Sunday, November 29, 2009

Dow - Resilient to Dubai's crisis

Dow gave up 154 points (1.5%) during last Friday half-day session. The drop can be considered quite ordinary. A bad economic figure could cause a similar drop. If Dow continues to drop further, it indicates that time is up for a major wave (IV) correction. However, Abu Dhabi's decision on Dubai's rescue plan will affect the markets to a certain extend in general.

I will be in Taiwan the whole of next week, I won't be writing anything until next Sunday.
Just look at the images below, wow!!!

Saturday, November 28, 2009

Abu Dhabi will not let Dubai fall

United Arab Emirates (UAE) consists of seven states or emirates, which are Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah, and Fujairah. These emirates have separate ruling families and budgets. UAE has the world's sixth largest oil reserves but the emirate of Dubai lacks oil wealth, it has to tap fund from credits markets for its spectacular growth.

Dubai's debt problem is not a new crisis, it is an anticipated problem as its building boom collapsed in the current world financial crisis, one of the many outcomes.

Abu Dhabi, which sits on 95% of UAE's oil reserves and the royal families with a wealth estimated at $33 trillions, has bought $15 billions of Dubai's bonds in the last several months, Abu Dhabi could easily bail out Dubai that has a total debts of about $80 billions. But the latest news from Reuters is that Abu Dhabi will not bail out Dubai, it will "pick and choose" how to assist its neighbour. But whatever method Abu Dhabi may use, it will not let Dubai fall as the repercussion will definitely affect UAE.

I expect those Asia Pacific markets that have over reacted and were badly beaten on Friday such as Hong Kong, Australia, Japan and Korea to rebound and recoup parts of their losses next Monday. After that, for Hang Seng, I expect the market to zig-zag downwards to complete the major (IV)

Friday, November 27, 2009

Hang Seng Plunged 1075 points (4.89%)

Dubai's appeal to delay its $60 billions debt payment has sent shock wave through Asia Pacific markets. Hang Seng Index of Hong Kong plunged 1075 points or 4.89% today.

Is this the beginning of the big C for Hang Seng

Or it is only a major wave (IV) correction. It is still the question of WHETHER the bear market that was started in the 4th quarter of 2007 has ended many months ago OR we are only half-way through the bear market. Dubai's debt problem is merely a timely catalyst to end the seemingly unending run for the major wave (III).

A possible wave count for Hang Seng is as shown above. It has completed its major wave (III), what is next? I think is (IV).

Not that bad for Dow, it dropped only 1.3% after 1 hour of trading, 137 points only, not bad at all despite of the Dubai debt fallout.

Thursday, November 26, 2009

Dow - wave 9 of major wave (III) is almost there

If I don't think Dow can break the upper trend line, I am assuming the major wave (III) is having 9 waves as shown above. My only question left is whether the wave 9 has been completed.
Looking at the 3-month chart, so far wave 9 has completed its sub-wave i, ii, iii and iv and sub-wave v is almost there as shown above. If v is really that well-behaved, it will have 5 mini waves, it will need another 2 to 3 days to complete. The book actually recommended the use of half hourly chart. I am expecting major wave (IV) to start next week. Am I on the right track??? Only time can tell.

In a lighter mood
when you are old you have many friends that are equally old.
when they tell you they feel old, their bodies are aching, hearing no good, memory......... It is OK, nothing to worry.
But when they tell you they feel like a baby, oh my God
They have no more hair, no teeth and sometimes they wet their pants.

Wednesday, November 25, 2009

What the gurus have said

Click on the chart to enlarge

Since the March's low (now we know), at various stages of the market, the gurus have their respective views on the market's direction. But the subsequent market development can be a much different story. It just shows the difficulty in making the right market calls. It is impossible to have a 100% record for correct market calls.

The question at this juncture is whether Dow can break the upper trend line. I don't think it is possible, but, there is always a but in stock market.

Tuesday, November 24, 2009

Dow, Marc Faber, Robert Prechter

Since the march's low, Dow has rebounded 60%, a magnitude not many investors have expected.
Dow gained another 132 points to reach a 2009 height of 10,540 but remained below the upper trend line. Is Dow going to break the upper trend line ? or whether it has reach a temporary top?
Volume remained low at 4.4 billions, momentum is lacking, it is possible that it has reached its target for its major wave (III).

The latest view from Marc Faber, Dr. Doom.

On equity, "S&P may decline from its current level ( 1100) to around 900 (18% drop). It may go up to 1200 next year."

On Gold, "I don't think that you will see gold below a USD1000 per ounce probably ever again. May be gold at this level is a better buy than it was USD300 per ounce in 2001."

On oil, "Very little downside."

Chart Guru, Robert Prechter - Elliott Wave International President, who believes the bear market rally is reaching a major top.

On equity, "Wall Street is setting investors for another Hurting." "2010 will be a year of horrible market declines."

On gold, "Just because everyone is telling you to buy (gold), it doesn't mean they're right."

On US dollar, "Dollar is making a bottom." "It will rally because there's so much debt."

I always believe there is no way to pinpoint the market's turning point because the market can not exist if there is a way. Nouriel Roubini, who has projected the 2007 and 2008 down trend rightly, on 12th March, after Dow has recovered from its 9th March's low of 6547 to 7170, he was talking about new lows in the next 12 to 18 months.

Glenn Neely, a prominent Elliott Wave analyst, declared on 16th June when Dow reached 8506, "March - June rally is now ending." "During the next 6 months (from June) S&P will decline 50%." Five months have passed, Dow put on another 23%. Most likely he has corrected his view in July when Dow did not behave as he has anticipated.

It is really difficult to read the market precisely. Amen.

Monday, November 23, 2009

Dow setting new 2009's height

Dow gained 168 point after 45 minutes of trading. At 10486, Dow has set a new 2009's height. Is Dow going to break its ceiling as shown below ?

Inch Kenneth, CNASIA, KNM

I am expecting major wave (III) to consist of 9 waves. Currently Inch Kenneth is in wave 6. Next wave is the 7th wave which can be quite dynamic.

My previous bullish count for CNASIA is wrong, its form has changed. It is likely at this stage that CNASIA is in its wave iii of major wave (IV)

KNM remains the same, it is forming its wave iii of wave E to complete its major wave (II).

Saturday, November 21, 2009

Dr. Doom - Eventually there will be a big bust

Speaking at a conference in Singapore on Wednesday, Marc Faber, the man commonly referred to as Dr. Doom by the investment community, said that the real crisis has yet to come for the global economy. (His longer term perspective) "I think eventually there will be a big bust and then the whole credit expansion will come to an end. But before that happens, they will print money, and they will grow into very high inflation rate, and the economy will not respond."

His current view on equity, "I would be careful buying equities now, we are in a correction period."

On US dollars, "As of today, I will be long in dollars". "It can easily rebound by 10% during the next quarter". "This rally won't last because the US will be forced to print more money to pay its debts". The dollar will remain in a "Structural long term bear market" in terms of purchasing power.

On Gold, for short term gold trader, proceed with caution. "If gold drops below $1,000.00, it may go to $800.00" For longer term, "I have consistently repeated that I hold gold and that I recommend the accumulation of Gold".

On Federal Reserve Chairman, "He is a money printer, he is nothing else".

This Dow/Gold ratio is obtained by dividing Dow by the price of 1 ounce of Gold. In 1932, after Dow has dropped 89%, one could buy one Dow with two ounces of gold and in 1980's equity market bottom, one could buy one Dow with one ounce of gold. It is interesting to note that since 2000 peak of 43.7 Dow to one ounce of gold, gold has appreciated much faster than Dow. Dow might have reached another peak in 2007 but Dow/Gold ratio was in a consistent down trend since 2000's peak. The 60% rebound in Dow since March this year has no impact at all to the ratio due to higher rate of appreciation of gold. Marc Faber expects the trend to continue for the next few years until the ratio to reach one from the current level of 10, if Fed continues with its money printing policy.

US Dollars Index is an index of the value of US$ to a basket of foreign currencies. Is is a weighted geometric mean of the dollar's value compared only with

Euro 57.6% weight
Japanese Yen 13.6% weight
Pound Sterling 11.9% weight
Canadian Dollars 9.1% weight
Swedish Krona 4.2% weight
Swiss Franc 3.6% weight

The index started in March 1973, after the dismantling of the Bretton Woods System. The index was 100 at its start. its historical height is higher than 160. Its low in 2008 was 70, the lowest since its inception in 1973.

Marc Faber long term view on US dollar,"It will go to a value of zero eventually, but not right now." "I think it will take 10 years until people realise that the fiscal situation of the US is a complete disaster."

Friday, November 20, 2009

MCA Presidential Council

According to MCA Constitution, the Presidential Council consists of President, Deputy President, one or more Vice-president, Secretary General, Treasurer General, National Organizing Secretary and not more than 10 other members appointed by the President.

Datuk Dr. Wee Ka Siong and Datin Paduka Chew Mei Fun were appointed by the President Datuk Seri Ong Tee Keat as council members in 2008 as they were strong supporters to Datuk Seri Ong Tee Keat then and they were able to work, to cooperate and to support the President. Rightfully the moment they were in disagreement with the President and could no longer able to work and cooperate with the President, they should resign from the post as appointed presidential council members. Since these two members refused to resign, the President has no choice but to replace them with other members who were able to work and support the president as new appointed presidential council members.

So, why should they cry?

Thursday, November 19, 2009

Dow - Closed Thursday at 10332

Dow closed its Thursday session with a drop of 93 points at 10332. The two possible scenarios for Dow that I have mentioned previously still hold. There is a third scenario that begins to look likely, I will talk about that in some other day.
If Dow continues to move south, I will take it that wave (IV) has started.

If Dow were to follow a bullish path as show above, it will remain here for a short while but within 2 to 3 days it will have to start breaking the ceiling. My bet is - Dow is heading for (IV).

Wednesday, November 18, 2009

You are so beautiful, to me

I saw this photo and the first thing that came to my mind was Joe Cocker's song 'you are so beautiful to me'. Forget about Dow, it can be boring for a while. Enjoy the song my friends.

Tuesday, November 17, 2009

Dow - Break out or turn south

Dow put on 136 points to reach 10406 on Monday. It has reached the upper trend line. Will it break this resistance line? Volume was low at 5.3 billions. Net new high was impressive at +441, a 50% increase. Just wait and see.

Monday, November 16, 2009

Dow - A mega view

Before March 2009, Wall Street was talking about a bear market that ultimately could match that of the Great Depression. One possible wave count based on Elliott Wave Principle, as shown above, has 2007 October market peak as wave 5 of the mega wave (III).

If the bear market that started in October 2007 is the mega wave (IV), it has to be comparable to that of the Great Depression mega wave (II). By Elliott's Rule of Alternation that states that
"no two sequential corrections of the same magnitude will ever be the same type. Foe example, if wave 2 is a simple correction then wave 4 is most likely complex." See illustration below.

Since the Great Depression mega wave (II) is a simple wave, the current wave, if it is mega wave (IV), chances is very high that (IV) will be a complex wave. Let's look at all the major consolidation in details.

To date, the Oct 07 bear is no way near that of (II) in both magnitude (% drop) and duration if it has to be (IV), more drop over a longer duration is required to make it looks like (IV). A complex A-B-C-D-E triangles will have to form for it to be (IV). Still a long way to go. For the 'head and shoulders' to form, it will need another 2 to 3 years to complete the right shoulder. The left shoulder took 4 years and the head took 6.5 years to form.

Based on magnitude (% Drop), the Oct 07 bear (53%) is closer to wave 2 (49%) and wave 4 (38% with longer duration) than to Major wave (II). But the duration of 17 months is far less than the 62 months and 104 months of wave 2 & 4. Even to be wave 6 it still has to come down for a double dips with a longer duration.

At this moment it can be Mega wave (IV) or wave 6 of the mega (III).

Saturday, November 14, 2009

Mirror mirror on the wall

Mirror mirror on the wall,
Is the stock market going to fall ?

Larry Kudlow (31st July), NRO Economics Editor - It's a new bull market, this bull should run well into next spring.

Simon Maierhofer (7th October), ETF Profit Strategy Newsletter - the biggest sucker rally since the Great Depression.

Robert Prechter (7th November), Founder of Elliott Wave Foundation - It is toppish, the bear market rally is over, stay away.

Warren Buffett (11th November), "The financial panic is behind us." - He is paying $26 billions buying Birlington Rail.

Ed Yardeni (14th Nov), President of Yardeni Research - He sees lots of 'fully invested bear' -- investors who don't believe that investing in stocks makes sense right now because of the state of the economy, but they are buying any way because they worry they might miss out on a bull run.

So, what to do now ?

My strategy - monitor for (IV) and watch out for the Big C (Robert Prichter's case). I think wave 9 has been completed. Dow will hover around the top for a few days before moving slowly towards (IV). The drop will accelerate on cutting through the first lower support line. Then, let's see whether it will stop at (IV).

Volume pattern is bearish, volume for each peak was getting lower as shown above with high volume for wave 8 sell-down.

For Nasdaq, if it fails to move higher from the current level, there is a potential head and shoulders formation. Volume pattern is a typical head and shoulders pattern with the volume being highest at left shoulder, lower on head and lowest on right shoulder. Top of wave (I) provides strong support.

S&P if unable to move higher from the current level, it may form a double tops pattern with typical volume behaviour as shown above.

What will happen if Dow breaks the upper resistance line ?

If that happened with low volume, say less than 5 billions, it can be a sucker wave.

However if it breaks with high volume of 7 to 8 or 9 billions, the most likely wave count is as shown below.

It could be the sub-wave iii of wave 7 of major (III). This is very very fantastic as wave 7 can assume the magnitude of wave 1 to 5, i.e. from march's low of 6547 to last Wednesday's height of 10291. That is 3744 points. Theoretically wave 7 can reach 13,456. (Add wave 6's low of 9712 (30th October) to 3744).

This scenario
can mean only one thing, world economy is going to turn around very very fast, employment is going to improve, property value is going to move higher in US and UK just like what is happening now in Singapore, Australia and Shanghai. What to buy? Fannie Mae, Freddie Mac, BAC, Citigroups...... I say,"this scenario is unlikely."

Friday, November 13, 2009

Inch Kenneth, OSKVI and CNASIA

Inch Kenneth, after 3 days of consolidation, it put on 6.5 sen (15%) today to closed at 50.5 sen. Its wave 5 of (III) has started. If (III) has the same magnitude as (I), it can reach 59 sen. If it does not stop at 59 sen, its next stop is 74 sen.
OSKVI has punched through its 'double bottoms' neckline with high volume. It pulled back to touch the neckline yesterday at 80 sen, it moved up 2 sen today to close at 82 sen, is this the starting of sub-wave v? Its OBV is very strong. If sub-wave v has started, it will reach Rm 1.11 as its minimum target.

If this wave count is correct, its next wave will be the *** of sub-wave iii of wave 3 of major wave (III). Must watch this stock closely on Monday.

Thursday, November 12, 2009

Forget Dow for a while

Wednesday, November 11, 2009

CNASIA - Has sub-wave iii of 3 of (III) started ?

It appears that sub-wave iii of wave 3 of major wave (III) has started. Is so, it should continue to move upwards tomorrow. I expect it to jump with very high volume. If it can break the 67 sen level it is likely to reach 77 sen for its sub-wave iii. Wave 3 has a minimum target of 80 sen; more likely to reach 97 sen (x1.618) and with luck, it can reach Rm 1.25 (x2.618).

Tuesday, November 10, 2009

What is in front of Dow ?

Dow put on 203 points on Monday and the form looks like a 9-waves (III) at this moment. Robert Prechter is thinking of a big wave C as shown above but Larry Kudlow is talking about an up trend for a few more months. I think these two opposite opinions are to stay for a while until Dow breaks either the upper or lower resistance line.

I myself don't really feel comfortable with Dow when trading volume is concerned. Yesterday big green candlestick came with a volume of only 4.7 billions whereas the previous week down volumes were 6 to 7 billions. Sign of distribution. If this is the wave 9 and it is forming a double tops, I am going to run for my life.

Even though Dow has been hovering around 2009's top and set a new 2009's height yesterday, but other world bourses were a step lower.

FTSE, DAX, CAC 40 and Australian All Ordinaries have already formed their respective wave (III). At best they are forming wave (IV) and at worst is the major wave C scenario mentioned by Robert Prechter.

Hang Seng and Singapore are still able to hold like Dow.

Nikkei and Seoul are more bearish. If they can hold at the current level and can move up from here, then it is wave (IV) and there is still an up trend (V) in front, this is Larry Kudlow's expectation. But if they can not hold at current level, the down trend is going to be too big for (IV), we will likely to get Robert Prechter's Major wave C. Be careful. The big question here is "are the rest going to follow Nikkei and Seoul ?"