Dow - Wait for confirmation

Still unable to confirm whether the wave 2 rebound has been completed.

Looking at the wave count below, it appears that Dow has completed three mini waves (i)-(ii)-(iii) signalling the completion of wave 2.



But when I looked at the candlestick chart, at a glance there are 5 mini waves 1-2-3-4-5 to form the mini wave i. The current pullback is mini wave ii, Dow has yet to complete its wave 2.



To predict short term movement can be suicidal. Anyway, if wave 2 has yet to be completed, Dow is at the tail-end of it. just sit back, relax and wait for Dow to unfold.



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World markets crumbled

First Headline

Greek Government has proposed to put its austerity plan to a public vote. If the plan failed to go through, Greece could drop the European currency and default on its debts.

World markets crumbled on hearing the proposal by Greek Prime minister.



Asian closed with about 2% down.



French CAC40 and German DAX dropped more that 4% at this moment.



US market dropped about 2% after about 2 hours of trading. If Dow dropped more than 2% at the close, the probability is high that the wave 2 rebound has ended.


Personally I expect the Greeks to protest against any austerity measure and then continue with their happy life under the Warm Mediterranean Sun.



I have been searching for a possible cause for Dow to reach 5,000. I think finally it is still the European debt problem and a possible disintegration of the Euro to pull down the world markets.

Second Headline

MF Global Filed for Bankruptcy Protection

MF Global, a 200-year-old futures brokerage, filed for bankruptcy protection on Monday, the first to go bust in the current European debt crisis.

It owns US$6.3 billions of Italian, Spanish, Belgian, Portuguese and Irish debt. Its stock price plunged 60% last week.




George Soros on the proposed European Plan to fix its debt problems.

"Unfortunately it is not the last crisis because the fundamental issues have not been settled. It is clear that the amount of debts that Greece has accumulated and is accumulating is untenable and the country is effectively insolvent."



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Correction to Hang Seng's Wave Count

Anonymous (Oct 28) has pointed out that the bottom to the 2008 bear run was set on October 2008 and not on March 2009. A check on the daily chart (instead of the weekly chart that I have been using) has clearly shown that the bottom is indeed set on October 27 of 2008 at 11,015. The wave count has been revised based on October 2008's low.

(Click on the chart to enlarge)

Until the November 2010 high, Hang Seng has indeed completed 5 waves as pointed by Anonymous

With this revised wave count, there are 2 likely options for Hang Seng at this moment. A very bullish wave count as shown below, a wave (3) of major wave (III) on the run. This run-up is usually very dynamic with very high volume.



OR Hang Seng has yet to complete its major wave B. there will be a short-term run up to complete the wave (3) as shown below before the starting of major wave C.


To enable Hang Seng to have a strong run-up, Dow is likely to extend its current run-up from 5 waves to 9 waves. Hang Seng won't be able to run if Dow started to move lower rapidly.




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Dow - Is wave 2 of C completed ?

Some experts are simply calling this European debt crisis solution as little more than convoluted. Rather than solve an ongoing crisis, it may only get the European markets through the holidays, prolonging "its day of reckoning" - by Brittany Stepniak

The surge in stock prices in the last few days has brought Dow nearer to its April high of 12,810. In fact, it is possible for wave 2 to have a 100% retracement to 12,810 to form a 'double tops' reversal pattern.


Looking at the chart below, in the last 2 weeks, Dow has completed 5 mini waves i-ii-iii-iv-v. Wave 2 will end at this level if it has only 5 mini waves.

However, if it has 9 mini waves, it will continue with its current run-up to form its mini waves vi-vii-viii-ix, that may bring the index to the 12,810 level.


Next week's development will tell whether wave 2 has been completed.



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Listen to the Guru

On the problem of leveraging up the European Financial Stability Facility (EFSF) I like the analogy given by Cullen Roche.

"This is like having 10 mortally wounded gunshot victims rushed into the ER and using the 9 to transfuse new blood into the 1 victim on his/her deathbed. And when you realize he/she can't be save you use the 8 to help the 1. So on and so forth until you recognize that the victims need is an outside blood transfusion".

The next question is whether Europe is able to entice Asian and Middle East investors to put money into investments that are linked to the bailout fund.

To read a Guru's comment on the newly formulated plan click Europe buys some time

Friday night with Sarah Brightman

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World bourses rally as European leaders clinched deal

European leaders managed to finalize a deal that they hope will mark a turning point in their debt crisis.

After more than 8 hours of tense negotiations on Wednesday night, the leaders were able to close a deal with banks and insurers, requiring them to accept a 50% losses on the Greek bonds when they swap their bonds in January 2012. This is practically a default on its debts by Greece. In addition to this, Greece will be given another new euro 100 billion loan.

To cushion the losses, banks and insurers were asked to raise euro 106 billions by June 2012.

The last measure is to reinforced the bailout fund to effectively put up a euro one trillion firewall to prevent Italy and Spain from being dragged into the crisis.

It is hard for an engineer like me to understand why stocks should rally because:-

1) Greece is allowed to default on its debts
2) More money is given to Greece
3) To standby one trillion euro to bailout Italy and Spain when need arises.

I prefer to look at the chart to gauge what is the most probable outcome.


The French CAC40 shows that the higher degree 500 points wave 2 of the major C rebound is almost there. This surge can be the last kick to end the wave 2.


German DAX is telling the same story. The down trend since the April peak has great similarity to that of the decline from 2007's peak.



FTSE 100's wave 4 rebound has reach an acceptable magnitude for a rebound wave. Watch out for a 'Head and Shoulders' formation.

Even with the latest surge in the indices, the major wave C formation remains intact. However, once the magnitude of the current run-up becomes too big to be a wave 2 or wave 4, I will really have to look for alternative wave counts.



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Fiddler on the Roof

One of my favorite movie. The first time I watched the movie was in 1972, that was 39 years ago.



The story centers on Tevye, a poor milkman, the father of five daughters, and his attempts to maintain his family and Jewish religious traditions while outside influences encroach upon their lives.

He must cope with both the strong-willed actions of his three older daughters and with the edict of the Tsar that evicts the Jews from their village.




The story took place in the Jewish village of Anatevka in westernmost Tsarist Russia in 1905.

For the story click "Story Guide".

The bottle dance - I like the music and the dance

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