Dow - Wave 5 has ended

Based on technical indicators such as William%R(14) and Slow Stochastic, it appeared that wave 5 has ended.



It is safer for me to assume that the mega wave B has ended until the market can prove me wrong that the current correction is a wave 6. But until then I will take the opportunity of the current rebound to sell whatever balance of stocks that I have.

In the next down, the mega wave C, Dow is expected to reach its March 2009 low of 6,547 or lower. If one is caught with blue chips and one has the holding power, it is still OK. But if one is caught with out-of money Warrant with short expiry date such as Dutaland Warrant A that expire in April 2012 and with a 1:1 conversion at Rm1.00, one may lose all his money as the warrant price can go to Zero upon expiry when Dutaland remains below Rm 1.00.



According to the following article written by Matthias Chang on 22 February 2011, Malaysian market should be able to hold until the coming General Election provided Dow can hold. But I am not going to take that chance at this moment.

Recommended reading, click Red Alert : For Smart Investor in Malaysia by Matthias Chang

Mail from London

About sunset time, I walked across the river, passed the London eye and sat by the river and watched the sun set over Big Ben. It was a beautiful sunset – very very rare in London because it is always so cloudy.


Then, I took out my sketch book and started to draw the Big Ben. Sketch sketch sketch and I didn't realise that a little girl, I think about 8-9 years old was watching me draw.

Courtesy of www.paperandthreads.com

You know my drawing skills la. So, anyway, she told her mother that she liked my drawing. So her mother said, "Excuse me,"

I turned because I thought maybe people want me to take picture for them.

"My daughter said she likes your drawing"

WAH!!!! First time in my life man! Someone say my drawing is nice - so happy. I think the pencil and sketch book got magical powers.

So, anyway, I asked the girl if she wanted my drawing, and she said yes. So, I wrote on the page,

"To Davinia (her name) with love"

and dated the sketching. I tore it out of my sketch book and gave it to her. You know, it can be very valuable one day and Davinia will be a millionaire.

Then, I sat there and watched the sun set a bit more, and I asked Davinia if she can draw in my book. Which she did. When I looked at it, I realised how come she thought my drawing was nice. :) Then again, she could be famous one day and I will be a millionaire.

**********************

Talking about becoming a millionaire, I am still keeping my son's drawing, hoping to be a millionaire one day.

But 14 years after drawing the rabbit, he is doing Economics in UCL now, but I am not giving up my $$$$$$$$$$$$ dream yet, after all, Ven Gogh took up serious painting only in his late twenties.

But I have to admit, current modern standard of living does not provide a conducive environment to nurture a painter.

When Ven Gogh's brother asked him,"Hey, how is your room?"
Ven Gogh had to start painting to send this to his brother.


My son sent the following to me when I asked about his room.


To show to his brother his new haircut, Ven Gogh had to paint again.


And I believed my son would have sent me the following when I emailed him,"Don't keep your hair too long."

What's next ?

Dow gave up another 107 points on its second day of decline. Its intraday low of 12007 touched the lower trend line as shown below.



Technically Dow should not go below the lower support line as it has one more sub-wave to go, the sub-wave ix, that can last another week or two before wave 5 ended, if there is no more extension of sub-wave.

However if Dow were to close below 12,000 at the close of Thursday session as shown below,


That would lead to a failure wave 5 scenario with sub-wave ix missing due to the overwhelming downward momentum. Then probability is high that last Friday closing of 12,391 could be the peak of mega wave B, the end of the rebound since March 2009's low of 6,547.

For your health

Dow - One more sub-wave to go, sub-wave ix

Dow dropped 179 points on Tuesday to form the sub-wave viii. If wave 5 has only 9 waves, the completion of the next sub-wave will complete the extended wave 5, a potential location to end the mega wave B.


Unless the major wave (iii) has 9 waves as shown below, then Dow will be able to survive for another 2 to 3 months. Any purchase during this stage is for short term gain, is a gamble, and before the run ends you have to get out whether you made your money or not. Don't forget to watch out for failure wave, this can give you a heart attack if you are still holding on to all your stocks.

Libyan Turmoil

Benchmark crude for March delivery was up $6.27 a barrel, or 7.3%, at $92.47 a barrel.

Nikkei, Hang Seng and Singapore STI at the close.

Current English, German and French Bourses

US Market at the opening bell

Today can be a bad day for stocks but I don't think the world bourses will plunge straight down from here, especially the US market. Until last Friday, Dow has not shown any weakness, there is no sign of market turning south and there is no reversal pattern.

If we recall the market behaviour after the October 2007's peak as shown above, there is no panic selling in the first few weeks after the market peak. The first plunge was in December 2007 after the formation of a small 'Head and Shoulders' reversal pattern, but that was followed by a 1,000 points rebound in early 2008. In fact for Bursa Malaysia the market peak was set in January 2008, three months after Dow has recorded its peak.



But this time around, it appeared to me that the Hang Seng and Singapore STI, as shown above have started to turn south ahead of the US markets. It gave me the feeling that the US market is being supported to enable the big fish to pull out from the Asian market gradually. Assuming the evacuation has not been completed yet, I don't expect an all out sell down, not at this moment.

However as I have mentioned in my previous post, I am expecting the the current run for Dow to end very soon possibly by first week of March if there isno further extension to wave (iii) of major wave B.


Want to have a glimpse at the future?

Bursa Malaysia - Sign of distribution

On Balance Volume (OBV) can be used to check whether a stock is under accumulation or distribution.






These are some of the stocks that exhibit sign of distribution. I think the big fish is leaving the market.

Dow - The big picture.

Going through my previous wave count again, I still think that Dow is either in its super wave (IV) as shown above, that will last for 10 years easily.


If October 2007's peak is the end of super wave (III), the 5 waves from October 2007 to March 2009 has to be the major wave 1. The rebound since March 2009 has to be major wave 2 that can have only 3 waves, wave (i), (ii) & (iii). Dow is at the sub-wave 5 of wave (iii).



The second possibility for Dow is a major wave 6 as shown above that can end in 2012.



Under this scenario, the 5 wave from October 2007 to March 2009 has to be major wave A. The rebound since March 2009 must be major wave B that can have only 3 waves. Dow is at the sub-wave 5 of wave (iii).

Let's have a closer look at this sub-wave 5 that refused to end at its mini wave v at the end of January 2011, it went into extension to form its mini waves vi and vii. This mini wave vii is expected to be completed by next week. If mini wave viii and ix can be completed by end of February or first week of March, that can be the end of sub-wave 5 of wave (iii), if wave (iii) has only 5 waves, major wave B will end at this level.


However if wave (iii) has 9 waves instead of 5 waves, its sub-wave 6, 7, 8 and 9 will push the completion of major wave B to April or May as shown below.


To be cautious, it is better to assume that wave (iii) will have only 5 waves and major wave B is likely to end very soon, latest by first week of March. Don't be caught by a failure sub-wave 5.

Jobless + Hunger = Unrest

Will it spread from North Africa and Middle-East to other parts of the world?

On one end there is so much liquidity in the market that chased up the commodity and stock prices. On the other end the unemployment rate remained high and food prices continued to go higher due to rising commodity prices. More civil unrest can be expected.

Winds of Unrest - North Africa and Middle East

Unrest of various magnitudes in 11 nations to protest against corruptions, unemployment, inflation, high food price ..........etc.

Tunisia - State of Emergency

Egypt - Mubarak has resigned - Military Rule

Algeria - Protesters clashed with security forces, hundreds were arrested

Bahrain - Protesters calling for the removal of Royal Family

Libyan police clashed with protesters

Yeman - Anti-government protesters clashed with pro-government demonstrators and security forces

Courtesy of Reuters, CNN, Yahoo and Google.

Will the winds of unrest spread to other parts of the world. The record high commodity prices (liquidity driven) and high food prices are going to create havoc around the world. Thanks to the money printing by the big nations to revive their economies.

ASB - It is mini wave 7

It is a breakout, it is mini wave 7 of wave iii with a record volume of 62 millions shares traded.



ASB closed at 33.5 sens today. Since the magnitude of major wave 1 is 12.5 sens and today's closing price of 33.5 sens is 1.618 x 12.5 sens and since ASB has mini wave 8 and 9 of wave iii, wave iv and wave v in front of it, major wave 3 should at least reach 46 sens (2.618 x 12.5). On a more bullish count it may reach 58.5 sens (3.618 x 12.5). After completing major wave 3, it still has major wave 4 and 5 to go.

One question is, "Can Dow able to hold for so long for ASB to complete its wave form ?" Wave form can always change with new developments.

Porter Stansberry, founder of Stansberry Associates asked, "How long do Americans have before the world dumps the dollars?"

With trillions of dollars of debt and a Federal Reserve that has engaged in two rounds of quantitative easing (and QE3 potentially on the way), his point is that the financial stability of US is on shaky ground.