Dow (24,633) - Wave B continues

Dow added 532 points (+2.21%) on Wednesday to show that its wave B has not been completed yet. The breakout from its April 17 high also ruled out its possibility as the possible end of wave B.

If the current run-up is the sub-wave iii of wave B, it will end within the next one or two days. If the next sub-wave iv pullback is around 5%, very likely the sub-wave v will mark the end of wave (iii) as well as the end of wave B.

However if Dow can continue to run up strongly with very high volume then the seemed to be impossible option of a mega wave (3) for the Dow can become a reality.

If the next surge is indeed the mini wave 3 of the sub-wave iii of wave (iii) of Dow, then it has to be an unmistakable dynamic run-up with strong, very strong unmistakable volume.

If these thing can happen, then the last low at 18,213 on March 23 with 38.4% drop from its peak of 29,568 is the end of mega wave (2).

Pray hard for a very strong run-up with a very very strong volume in the next 5 trading days. Failure which, a timid run-up will end up as a B wave.

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Dow (23,775) - Has the wave B rebound ended?

Dow rebounded 260 points (1.11%) on Friday after the US House approved the $484 billion coronavirus rescue package on Thursday night and President Trump signed into law the package on Friday. The rebound in oil price is another positive factor.

Dow reached an intraday high of 24,268 on April 17, gaining 6055 points or 33.2% from its low of 18213 recorded on March 23. If Dow instead of moving higher, it starts to move lower next week and break the top of wave (i) the 22,595 level, then very likely Dow has completed its wave B.

But if Dow can hold above the 22,595 level and can move higher, it is possible that the current correction is the wave (iv). Dow has another 3 waves to go, wave (v), (vi) and (vii) before ending its wave B.

But if Dow can continue with its Friday's rebound on Monday, then it has 3 more sub-waves to go, the sub-wave iii, iv and v to complete the wave (iii) as well as the wave B before turning south.

But at the back of my head I still have this seemed to be impossible alternative at this moment as the world economy is heading for recession with possibility of great depression further ahead, the mega wave (3) scenario.

China is able to contain its Covid-19 and has started to rebuild its virus-battered economy ahead of all other nations. With cheap oil, close to zero interest rate with and economy stimulus packages on the table, the Chinese economy should be improving and consumption should be picking up. Hopefully this is the starting of the next up cycle of China to be followed by all other countries, one by one that are lagging behind in the fight against the virus.

The following charts show the current situation of Covid-19 in some of the countries. In each chart I plotted the cumulative virus cases (blue line), the 10-day moving average of cases (red line) and the rate of increase of cases (green line).

China is out of trouble water with South Korea following closely

France will be next to recover as the 'cumulative cases' and the '10-day moving average' have started to converge and the 'rate of increase' is approaching zero. Germany is following closely behind France.

For Italy and Spain, 'rate of increase' are 1.68% and 2.32% respectively. They will take another 2 weeks to reach 1%. The blue and red lines are expected to converge after that.

US and UK need more time as the 'rate of increase' is still above 4%.

Malaysia looks promising with the 'rate of increase' at 1.24% and the blue and red lines start to converge. Singapore is bad due to the foreign workers cluster. But things appeared to be under control now as the 'rate of increase' has started to drop again.

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Crude Oil (WTI) turned negative on Monday (April 20)

Crude Oil (WTI) price went as low as negative US$40.32 on Monday on expiry of May Future Contract by end of Tuesday, April 21. The price finally closed at negative US$37.63

The June 20 future contract on Tuesday, April 21, opened at US$21.27. It briefly went to its high of US$22.56 before drifting lower as time passes. At this moment while I was writing, the June contract has dropped to US$11.89 earlier and is rebounding now to US$14.08. Very very volatile indeed.

The sharp plunge of crude oil price on the expiry of May future contract reflected the acute problem of shortage of storage facilities. Upon expiry of the May contract by Tuesday, the long positions are obliged to take physical delivery of crude oil. If they knew very well that they won't be able to find storage facility to store the oil the only way out is to square their position and take the losses.

Will the price turn negative again in one month time when the June future expired? Possible if the Covid-19 lockdown continues and the crude oil demand remains depressed and with no drastic cut down of production. But don't expect those with long positions to wait until the last 48 hours before the expiry date to take whatever necessary action like what has happened yesterday and what is happening today. 

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Crude Oil (WTI) (US$22.77)

WTI is likely to fluctuate between US$18 and US$26 in the next few months to form the wave iv of 3 of E. Wave v of E will take another few more months and that will stretch the down trend easily until end of 2020.

Wave E may not be the end of the mega wave (2). The next major rebound is likely to be wave X follows by another ABC waves or ABCDE waves.

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Weekly Summary

Dow (24,242)

Dow surged 704 points(+2.99%) on Friday over report of a drug from Gilead Sciences that appeared to be effective in Covid-19 treatment.

Dow continued with its wave B formation. 

Wave C of super wave VIII is likely to drop to about 14,200 level for a 52% pullback which is about the same magnitude as that of the super wave VI (54%) and super wave II (52%). Super wave IV correction is slightly smaller at 42% but it has a much much longer duration.

Another fundamentally unbelievable but technically possible option that I have mentioned before is the mega wave (3) of the super wave VII option.

The March intra-day low of 18,213 (-38%) is about the same magnitude as that of the mega wave (2) (-36%) and mega wave (4) (-35.6%) of the super wave V.

FBMKLCI (1,407)

From its low recorded on March 19 of 1,219, KLCI has rebounded 15.4% to 1,407 on Friday. This magnitude of 15.4% is much bigger than all its previous 4 rebounds of 9.6%, 5.4%, 5.7% and 4.1% and all together 9 waves have been formed for this wave C, there is a possibility that KLCI has completed the wave C of the mega wave (6).

Is it possible that KLCI has already started its mega wave (7)?

Similar to the mega wave (3) option for Dow, fundamentally it looked absurd at this moment in view of the Covid-19 situation and the world economy that many gurus said may turn from recession to a great depression.

 Even if KLCI is forming the major wave 1 of its mega wave (7), don't forget that major wave 2 can always go for a 100% retracement to retest the 1,219 level again to form a 'double bottom' reversal pattern.

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Dow (22,680) - Jumped 7.73%

At the close of Monday trading Dow surged 1,627 points or a fantastic 7.73% for the day. If Dow can move higher from here this week, it is on its wave (iii) of B.

But if Dow losses steam and starts to move lower starting tomorrow, then most likely it is not yet out of its wave (ii) of B formation.

There is this very unlikely option at this moment and some said 'zero possibility' in view of the Covid-19 pandemic that has the capability of turning a recession into a great depression, but technically still can be considered as an option - the mega wave (3) scenario that I mentioned previously.

The magnitude of pullback is 38.4% at its March 23's low of 18,213.

But looking at the long-term chart the plotting was based on closing price, the March 23 closing price was 18,591 that gave a 37% correction that is about the magnitude of the previous mega wave (ii) (-36.1%) and mega wave (iv) (-35.6%) corrections of the super wave V uptrend.

The mega wave (3) of the super wave V began after the famous 19 October 1987's 'Black Monday Crush'. From its low of 1,738 level, Dow moved to its mega wave (3) high of 11,750 for a 576% gain over a 13-year bull run from October 1987 to September 2000.

Another factor that needs to be looked into is the reasons the caused the October 1987 crash and the reasons for the current crash, they are of very much difference nature.

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Dow (20,943) - wave (ii) of B completed?

Dow dropped 973 points (-4.44%) on Wednesday, magnitude wise it is possible that it has completed its wave (ii) of B. The next up trend will be the wave (iii) of B. This is assuming that Dow is forming its super wave VIII.

A bullish but unlikely fundamentally (due to Covid-19 pandemic and its impact on world economy) at this moment is a mega wave (1)-(2)formation for Dow.

Under this scenario. the next up trend is the wave (iii) of the major wave 1 of its mega wave (3).

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