Monday, May 31, 2010

Alamak - Like that how to win the world cup ?

Courtesy of Reuters
Kawashima saved Lampard's penalty kick

Japan 1 - 2 England but all the 3 goals were scored by the Japanese !!!!

In their final warm-up match before flying to South Africa for their World Cup quest, Capello has fielded 17 different players and has tried two formations, a first half 4-4-2 followed by a more compact 4-4-1-1 for half an hour in the second half. A surprise to me that he has yet to firm up his players and strategy until this last warm-up match. May God bless the English team, Amen.

Until now Capello has not named his final 23 players for England. Just wonder what he has been doing all these while. Can Capello, an Italian, be trusted ???

In the last world cup (2006), English has trusted Sven Eriksson, a Swedish, and they lost the cup. They could have won the world cup in 2006, they were tipped to win the world cup with a strong and balanced squad at that time. They should have replaced Eriksson with somebody else after all the unhappy happenings between Eriksson, FA, the general public and the press. He was expected to step down immediately after the 2006 world cup. Until today I still think that Eriksson has sabotaged the English in their 2006 world cup quest.

Dow - US markets closed for Memorial Day, World Bourses went sideway. Didn't know what to do without Uncle Sam

Sunday, May 30, 2010

Dow - Most likely it is wave A of Mega wave II

Out of the 3 hypotheses that I have mentioned in my earlier post, No. 1 is forming sub-wave iv, No. 2 is forming mega wave III and No. 3 is forming wave B of mega wave II, I personally feel that hypothesis No. 3 - forming wave B is most likely.

For wave B's hypothesis, the 9974 level cannot be broken. Dow has to stay above 9974. The moment Dow closed below this level, that will mean that the last rebound is sub-wave iv, wave A is not even formed yet.

BP - 'Top Kill' has failed

Next Option 'Top Hat"

Using the most conservative estimate, scientists have estimated 18 million gallons have spilled so far. Worst-case scenario is 39 million gallons. This oil spill has overtaken Exxon Valdez (1989, Alaska, 11 million gallons) as the biggest oil spill in US history.

Whatever methods used to cap the well is considered as temporary measure, the real solution is a relief well. BP currently is working on 2 relief wells, but they are not expected to be ready until August. If all the temporary capping failed, by August, assuming the relief well managed to stop the spilling, 72 million gallons, most conservative estimate, would have spilled.

Friday, May 28, 2010

OK we shall blame it on subsidies

At the Subsidy Rationalization Open Day organized by PEMANDU, Performance Management and Delivery Unit in the Prime Minister Department, Minister in the Prime Minister Department, Idris Jala said "We do not want to end up as another Greece." A great statement. But he failed to see, even with zero subsidy, the rampant corruptions, 'subsidy' to cronies, 'you help me and I help you', wasteful projects, project cost over-run, the over-sized, over-paid, low productivity and inefficient public sector can still bankrupt the country within a foreseeable future.

Malaysia is very lucky. First we have tin and the hardworking Chinese tin miners. then we have rubber and the hardworking Indian and Chinese rubber tappers. Then came the oilpalm and then we found oil and gas. If Malaysia is like Singapore and has non of the above, I won't be surprise to see Ringgit at par with Indonesian Rupiah by now.

Through subsidies, taxpayers at least can get back some of their money and the poor can get essential goods at a lower price. But with the unchecked corruption and the unchecked wasteful Government spending, the taxpayer's money in going down the drain. Idris Jala should concentrate his effort to plug all the Government's leakages in the first place instead of taking an easy way out of removing all subsidies that affect only the lambs. To plug leakages he has to face the tigers and crocodiles.

Thursday, May 27, 2010

Gulf of Mexico Oil Rig Explosion

Deepwater Horizon was an ultra-deepwater drilling rig. The rig exploded on 20th April, 2010 with 11 deaths. At the time of the accident, it was working on BP's Mississippi Canyon, Block 252, 50 miles off the coast of Louisiana, USA. The seabed is 5000 feet under water. The oil rig has drilled to a vertical depth of 35,050 feet.

According to reports, the explosion was caused by a deadly bubble of methane that forced its way up the drill column from 30,000 ft beneath the ocean floor. Under high pressure, the gas burst through a series of seals and barriers, expanding rapidly and exploded on reaching atmospheric pressure.

Crude oil is spilling into the ocean at an estimated rate of 200,000 barrels a day. Initially 6 robotic submarines were deployed to stop the leak, they were unable to stop the leakage.

Meanwhile blanket of oil has reached Mississippi rivermouth

Wetland of Louisiana is likely to be destroyed

The current water surface area affected is about 11,000 sq. km.

Dolphins were seen swimming in oily water. Many dolphins, sharks and other marine lives were found dead along coastal zones

On 7th may, a giant 98-ton concrete and steel 'Dome' were lowered 5000 ft down to the ocean floor, with the help of submersible robots, to cap the leaking well. Operation failed due to buoyancy problem.

Meanwhile a relief well is being drilled from another oil rig to intercept the leaking well. It is expected to reach the intercepting point at a depth of 13,000 ft within 2 month to seal the well with cement provided the relief well can accurately intercept the leaking well.

Yesterday, BP has started using "Top Kill" method to block the oil leak. This is the first time this method is being used for underwater operation at a depth of 5000 ft. The Engineers are talking about 60% to 70% probability that it can work. Within the next 48 hours, we will know the result.

The damage to the ecosystem and environment to date is beyond imagination and it will take years to heal.

(Courtesy of AOL News and wikipedia for the photo, facts and figures.)

Wednesday, May 26, 2010

A Hammer - 60% Chance of a Reversal

Hammer is a candlestick that has a small real body with a long lower shadow. Dow formed a hammer at the closed of Tuesday trading. Hammer is a bullish reversal pattern that formed after a decline. It can mark bottom or support level. A confirmation candlestick is required for reversal confirmation.

Based on study carried out by Bulkowski, probability of a reversal for hammer pattern is 60%. Overall performance ranking is 65 out of 103 candlestick patterns where 1 is the best.

Hypothesis No. 1 - A small rebound to form vi of A

Hypothesis No. 2 - A big rebound to form III

Hypothesis No 3 - A medium rebound to form B of II

Dow up about 40 points after 2 hours of trading on Wednesday morning. At one stage it gained about 135 points. Hopefully Dow can give a confirmation candlestick at the close to signal a reversal.

Tuesday, May 25, 2010

Fears over European Debts Crisis

Asian Markets dropped 2.5% to 3.5%. European Markets currently down about 3%. US markets gave up about 2% after 2 hours of trading. Dow is about 9,860 at the moment, 140 points below its 10,000 level.

European financial problem is actually very serious, Iceland I think has gone bankrupt, Greece is struggling for survival, Spanish banks are facing big problems, some investors have started to wonder whether Euro will still be there three years down the road. But I believe European Union can not afford a disintegration, so the big brothers will step in to do something.

From the chart below, it is more likely that Dow is having its mega wave II correction. Of course I can be wrong. If it is a bear, I would like to maintain that it is a small teddy bear.

S&P wave count appears to be the same except the count on its slow stochastic %K(60)%D(5). But I don't remember Elliott mentioned that its wave principle is applicable to technical indicators.
So, as I have mentioned previously, at this stage it is impossible to gauge the form and depth of this mega wave II. I have to wait for its first rebound to have an initial assessment of its possible form, its magnitude and duration. Dow so far has form 5 mini waves in its down trend direction, I don't rule out the possibility that today's shake-out can be the climax sell-off before its first rebound.

Monday, May 24, 2010

Is it just a correction or a new bear market ?

Bursa Industrial Index - Wave II correction

Dow - Wave II correction

Nasdaq - Wave C Bear (Based on Indicator)

S&P - Wave C Bear (Based on Indicator)

Nasdaq - Wave (IV) Correction (Based on indicator)

S&P - Wave (IV) Correction (Based on Indicator)

I believe there is no definite answer. Opinion will be split 50-50, that is why there are buyers and sellers everyday. For every transaction you need a buyer and a seller to close the deal. But whatever it is, I will be reducing my stocks holding gradually. Stocks with bearish looking pattern will have to go first. At this stage there is still no sign that I have to run for my life.

Sunday, May 23, 2010

The Great Mourinho

Courtesy of BBC

Two superb goals from Diego Milito gave Mourinho's Inter Milan a 2-0 win over Bayern Munich. The win also lead Inter milan to a historic feast of winning 3 football titles in a year. They won the Coppa Italia, Serie A and now the Fifa Champions League.

Courtesy of BBC

The Champions League title is an unbelievable achievement as Mourinho's side has to beat the English Champion Chelsea, the Spanish Champion Bercelona and German Chanpion Bayern Munich to clinch the title.

Courtesy of BBC

It was an all-night celebration for Inter Milan after 45 years of waiting. Inter Milan last won the European Champions League title in 1965. Just imagine a young 25 years old Inter Milan supporter has to go through 45 long years of waiting until he is 70 now for the celebration. Another story of never ending love.

Saturday, May 22, 2010

What form mega wave II will take ???

Since the lower trend line has been broken, the mega wave I that consists of 5 waves ((I),(II), (III), (IV) & (V)) has been completed as shown below. The next wave to be monitored is the mega wave II corrective waves.

Corrective wave is most unpredictable especially wave 2. Elliott, Frost and Prechter have classified 21 corrective patterns. The three most simple patterns are Zig-zag A-B-C, Flat A-B-C and Triangle A-B-C-D-E.

The first wave is wave A that can have either 3 sub-waves or 5 sub-waves. For this wave A, there are 3 possibilities as shown below.

CASE I : Wave A not yet complete. So far 5 sub-waves i, ii, iii, iv & v have been formed, it is possible that it can have a shallow rebound to form sub-wave vi follow by vii. It can continue further to form viii & ix and so on to form A. A dangerous and yet classical sign is a rebound to touch the lower resistance line before it continues with its down trend. sub-wave vii can be very dynamic and thus can be very damaging.

Case II
: Wave A Completed
. Under this scenario the rebound wave B will moved back to above the lower trend line to reach around the level of sub-wave iv, before moving down to form wave C to complete the mega wave II.

Case III : Waves A-B-C Completed.
The is the most bearish formation as it may develop into the double dips scenario especially when after it has formed 5 up-waves and it has stopped at somewhere near its previous high for a potential double tops formation as shown below.

The above charts are for my own consumption. My chart interpretation can be wrong as I am only a part-time chart technician.

Friday, May 21, 2010

How low the Euro can go

Suzhou China

Euro continues to slide against the US dollars while the European leaders trying to get their debts and finances in order. Some economists started to question the viability of a single currency for Europe that was started 11 years ago. There were talks that Greece may pull out from the 16-country eurozone, drop the euro and go for a weak currency policy in order to revive its economy, its competitiveness and its export to arrest its raising unemployment rate that has reached 22% from 6% before the crisis.

From the chart, the indication is that Euro is likely to reach 0.85 or 0.9 Euro to 1 US dollar pretty soon for a 8 to 10% drop.

Last Tuesday Germany has banned the short selling of Government's bonds and stocks of 10 of its financial institutions. Is the crisis caused by speculative funds? How active are the hedge funds in Europe? Will the 1998 Asian financial crisis repeats itself in Europe?

Thursday, May 20, 2010

Dow - It is mega wave II


At the close of Wednesday session Dow, Nasdaq and S&P were resting at the lower support line. After 2 hours of trading on Thursday morning, all the 3 indices have dropped 2.5% to 3.1% and have broken their respective lower support lines decisively. Unless the markets can reverse the direction and can recoup all their early losses at the close of Thursday trading session, we can safely conclude that Dow is in its mega wave II.

For mega wave II, the first 5 sub-waves i, ii, iii, iv and v have formed as shown below. So it is the case of 'Sell in May and Go Away'. A normal mega wave II will take at least 2 to 3 months to complete. The next task is to determine the wave form of this mega wave II. Will it form a shallow but longer duration A-B-C-D-E or it will take the form of a sharp but shorter duration zig-zag A-B-C ???

I expect Bursa Malaysia and other world bourses to behave the same way as Dow.

So, it is mega wave II for the Industrial Index as well. It looks like the index is at the tail-end of the first 5 sub-waves.