The Good, The Bad and The Ugly

Good : 3 MACC officers went to Kuala Dimensi CEO Datuk Seri Tiong King Sing's office (Bintulu MP, Treasurer General Sarawak Progressive Democretic Party) to investigate PKFZ Rm12.5 billions Scandal. Tiong had been given notice of the investigation, his lawyers were at his office to assist/advise him. The process lasted from 2.00pm to 6.30pm. Very peaceful.

Bad : Wong Chuan How, aide to Selangor Exco Ronnie Liu was initially told that he was to be questioned as a witness relating to the award of 230 projects worth Rm500,000.00 ( each project worth Rm 2,174.00 on average ) but 5 MACC officers went to his service centre with a warrant of arrest and told him he was a suspect and was to be arrested and taken to their office for questioning. The subsequent developments were as reported by newspapers.


Ugly : Everybody knew what has happened.

It is horrible

Must read this Fantastic Facts and Fancies from Patrick Teoh

Dow - Recap

It may be good to recap at this stage Dow's chart from a longer term's perspective. There are lots of good news lately. Financial sectors are turning in impressive 2nd quarter results, Germany and France 2nd quarters were up 0.3% respectively (technically they are out of recession), Lee Kah Shing said yesterday, "The worst is over". Larry Kudlow said, "It is a new bull market" and there are many more bullish gurus in Wall Street. But this is supposed to be a crisis comparable to 1929 Great Depression.

From long-term chart on a semi-logarithm scale as shown above, the drop since October 2007 from 14164 to 6547 (-54%) on March 2009 and the rebound to 9398 (+43%) look rather small. In the long term chart it looks rather ordinary and does not have a look that is equivalent to that of 1929.

My Elliontt wave count for Dow is as shown above, Dow is forming the major wave (IV). By the rule of alternation (Elliott wave principle) since wave (II) is a 'sharp and short' simple wave, wave (IV) is likely to take a complex form of a-b-c-d-e 'shallow and long' formation as shown above.

An alternative count is an a-b-c wave (IV) as shown above with a "Head and Shoulders" formation. Based on the economic news todate, it is hard to come out with a reason why Dow can drop to 3000 from say 10500 (-71% drop). Can rule out this possibility at this juncture. So if Dow is truly in major wave (IV) forming a-b-c-d-e complex pattern, assuming March 2009's low is wave a (17 months), Dow is currently in wave b (refer to the 1st chart above).
From the 6-month chart above, we can see that Dow has completed wave (I), (II) and sub-wave 1 of (III). Dow is currently in sub-wave 2 of (III)
This sub-wave 2 can take the form of either a-b-c or a-b-c-d-e. If it is a-b-c, another 3 days can complete sub-wave 2. a-b-c-d-e will stretch sub-wave 2 by another 10 days.

The only worst possibility that we have to be careful is the case, as mentioned in my previous post, the 9398 height of last Thursday is major wave (III), the rebound wave B has ended. This possibility is considered unlikely but in stock market, anything can happen. Yesterday's transected volume of 5.4 billions needed 5.4 billions sell orders to satisfy the buy orders.

Pathologist Dr. Khairul Azman Ibrahim's "suicide theory"

Pathologist Dr. Azman who conducted the post mortem on Teoh's body said that Teoh could have committed suicide based on the followings:
1) Injuries sustained showed no struggle.
2) Tests showed no alcohol and drugs
3) DNA of all witnesses did not match the DNA of "unknown male" found on Teoh's blazer and belt
4) Examination at the scene.

Dr's Theory and explanations were very very sound and good.

Unknown male DNA - "DNA contamination may have occurred when we placed him on the autopsy table.
Drag marks on the right shoe - " landing on his right foot from the fall"
No struggle - "MACC's pen in his shirt pocket would have flung off if there was a struggle"
The lose left shoe found beside the body - "Left shoe could have come off during impact"
Distance between left shoe and body - " I didn't measure, I did not have a measuring tap."
Did not test the left shoe for fingerprints - "The laboratory did not have the facilities." "thought the police would have done it."
Why he did not direct the police to conduct the test - "I forgot."
Dr's theory - "He climbed out of the window before falling to his death."
Why no foot prints or hand prints on the window frame - "The prints may be there. I looked but I didn't see any."
If Teoh had jumped, his body would be found near the wall - "I agree"
But the body was quite a distance from the wall - " I did'nt measure, I did not have a measuring tape."

Dow - looking for breakout

Dow closed with 120 points up yesterday but remained below the resistance line. Tuesday bottom can either be end of wave a or end of wave 2 depending on whether Dow can have a breakout above the resistance line today with high volume or it moves down again to complete the a-b-c wave 2. The 120 points up was impressive but the volume of about 6 billions was on the low side.

Dow in wave 2 of major wave (III)

Dow gave up 96 points on Tuesday and moved into wave 2 which is expected to last a few more days unless Dow can put on more than 120 points at the close today. Anything more than 120 points, say 140 or 150 points will practically mean the wave 2 is very short and has come and gone and wave 3 has started. This coming wave 3 is expected to be more dynamic and with a higher volume of at least 8 to 10 billions.

Wave 2's drop is expected to be about 5% to 6%, that will bring Dow to a low of 8900 before the starting of wave 3. However, if Dow started to move lower and goes beyond 6%, the possibility that wave B has ended as shown below will have to be taken seriously. Looking at the current world economy, this option looks unlikely at this moment.



Looking at the 5-year chart above, it is hard to think of a reason for Dow to go below March's low of 6457.

For wave B to complete within the next two months and the Dow to move lower as shown above, there has to be a new form of crisis taking place. Hard to imagine at this moment.

From the Wall Street, there are more and more people believe that March's low marks the end of the 2007/2008 bear market and it is the beginning of a new bull cycle.

Stocks with (I)-(II), 1-2 Elliott's wave count.

Why HPI's price behavior, as mentioned in my previous article, can not be interpreted using Elliott wave principle? The main reason is HPI has been thinly traded all these while until lately. There was no mass participation in the past.

The most important element for Elliott wave is mass participation. Elliott wave principle basically describes how groups of people behave, how the mass psychology swings repeatedly between optimism and pessimism and in the process a specific and measurable pattern is developed. The main assumption is that the mass behavior to fear and greed, optimism and pessimism, booms and busts is always the same in the olden days of Tulip Mania and South Sea Bubble and is still the same in the present days of programmed tradings.

Back to today's topic on stocks that have formed major wave (I)-(II) and a lower degree wave 1-2. Followings are stocks with such Elliott wave count. Stocks are arranged in alphabetical order. The significance of this type of wave form is that the up coming wave 3 of major wave (III), the 3 of (III) is usually very dynamic with high volume. Can be very juicy.

Axiata's wave 3 has started with Rm3.60 as immediate target.

Duta Land's wave 3 has started. Major (III) with the magnitude of major wave (I) can reach Rm1.00. With 1.618 of (I) can reach Rm1.30.

Inch Kenneth's wave 3 has started with high volume. 60 sen is the minimum target.

KNM, no sign of wave 3. How low can wave 2 goes?

Mulpha, same as KNM, waiting for wave 3 to takeoff

RCECAP is currently in wave 3

SAAG, still waiting for its wave 3

UEM, no sign of wave 3 but a 'Doji' has formed.

In charting there is such thing called pattern failure, remember the failed 'Head and shoulders' pattern before the current run-up, before the wave 3's breakout with high volume, if wave 2 drags side way or lower for too long, the form can change into something else especially if it goes lower than (II).