Dow - Pay Attention to the 10,720 level.

Dow dropped 119 points on Thursday, it dropped another 160 points (1.4%) after one hour of trading on Friday to 11,135, which is lower than its recent low of 11,139. It is likely that the mini wave (iii) of its sub-wave v has started. For major wave C to remains intact, it has to break the 10,720 level.

Friday night music.

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Dow in sub-wave v of wave 1 of major wave C

All the three indices gained more than 1% at the opening of Wednesday trading session. This rebound can be the mini wave (ii) rebound for sub-wave v as shown below. I am expecting the sub-wave v to end near the 10,000 to complete the wave 1 of the major wave C.


Looking at the long-term chart (1900 to August 2011) below, I expect the end of this major wave C to reach at least the major wave A level of March 2009's low of 6,547 level. This major wave C can either be the C of the super wave (IV) as shown below. (A-B-C-D-E formation).



OR it can be the major wave C of the mega wave VI as shown below (a-b-c formation). In this case the major wave C can even reach the 5000 level depending whether the mega wave VI is a contracting a-b-c or a zig-zag a-b-c.


Besides the above two possible wave counts, there is actually another possible wave count that is more bullish as shown below.


I considered this scenario as highly unlikely. Under this scenario, the peak of the 'Dot-com bubble' in October 1999 is the end of mega wave V (not the October 2007 peak). From October 1999 to the March 2009's low, Dow took 10 years to form an expanding a-b-c to complete the mega wave VI as shown below.



In this unlikely case, the March 2009 low of 6,547 actually marked the starting of a new bull market, the mega wave VII.

So far Dow has completed sub-wave i, ii, iii and iv of its wave 1. Under this scenario, Dow will have to run all the way to 14,000 from the current level to complete its sub-wave v and the wave 1. That is a 2,700 points gain.


This possibility can be ruled out within the next 5 trading days (hopefully) the moment Dow failed to reach the 11613 level (set on 31st August) and starts to move lower to set another low that is lower than its previous low.


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The Double-Dip.

This is going to be a dramatic week for Europe following the abrupt withdrawal of 'Troika', the tripartite financial rescue team, from Athens on Friday. The Italian Treasury must redeem Euro 14.6 billion of debts this week and another Euro 64 billions of debts by the end of September.

Nouriel Roubini," .... most advanced economies are on the brink of a double-dip recession. .....".

Click "Is Capitalism Doomed ?" for his article published on 15th August 2011.

At this moment, several stock indices have already given back more than 50% of their gain since the 2009 bottom.

Within 4 months, German DAX has given back more than 50% of the gain that it has made over a period of 24 months.

Talking about double-dip recession, I think the French CAC 40 is almost there, all it needs is another 14% drop. In the last two days, CAC 40 has dropped about 5.9%

Besides DAX and CAC 40, there are many other indices have dropped below the half-way mark.

In Asia, so far there are only two indices, the Tokyo Nikkei 225 and the Shanghai SSEC, have dropped below the 50% level as shown. Other Asian indices are fast approaching the 50% line.

Looking at the above charts, I choose to believe that the double-dip is in the making rather than questioning the possibility of a double-dip.

What about commodity?



For Soybean, there was a price breakout last week, as long as the price can hold above the 1410 level, the possibility of a last surge same as that in early 2008 is still there. Must monitor closely before making any conclusion.

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European Markets Fell Sharply on Monday

European shares fell sharply on Monday amid renewed fears over the euro zone debt crisis and a warning from Deutsche Bank’s CEO on the outlook for banks.

German DAX is the worst hit, dropping 5.01% at this moment. UK FTSE dropped the least with 3.21%. French CAC 40 is equally bad, falling 4.39% at this moment.





September 5, being the first Monday in September, is the Labor Day public holiday for the US.

Dow, as shown above, has completed its sub-wave iv. It is currently in its sub-wave v that can end around the 10,000 level with strong support at 9700 level. If wave 1 has only 5 waves, sub-wave v will mark the end of the wave 1 of the major wave C.


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Three Blind Mice

Three blind mice. Three blind mice.
See how they run. See how they run.
They all ran after the farmer's wife,
Who cut off their tails with a carving knife,
Did you ever see such a sight in your life,
As three blind mice?

An excellent article from N.H. Chan. Click "Who Killed Teoh Beng Hock ?" to read.

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Will History Repeat ?

Soybean closed at $1445 on Friday, remained on top of the breakout price of $1410. I will have to monitor closely to see whether it can break the $1500 level.

If Soybean can break the $1500 level, it is likely that the crude palm oil price (CPO) will proceed to break the Rm 3801 level as shown below to complete its wave 5



However if the soybean price turned south and move below the $1410 level, CPO price will form a major A-B-C waves as shown below.


Similarly the Bursa Malaysia Plantation Index can either move higher to complete its sub-wave v of wave 5, if CPO price moves higher as shown below.



The Plantation index can also move lower as shown below if CPO failed to move higher.


Dow dropped 253 points (2.2%) on Friday, it has completed its sub-wave iv and has started its sub-wave v, heading for 10500 level to complete its wave 1 of major wave C before end of September as shown below. (note that wave 1 takes about 4 months to complete)


It is possible that both the Soybean and Crude Palm Oil prices can have a strong run-up to complete their respective fifth wave during the Dow's wave 2 rebound that can easily last two to three months. It is possible that the Bursa Malaysia Plantation Index can have its last surged to 9500 level, in tandem with CPO and Soybean.

But ultimately, all will plunge together with Dow when Dow started its wave 3 like the way they dived in 2008.






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US Open 2011 - Colourful Outfits

US Open is definitely more colourful than the All White Wimbleton Tennis Open


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