Saturday, October 31, 2009

Today is Halloween

Hang Seng, "You jump I jump"

Dow plunged 249 points (2.5%) on Friday. When Dow plunged the whole world plunged, that is the rule. Next Monday Hang Seng is expected to drop at the opening at least 543 points (2.5%). Similarly Singapore STI, Australia All Ordinaries, Nikkie, etc except KLCI are expected to drop about 2.5% at the opening. And of course the closing indices can be much higher or lower depending on the Dow's future on Monday. This is only Monday's movement, in general, down trend has been set, short term won't be good.

Dow is expected to continue with its major wave (IV) downwards journey even though it has yet to break its immediate short term support as shown above. S&P and Nasdaq as shown below have already broken that short term support lines respectively.

Refer to the 3-month chart below, Dow is currently on its sub-wave v of wave A, if A has no extension (vi,vii,viii & ix), next week can witness the formation of wave B before the starting of wave C.

Don't try to imitate Leonardo DiCaprio and Kate Winslet when there are sea gulls flying near you.

Friday, October 30, 2009

Green Packet Bhd

Green Packet has just completed a double bottoms with high volume. It has completed major wave (I) and (II) and wave 1 and 2. It is forming its wave 3 at the moment.
From the 6-month candlestick chart, it is at sub-wave iv of wave 3. If sub-wave v, which is usually unpredictable, if well behaved, v should be able to reach Rm 1.20. If so, its wave 4 pullback is likely to form an inverted head and shoulders.

KNM A-B-C-D-E formation for wave 2

KNM is going for an A-B-C-D-E formation for its wave 2. Wave E may stop right at the support level of 68 sen but as I have mentioned earlier, wave E can fall short or over shoot but wave E will have 3 waves, so just count to 3 and if Dow's correction has completed or has formed a base, that will be the bottom for wave E. The target for wave 3 is either Rm1.45 or Rm 1.90 as mentioned in my earlier post. I am assuming Dow has its bear cycle ended in March 2009. Currently it is forming wave (IV) to be followed by wave (V) that can last until Chinese New Year.

Wednesday, October 28, 2009

Dow no good, the whole world no good

It is quite clear by now that Dow is in its down trend channel. How low will it move is the next question.

The wave form above is the most optimistic option. As the technical indicators and OBV are bearish, this option is possible but is unlikely.

Most likely the 2009 March's low is the end of the 2007/2008 bear market. If Dow is in its new cycle since March, the current pull back has to be major wave (IV) correction, we can stand on the sideline until mid-December 2009.

This is very very bearish, but at this moment it appears that there is no strong reason for Dow to go below March's low of 6547.

Monday, October 26, 2009

KNM - Not ready to run yet

Sub-wave iii to date was not dynamic, at best KNM would stop at 80 sen to form sub-wave iv as shown above. However, if Dow were to go into a major consolidation, KNM might take an A-B-C-D-E formation as shown below.

It is more likely that KNM is currently in wave E. It is not a must that wave E has to stop at 68 sen. Wave E is usually quite unpredictable, it can fall short of reaching 68 sen, it also can overshoot the support line and go lower than 68 sen.

Saturday, October 24, 2009

S&P - Take the lead in down trend

S&P has its Friday's closing price lower than its Wednesday's closing price. Based on Dow Theory, when the high is lower than the previous high follows by a low that is lower than the previous low, the primary trend is down trend.
Both Dow and Nasdaq have their respective last high lower than their previous high but have yet to set a low lower than the previous low.
But I believe by next week both Dow and Nasdaq will confirm their primary down trend. Based on some technical indicators, the market is very likely to trend downwards as shown below.

The most likely outcome for Dow is a major wave (IV) correction as shown below.

There are other possible wave counts but I believe they are less likely.

If the current down trend can stop at X-X support level, the major wave (III) may have 9 waves instead of 5.
The scenario where Dow breaks both the X-X and Y-Y support levels is the worst that can happen. This is what some Wall Street's economists said, "W-shape recovery".

Friday, October 23, 2009

Dow - The starting of a major correction?

One hour into Friday's session, Dow has dropped 40 points. Based on the wave count as shown below, it is highly possible that the major wave (IV) correction has started and hopefully it is not the beginning of the major C.

The chart below indicates divergence between Dow and OBV, the first time since this year March's low

Thursday, October 22, 2009

Dow - Is March 2009's low the end of the bear ?

If March's low is the end of the 2007/2008 bear market, then Dow will have 5 waves as shown below. The existing major wave (IV) will drop to its short term support line.
If March's low is not the end of the bear market, then it is possible that the major wave B of the bear market rebound has ended as shown below. This is very pessimistic as the next wave is the major wave C that can bring Dow to 5000 for another 50% drop.

Many economist believed that Case B is of slim possibility. At this moment it looks unlikely but I would not like to rule out this possibility. A safer way is to hold cash until the picture is clearer.

Wednesday, October 21, 2009

Dow - subwave ix missing?

Dow has just closed its Wednesday session with a drop of 92 points. Before I went to bed last night it was on a positive territory with a plus 45 points and I was expecting it to close the session with a positive 70 to 80 points to complete its sub-wave ix. Is sub-wave ix missing? A look on its intra-day chart can see that Dow has indeed completed its sub-wave ix on an intra-day basis as shown below.

Is this the beginning of its major wave (IV) correction? or is this the end of the financial crisis's bear market rebound, the major wave B rebound, and this is going to be the beginning of the major wave C?

What is the meaning of life ?

China's footless Quin Hongyan moved around with a pair of wooden handle bars. She was run over by a truck when she was four.

China's halfman Peng Sui lin

Peng was cut in two by a lorry in 1955, it was a medical miracle that he lived. With the help from China Rehabilitation Research Centre in Beijing, he can walk with two bionic legs.

What is the meaning of life?

Life on a rocky peak in the Waitakere Ranges

Monday, October 19, 2009

Sub-wave vii can indicate directions

I always give special attention to the 7th wave because sometimes it can provide some hints to the short-term future index or price movement.

The latest 96 points up for Dow is sub-wave vii. In a market that is nearing its end this vii will be weak and with low volume with the following viii and ix waves overlapping each other as shown below, then it is the end of wave 5 indicating the completion of major wave (III).

However if this sub-wave vii in the next two session can become dynamic with high volume, it will be able to punch through the upper resistance line as shown below. Its magnitude can equal to the sum of the magnitudes of sub-wave i to v or 1.618 of the sum. Under this scenario with a dynamic sub-wave vii formation, the uptrend should be able to last until December.

Next two days should be able to tell. Personally I am expecting a weak sub-wave vii with overlapping sub-waves viii and ix to complete the wave 5 and the major wave (III).

Sunday, October 18, 2009

KNM - Other alternative wave counts

On 14th October I put up a very bullish wave count for KNM as shown above where major wave (III) has started.

As usual there are many other alternative wave counts for any stock at any instance. Two other possible wave counts for KNM are as shown below.

The second possible wave count is as shown above, KNM has yet to complete its major wave (II). It is currently forming wave D of major wave (II).

The third possible count as shown above, KNM is forming the wave 3 of wave B of the major (II), still a long way to go before KNM can complete its major wave (II).

Besides these 3 possible counts, there are other alternatives but I consider them as unlikely at this moment. For the three alternatives as shown above, I would like to put aside the last alternative as the least likely. The current monitoring is based on first possibility and keep an eye on the second possibility.

Saturday, October 17, 2009

Dow - Is this the starting of a higher degree consolidation?

Friday's drop might not be big for Dow, 67 points only, but could it be the first candlestick in the down trend direction? Possible if Dow continues to travel south.

If wave 5 of major wave (III) has ended, the next wave can be major (IV) that can go as low as 9400 as shown above. Another possible scenario is as shown below where the major wave (III) is the end of the bear market rebound for the current US financial meltdown. In this case the next wave is the major wave 'C' that can go to 6000.

A crucial question is whether wave 5 of major wave (III) has ended. The following 3-month charts show 3 possibilities for wave 5 of major wave (III)

If Dow continues to drop, then wave 5 that has completed its 5 sub-waves i-ii-iii-iv-v has ended, its major corrective wave(IV) is likely to reach 9400.

The above chart shows that Dow instead of going south, it continues to move up-trend to complete its extended sub-waves of vi-vii-viii-ix for wave 5 before turning south.

If Dow is able to hold above the shorter term support as shown above, the major wave (III) will have 9 waves instead of 5.

Even though Dow may have several possibilities at this juncture as what has been discussed so far, the fact remains the same that the risk at this level is high and is getting higher with each passing session unless Dow can punch through the upper trend line with high volume and can continue to run north together with bond yield, then it is entirely a different story and is a different ball game.

Thursday, October 15, 2009

Dow - Which way now ?

Dow put on an impressive performance statistically on Wednesday. It put on 144 points, it broke the 10,000 points level, its volume moved from 4.1b to 5.0b to 6.1b (Monday to Wednesday), its net breadth jumped from +167 to +582, the highest recorded since it turned positive in July. The 10-yr bond yield has moved from a low of 3.18 on Oct 7 to Wednesday's 3.42.

So, is this the last kick before Dow started to turn down from here as shown below.

Or is Dow going to build up its momentum and punches through the upper resistance line as shown below.
I think case (A) has a higher probability.

Wednesday, October 14, 2009

Media Prima Bhd and KNM

Media Prima Bhd really surprised me today. After completing its sub-wave v of wave 5 at Rm 1.60, I was expecting this stock to undergo two months of consolidation. It went into extension sub-wave vii today after breaking its short-term resistance line S-T as shown above. The magnitude for sub-wave vii is rather difficult to project. Its immediate target is to break its long-term resistance at around Rm 1.80.

KNM gained 4 sen (5%) with 93 millions share changed hand. A very bullish wave count is as shown above. Its sub-wave iii of wave 3 of major wave (III) has started today, quite a surprise to me when I was expecting the sub-wave ii to pull back to around 76 sen. It may need another 2 to 3 months to complete its major wave (III) with a minimum target of Rm 1.45 if the magnitude of major (III) is the same as that for the major (I). If major (III) is 1.618 that of major (I), KNM can reach RM1.90 on completion of its major (III). If there is no panic sell off for Dow, some individual stocks in Bursa Malaysia still can shine during the corrective phase of Dow. At this moment Dow is moving towards its upper trend line at around 10100, let's see what will happen after that and let's see whether Dow can break its upper resistance line and extend its wave form from 5 waves to 9 waves.