Dow is on course to complete its wave (vii) of major wave (5). I see no immediate danger for major world bourses. The next major pullback will take place after the completion of major wave (5).
But Bursa Malaysia may behave differently due to the coming General Election.
The FBMKLCI has a sharp 2.4% drop on Monday and a close to 2% intra-day drop on Tuesday. However buyers were able to keep the index within the up-trend channel as shown below.
In the run-up to the 2008 election, KLCI dropped about 9% from the day of announcement to the last trading day before the election. The index dropped another 11% on the following trading day after BN lost its two-third majority and 5 states. But one has to bear in mind that during that period in 2008, US market and the whole world were in a big bear run. In fact Dow dropped close to 1000 points during the same period when KLCI dropped 20%.
Meanwhile pay attention to the 1620 level, it may not be able to hold when the big boys started another round of unloading.
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