best) of wave B. At this level risk is on the high side.

If March's low is the end of major wave (I), the current rebound is major rebound wave (II) as shown below. Dow is currently in sub-wave 3 of major wave (II). Sub-wave 3 can be quite short.

Moving into the market at this level has to be very careful, at the end of the uptrend it is advisable to get out irrespective of gain or loss.

Saturday, July 25, 2009

How is Dow's chart after the breakout

Dow has a strong breakout candlestick with high volume of 6.8 billions on Thursday but on Friday the volume shrink to 4.9 billions even though it closed with a positive +23 points indicating few buyers and the likelihood of a weak uptrend wave. With the breakout, my previous unlikely outcome of 'possibility 2' has became the more likely scenario as shown below. Dow is currently in wave 1 of the major wave (III). Next pullback will be the wave 2 to be followed by a theoretically more dynamic wave 3 of (III) and ideally with higher volume of 7 to 9 billions.

Click to enlarge the chart

My previous more likely outcome of possibility 1 as shown below is less likely but still possible if the Thursday's breakout is a manipulated breakout by the big boy. Under such circumstances there will be a series of red candlesticks to form wave C of the major wave (II). However, based on past record, there was no 7-day or more upwards streak in wave B phase, does this means possibility 1 is out? In stock market anything can happen especially when there is manipulation.

Friday, July 24, 2009

What can a long upward streak tell us?

Dow ended Thursday trading session with the 9th winning streak, the immediate comment from anybody is, "the market is overbought". But, when Dow has its 6th upward streak, the market was considered by some as overbought. The past market pattern has shown that an overbought market can continue to run until it has decided to stop. Last year when Dow was sliding downward, there were many seriously oversold situation and yet the market continued to plunge.

When will the current upward streak end? I have no idea but let's look at the cases of streak of 7 days or more as listed by Laurent Belsie and see what can follow a streak.

Except the 10-day winning streak on April 1971, which was followed by a 8% drop within 2 months, all the rest were followed by a few months of uptrend with gain averaging 15%.

a 15% up for the current 9-day upward streak will bring Dow to 10,350 level to complete wave (III) of major wave B of the 2007/2008 bear market unless the rebound since March 2009's low is not a wave B rebound.

Thursday, July 23, 2009

Dow - A Breakout From Previous Top With High Volume

Dow has just ended the day with 2.1% up with a high volume of 6.8 billions, Nasdaq 2.4% up with 3.1 billions in volume and S&P 2.3% up. It is a case of breakout with high volume. The indices are in the 9th day of the major wave (III), the train has left the station two weeks ago. A nine-day winning streak for Dow, very rare, the last time a nine-day and above streak happened for Dow was in June 1987.

The table below was produced by Laurent Belsie from Click HERE for his article.

Wednesday, July 22, 2009

Our PM is good, very good

Our PM is really good. He is so nice, you asked for Royal Commission, OK no problem, a Royal Commission will be formed with well defined duty "to look into the interrogation methods by MACC against Teoh Beng Hock".

Beng Hock is quite a common name and it reminds me of a chinese technician working for me 30 years ago. He spent most of his time at the construction site, so he was very dark. One day while eating at a roadside food stall in Pekan, Pahang, he was approached by a few officers, they asked for his IC, he showed them his IC, they straight away arrested him for eating before the breaking of fast ( It was Ramadan, fasting month for muslim). His problem was his name 'Lee Bin Hock' (He was not a muslim). I just wonder what would be the outcome if Teoh Beng Hock were to be Teoh Bin Hock.

Tuesday, July 21, 2009

US Market - Likely to come down

The current uptrend is likely to be wave B as the volume remained low and the market was not dynamic. Dow's latest cabdlestick is a 'spinning top', let's see whether it will reverse direction on Wednesday.
Nasdaq formed a 'dragon fly doji' which is bearish but need confirmation with a red down candlestick.

Dragon fly doji indicates strong selling at the early trading session, by the end of the session buyers resurfaced and pushed prices back to the opening level. The question here is whether the push-back was due to genuine buying or market manipulation by the big guy.

S&P ended Tuesday with a 'spinning top', same as Dow, looking for reversal.
However, in the next few sessioons if the indices continue to climb with increasing volume, it is more likely that wave (III) has started as shown below. But I still think it is unlikely at this moment.

Watch out for a 'double top' formation when prices approaching previous height with lower volume.

Monday, July 20, 2009

Art Harun - Macdeth

Macdeth, an earlier post by Art Harun, Must read.

Art Harun - An open letter to Berita Harian

If only there are more Art Harun. His OPEN LETTER to Berita Harian has brighten up my sky.

Thank you Art.

Sunday, July 19, 2009

Boycott New Straits Times

Now I understand how a racist can be promoted. Either he has forgotten his master newly baked 'One-Malaysia' chocolate cake or he understood that the cake is a showpiece-not for sale. He accused the opposition of politicising the death of Beng Hock to weaken malay-controlled institutions. wah lau eh ! When did a non-partisan civil service becomes a malay-controlled institution? Is this the begining of an era whereby the Government Departments (since more than 90% of civil servant are malays) can not be questioned by non-malay??? This shit also asked the question "Why did the Selangor MB, a malay, question those of his own race to act fairly?" A classical shit is as shown above.

Friday's candlestick shown weakness

Friday's candlesticks for Dow, Nasdaq and S&P have shown weaknesses, look for possible turnings. 'spinning top' candlestick for both Dow and Nasdaq indicates indecision and weakness. Red candlestick is needed to confirm the turning.

The 'doji' candlestick for S&P indicates potential turning point. It needs a red candlestick next Monday to confirm the turning.

Justice for Beng Hock

Mr. Sim Kwang Yang was MP for Bandar Kuching from 1982 to 1995, his Nation shocked by death plunge is a must read article.

MACC chief - we have nothing to hide......conduct own internal inquiry........the truth will be out not turn this into a racial issue .

Selangor CPO - there will be no cover-up......police had already developed a theory..... he died of multiple injuries due to a fall from a high place........Teoh did not suffer any other injuries prior to the fall..... we will wait for the full pathologist's report. (Soooo good, can draw conclusion already)

Home Minister - investigations are being conducted transparently without the police taking sides......

DPM - calm down calm royal commissions at the moment.......

Home Minister - investigation must be completed as soon as possible to prevent the matter from being exploited by certain parties (his real concern) ...............I have ordered all involved including MACC to be investigated (now you can investigate MACC with my order) ##*@#%**#@##**%??@#

Friday, July 17, 2009

Dow and S&P approaching strong resistance

In my previous post, I have narrowed down the number of possible chart patterns to two as shown below

I have also mentioned that possibility 1 is more likely because the volumes traded were low. However as shown in the following charts, both the indices are approaching a resistance level, if Dow and S&P can break the respective resistance line with high volume in a convincing manner, then possibility 2 is in place, the market will run with high volume to complete the wave (III).

For sign of possibility 2, look for price breakout and volume reversal. Failure which, the current run up is a sucker wave B, wait for the wave C pull back for fresh entry.