FBMKLCI - Sharply lower

FBMKLCI dropped 22 points (-1.25%) today as investors reacted to  anxiously to the Fitch's downgrading Malaysia's sovereign credit rating outlook from 'Stable' to 'Negative'.

To read the view of others on Fitch's move, click ' Market Weakness '.

My long-term reading on FBMKLCI remains the same. Since the 1998's low, the index has completed its mega wave (1), (2), (3) and (4) and major wave 1 and 2 as shown below.

From the 5-year chart as shown below, major wave 1-2 and wave (i)-(ii) remain the same.

The wave count from May until today will have to be changed. Before today's drop, I have considered the current pullback as a mini wave 4 correction. With today's 22 points drop, the magnitude is too big to be a mini wave 4. Without this mini wave 4, the earlier run-up since end of June has only three mini waves, 1,2 and 3 as shown, the run-up has to be wave b of wave (iv) and the current down is the wave c of wave (iv).
 

This wave c, in an expanding a-b-c wave (iv), it may drop to 1700 level, another 4% to go.

Rapeseed Field

 

If you visit Luoping on Eastern Yunan in China during spring, this is what you will see, miles and miles of rapeseed flowers. The best time to visit is from mid February to April.

In UK, Hambledon, Hampshire has picturesque landscape of rapeseed fields dotted with traditional English cottages.

 

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Dow - Assuming a diagonal wave (v) formation

The current major wave (5) started in October 2011 from 10655 level. If wave (v) can reach 16000 level, the gain for the major wave (5) over 22 months is 5300 points or 50%.

Sub-wave 5/(v) will have three waves. Dow is currently forming the mini wave 2 with low volume. The mini wave 3 is expected to reach 16000 level in August and if it reaches there with a half-dead volume and in a half-dead manner, be prepared for a sharp correction of around 12% to 15%, the major wave (6) pullback.

Lavender

Summer is also a time to walk the lavender field with your love one. In Hokkaido, lavender usually starts blooming in late June and reaches its peak from mid July to early August. Now is the best time to have your honeymoon or your second or third or fourth .....  honeymoon at Furano in Hokkaido.

Click 'Furano' for more information.

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No sign so far for a Euphoric run.

As long as the volume doesn't pick up, I will assume that Dow is forming a diagonal wave (v) and it can end pretty soon. That also mark the end of major wave (5).

Then the next question is whether the Mega wave 1 has 5 or 9 major wave.

(a) Mega wave 1 has 9 major waves.

Dow will have a 12% to 15% major wave (6) correction as shown below.

This will tie in quite well with Paul Schatz, President of Heritage Capital, has in mind. He is bullish but expecting a near term pullback.

"I do think we are building towards a peak that will mark a 10% to 20% decline." He think a new market top could be set in the coming August or September.

"If we do have a decline, I think it will bottom in October, and possibly it will lead to another rally ......."

Click 'Heading for a 1987-style crash ?' for the report by Matt Nesto.

(b) Mega wave 1 has only 5 major waves.

Under this scenario, the end of the diagonal wave (v) also mark the end of the mega wave 1.

A mega wave 2 correction can be very damaging. Minimum target is the bottom of major wave (4) at 10655 level, a 33% pullback. The worst case scenario is a 100% retracement to March 2009's low of 6547 level - the bubble has burst.

As I have mentioned before, I don't expect the asset bubble to burst without going through a dynamic, high volume, speculative euphoric run. If Dow does form a diagonal wave (v) to end the major wave (5), I expect the next correction to be a major wave (6) pullback with magnitude not exceeding 15%.

Summer is the best time to see sunflowers. Whenever I see sunflower, I think of Van Gogh and his Sunflowers.

 And then his starry starry night

 

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Short-term direction.

Dow Jones Industrial Average

Dow is at mini-wave iv. It needs a few more days to complete the correction

Singapore STI

STI is at sub-wave ii correction. It needs another week to complete the wave.

Hong Kong Hang Seng Index

Hang Seng is the same as Singapore STI, having its sub-wave ii correction

 

Bursa Malaysia FBMKLCI

Same as the Dow, it is forming the mini-wave 4.

It appears that next week is going to be another slow and boring week.

Interesting Stock

Bina Darulaman Bhd

In May, it managed to break the upper long-term resistance line. It went to an intra-day high of Rm 1.88 before pulling back to rest on top of the resistance line.

It is very likely that BDB has completed its sub-wave i &ii of wave 7 and is forming its sub-wave iii currently. The next mini-wave 3 of sub-wave iii's surge must be accompanied by high volume, failure which it is possible that the current wave up is the wave b of sub-wave ii, sub-wave iii is not here yet. Need to wait for the completion of wave c of sub-wave ii.

For 12 months ending 31st December 2012, its earning per share was 30.03 sens. Its 1st quarter earning ending 31st March was 9.58 sens, very impressive. Its current NTA per share is Rm3.52 which is 112% higher than its last Friday closing price of Rm 1.66. BDB is comparatively a small company with 72.8 million issued and paid up shares.

BDB is the only government-linked company in Kedah with principal activities in township development, construction, road works, granite quarry operation and golf resort operation and management.


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Singapore STI & Hang Seng Index

FBMKLCI managed to break the 1800 level yesterday and today it added another 4 points to close at 1810. The volume was not impressive on both days. Is FBMKLCI ready for a euphoric run ? To get an answer I need to look at other Asian markets, particularly Singapore and Hong Kong as I believe FBMKLCI can never have a dynamic run by itself.

Singapore STI

From its 2008's low, Singapore STI has completed its mega wave (1)-(2) and its major wave 1-2.

From its 6-month chart, after completed its major wave 2, STI has formed 5 mini waves. According to Elliott Wave Principle, 'A five-wave advance identifies the larger trend as up". These 5 mini waves have to be the sub-wave i of wave (i) of major wave 3 of the mega wave (3).

Hong Kong Hang Seng Index

My wave count for Hang Seng Index is similar to that for STI. The Hang Seng index has completed its mega wave (1)-(2) and major wave 1-2.  

 

From its 6-month chart, Hang Seng has completed 5 mini waves too.

So the next major trend for both STI and Hang Seng is the major wave 3. Both of them are about to complete their respective sub-wave i, to be followed by corrective sub-wave ii. The volume for sub-wave i and ii is usually low due to uncertainty of trend. The volume is expected to pick up during sub-wave iii when prices can start to move with a steeper gradient.

Just received from my friend

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Perak Corporation Bhd

Perak Corp surged with high volume and gained 34 sens (+13.4%) to close at Rm 2.88 today. My wave count on 19th June for this stock has to be modified with this development.

The wave count for its long-term chart remains the same. A double-bottom with mega wave (I), (II) and major wave (1) and (2) completed.

 

My current wave count for major wave (3) is as shown below.

Perak Corp is forming its mini-wave v at this moment.

 FBMKLCI

Will there be a euphoric run for FBMKLCI ?

It has to be led by Dow and in tandem with other Asian bourses.

 

FBMKLCI is currently forming the sub-wave iii of wave (iii) of major wave 3, it has to be very dynamic with high volume. But so far the market is half-death with unimpressive volume as the index moving towards 1800 level. No sign yet.

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Inch Kenneth Kajang Rubber PLC

Inch Kenneth opened its trading with a gap on Friday and moved up strongly  and swiftly to Rm 1.02 within 10 minutes with high volume. Seller emerged in late morning and in the afternoon session to push the price lower. It closed at 99 sen for a 4 sen gain with 6.7 millions shares traded.

Its long-term chart looks very bullish. An inverted head and shoulders formation. It punched the neckline in January followed by a 'a-b-c-d-e' sub-wave iv consolidation resting on top of the neckline.

It is likely that its sub-wave v of wave (iii) has started.

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Dow - Diagonal ending or Euphoric run ?

Dow gained about 100 points after 2 hours of trading on Thursday morning. With this 100 points, I can safely remove the wave (viii) scenario.

If Dow continues to move within its lower and upper trend-lines with low volume as shown below, then it is a diagonal wave (v), a terminal wave form. Mega wave 1 will end within this year.

Another possibility is Dow started to surge with high volume and breaking its upper trend-lines one after another as shown below. This is a typical crazy, euphoric run with fantastic volume before the bubble bursts, likely to be in 2014.

Bursa Malaysia

Malton

Malton gained 3 sen to 89.5 sen with high volume.

 

This is likely the wave b of sub-wave iv.

 

TA Enterprise

 TA has started its sub-wave v today.

If Dow is going to lead the world bourses for a euphoric run, TA can be very interesting in its wave 3 run. Wave 2 correction can provide a good entry point.

 

Asian Pac Holding

This property penny stock looked interesting. The return can be fantastic provided my reading is correct and there is a euphoric run.

After breaking out of its upper trend line, Asian Pac is forming its wave 2 at this moment. It may drop back to 12 sen level before starting its wave 3 of (3). For 3 months ending March, 2013, Asian Pac earned 1.75 sen per share. NTA is 35 sen.

Its borrowing is high at Rm290 millions but it has Rm400 millions worth of investment properties and lands that must have appreciated by quite a lot. It has cash of Rm 83 millions.  

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Prolexus and SEAL

Prolexus Bhd

Mini-wave ii of sub-wave 9 is about there.

SEAL Incorporated Bhd

 

Watch out for mini-wave iii of  sub-wave (iii) of wave 1 of major wave (3).



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