How high KL Composite can go ?

(Double clicks to enlarge the chart)

KLCI after hitting a bottom at 835 in December 2008 (refer to my older posts), it has so far completed wave (I) and (II) to form a "Triple Bottoms Reversal" pattern. Wave (III) started in March 2009 from 837. So far wave (III) has completed its sub-waves i-ii-iii-iv-v-vi-vii and viii, currently it is in sub-wave ix that may take another 3 to 4 days to complete. Based on the magnitude of wave(I) of 92 points, by using Fibonacci ratio of 2.618, wave (III) can end at 1077 (92x2.618+837) unless wave (III) continues with sub-wave x-xi-xii and xiii, under such circumstances Fibonacci ratio of 3.618 will have to be used.

Dow put on 235 points (2.8%) on Monday

Dow's 235 points up (2.8%) on Monday is bigger than what I have expected and has temporary reversed the downtrend set by the first 5 mini waves that I have mentioned two days ago. It appears that the current uptrend is being prolonged for a while.

As for the technical indicators, as usual they will swing together with the index.

After forming the 5 mini downtrend waves, I was expecting the Dow to break through the lower trend-line but instead of that, Dow has a candlestick that has recouped 75% of the losses caused by the 5 mini waves and at the sametime ruled out the expected downtrend waves i-ii-iii-iv-v that I have mentioned previously because the 'iv' rebound can not be so big that it overlapped 'i'. As shown below, the current uptrend is still remained intact.

The uptrend cases of either (I)-(II)-(III)-(IV)-(V) formation as shown above with Dow currently forming wave(V) or the 1-2-3-4-5-6 formation as shown below with Dow currently forming wave 7 (same as KLSE Composite) are more likely. Traders that have cleared out can move in again for another round whereas medium term investors can clear more stocks at better price.

Meanwhile keep an eye on the lower trendline for a break down in the uptrend. The balance of the uptrend journey is expected to be short.

'Char Siew Pau'

This is something from my daughter, some of you might have heard this before.

These are 'Char Siew Pau'

And these are 'Man Tau'

Question No 1 : 'Char Siew Pau' and 'Man Tau' went for movie, a sad movie. 'Char Siew Pau' cried and cried and cried but 'Man Tau' didn't, why?

Answer : 'Char Siew Pau' has filling (feeling), 'Man Tau' doesn't have filling.

Haha 'Mo Liew'

OK, next question most people can answer

Question No. 2 : 'Char Siew Pau' and 'Tai Pau' went for the same movie. 'Char Siew Pau' cried and cried, 'Tai Pau' cried louder, why?

Answer : 'Tai Pau' has more filling.

Question No. 3 : 'Char Siew Pau' and 'Tau Sar Pau' went for the same movie, 'Char Siew Pau' cried and cried, 'Tau Sar Pau' hugged 'Char Siew Pau' and consoled 'Char Siew Pau', why?

Answer : 'Tau Sar Pau' is sweet.

Next question many people can not answer.

Question No. 4 : This time 'Char Siew Pau' went to the same movie alone, 'Char Siew Pau' didn't cry, why?

Answer : This is the fourth time 'Char Siew Pau' watched the same movie. The filling has no more feeling.

'sub-fun-moo-liew'

Five waves set the trend

Both Nasdaq and Dow closed with about 0.5% drop on Friday as shown below with their respective technical indicators.


It is interesting to find that the indicators for the first time since March 9 are moving towards the baseline. It is also interesting to note that also for the first time since March 9, Dow has formed five mini downtrend waves as shown below. The Elliott's wave basic concept is "five waves in the direction of the main trend followed by three corrective waves". Based on this basic concept, the main trend for Dow currently is downtrend.

As discussed in my previous post, in a 1-2-3-4-5 formation as shown below, Dow after completing its major wave (I), it is currently trying to complete its wave "a" of its a-b-c or a-b-c-d-e corrective wave (II). So far it has completed "i" and "ii" and is either has or needs another one or two days to complete its "iii". "a" can take the form of either three-waves i-ii-iii or five-waves i-ii-iii-iv-v.

The second possible form of (I)-(II)-(III) formation for Dow (the bearish option) as shown below, after completing wave (III) and that is the major (6) of the bear since October 2007, Dow is heading for major (7) as explained in my previous post, Dow can reach 6,547 or even lower. This option looks unlikely at this moment but in stock market "anything can happen". At the end of 2007 very few people including those experts of the big international investment houses were able to foresee the Dow to drop for 17 months to 6,547. In the current down trend Dow has completed "i" and "ii", currently in "iii" to be followed by "iv" and "v" to complete its wave 1, which is to be followed later by waves 2-3-4 and 5. A "long and winding road"-The Beatles

While analysing the Dow, it suddenly struck my mind that there is another high possibility that the market might just take a short pause before it continues to run for another leg as shown below. In this case, the waves after (III) is not i-ii-iii as mentioned above, they are a-b-c instead as shown below with "c" having 5 mini waves. If this is really the case "c" has either completed or it needs another one the most two days to complete. What about the indicators? Well, the indicators will just touch the base and then go back to touch the top again. If this does happen, the (V) is going to be a short (V) for a diagonal wedge formation, just nice for one to sell the rest of the stocks in hand. For the traders, just nice to go for one more round especially on those speculative penny stocks that have pulled back sharply in the last few days. ((III) is much shorter then (I), (V) should be much shorter than (III)).

Wonderful Flowering Inducer

About two months ago I went to the Orchid Garden near Taman Tasik Pertana (KL Lake Garden), while chichating with one of the store operator, he recommended to me this blue colour flowering inducer in a 500ml mineral bottle as shown below. I paid Rm 10.00 for a bottle.


I mixed 5ml of this solution to 1 litre of water (as per instruction) and sprayed my orchid plants once a week. After one month plus I noticed that most of my orchid plants started to flower including some of the plants that have never flowered before.

This yellow flower orchid is a rare wild orchid that has refused to flower for years. I saw this plants at Sg. Buloh a few weeks ago, a 1 foot tall plant was selling at Rm700.00 per pot.

If your orchid plants have flowering problem, you can try this blue solution.

Nasdaq taking the lead in correction

On Wednesday Nasdaq closed with 51 points down (2.9%) that confirmed that the market is in a higher degree correction, it also means that the option of a wave (I)-(II), 1-2 formation as shown below is unlikely simply because with the 51 points red candlestick, the lower degree 1-2 is now bigger in magnitude than the higher degree (I)-(II).
The above two indicators have shown clearly that the current correction, which is in its fifth days is of a higher degree correction, the indicators have never dropped that low since the beginning of the run up in March. I expect the indicators to move side way at the base through out the entire correction phase.

With the wave (I)-(II), 1-2 out of the way, Dow is either forming a 1-2-3-4-5 wave (I) as shown above (and it is currently in wave (II) correction that can last another 10 to 15 days for a simple a-b-c, or it can last longer if it goes for a-b-c-d-e formation) or forming a (I)-(II)-(III) waves as shown below.
This wave (I)-(II)-(III) is very bearish, as I have explained in my May 7's post under possibility 3, Dow can drop until the March 2009 low of 6,547 for a possible double bottoms formation or can be lower for major wave (7).

The gain is juicy - American stocks

Some of the American stocks that I have mentioned previously as shown above have recovered from their respective lows that were recorded in either November 2008 or March 2009. The gains in their respective stock prices are fantastic during the current wave (I) up trend movement. It will be interesting to see how much they can drop during the coming wave(II) consolidation. Don't forget wave (II) can have (but no necessary) 100% retracement to form double bottoms reversal pattern. These are gold mines if they go for 100% retracement. The gains during wave (III) can have a minimum of 1.618 times of the figures shown above.