Dow - A higher degree correction

Dow dropped 130 points or 0.8% on Wednesday. Dow opened lower on Thursday morning, it dropped another 70 points after 30 minutes of trading. Dow is having a higher degree correction.

Possibility 1 - Mini-wave 2 correction.

As shown below, Dow is forming wave c of mini-wave 2 of sub-wave iii of wave (ix). This is a more bullish scenario as wave (ix) will take a longer time, say 4 to 6 months to complete and it may reach 17,000 level.

Possibility 2 - sub-wave iv correction.

Dow is forming wave a of its sub-wave iv. Dow is likely to complete its sub-wave iv by early January 2014. Sub-wave v may take another month to complete. Wave (ix) is likely to be completed before end of February, 2014 and wave (ix) may reach only 16,200 or it may even end at wave (iii)'s high of 16,086 to form a double-top reversal pattern.

On the completion of wave (ix) I will have to answer the crucial question of whether that is also the end of major wave (5) and mega wave 1 as shown below.

Mega wave 2 may go for a 30% pullback. Be careful.

However if the subsequent pullback is the major wave (6) then I will have to worry about the possibility of an 'Expanding Triangles' on the completion of major wave (7), that will be years later, so no need to worry about that at this moment.


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Any danger sign ?

Hang Seng Index

No danger sign. Forming sub-wave (ii) of wave 3.

Singapore STI

No danger sign, forming sub-wave ii of wave 5.

FBMKLCI

 

Forming sub-wave iii of wave (v), no danger sign.

Pan Malaysia Corporation Bhd (PMC)

PMC Group is primarily involved in the manufacturing, marketing and distribution of food and confectionery products with subsidiaries operate in Malaysia, Singapore and Hong Kong. Its products under established brands such as Tudor Gold, Crispy, Tango, Kandos and Kiddies are exported to more than 30 countries worldwide.

Its earnings for 2011 and 2012are 0.39 sen and 1.13 sen per share, very low.  For 2013, its cumulative earning until 3rd quarter is 3.28 sen per share. The higher earning this year is due to an exceptional gain of Rm 21.58 million from disposal of a piece of land with building. Net Assets per share is 48 sen. Its cash in hand is about Rm 139 million, bank borrowing is about 6 million. If I divide net cash of Rm 133 million by its 712 million shares, It is 18.6 sen per share.

In early September, its share price started to move from 14 sen to a high of 34 sen by early November to complete its wave 5. Since then its price has started to move lower and it closed at 23.5 sen today.

Looking at the chart, I just wonder whether the current correction is the wave 6 pullback or it is the starting of the higher degree major wave (4) correction, if wave 5 marked the end of its major wave (3).

For major wave (4) correction, it may drop to around 16 sen level. But for a wave 6 pullback, the magnitude is about there.


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Worst case scenario - Expanding Triangles

Bearish Option

Refer to Matthias Chang's 'Dow at 16,000 - Suicide Poker' and several of his other articles, I guess Dow with an 'Expanding Triangles' will fit into the magnitude of the coming financial tsunami in his mind.

In this bearish option, the year 2000's peak at 11,722 marked the end of super wave (V) as well as the end of grand super wave (III) as shown. Grand super wave (IV) is a 3-3-3-3-3 expanding triangles formation.

The bull run since 2009's bottom is the mega wave D that has 7 major waves. Major wave (5) is about to complete. After that Dow will have a major wave (6) correction to be followed by the final major wave (7)'s run-up to complete the mega wave D. Mega wave E may fall short or it may also over-shoot on the down side to 5,000 or 4,000 level for Dow. If Dow can hit 17,000 before it drops to say 4,000, that is a 76% drop.

Not So Bearish Option

In this option, assuming the 'Untested New Concept (flood the market with money)' of the central bankers some how can work, then the bull-run since the 2009's bottom is the mega wave 1 of the super wave (VII).

Major pullback will only take place after the completion of the mega wave 1. The only question now is whether mega wave 1 has 5 or 9 major waves.

Possibility 1 - Mega wave 1 has 5 major waves.

Dow is about to complete the wave (ix) of its major wave (5) as shown below. The mega wave 2 correction may bring Dow to the 11,000 level for a 30% correction.

Possible paths for wave (ix)

For either case wave (ix) is likely to end during 1st quarter of 2014.

Possibility 2 - Mega wave 1 has 9 major waves

Still a long way to go before the completion of  major wave (9) and before the mega wave 2's 30% correction takes place, may be in 2015. Since the 2009's bottom, Dow is about to finish its major wave (5). It still has major wave (6), (7), (8) and (9) to go.

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Nelson Mandela
Born : 18th July, 1918
Died : 5th December, 2013

 "If I had my time over I would do the same again, 

so would any man who dares call himself a man"

When asked to give a tribute to Mandela, 

Jose Mourinho, "I feel too insignificant to make any comment."

Sorry Dow has not finished its mini-wave 4

Dow Dropped another 25 points on Wednesday and it opened lower on Thursday morning. The mini-wave 4 can have a possible low of 15,746. But once it goes below 15676 level (the top of sub-wave i, then I will have to review my wave count.

Matthias Chang, "If any one of you venture into the market after Dow hitting 16,000 in the hope that it WILL soar higher, YOU WILL BE IN FOR A SURPRISE. Dow may collapse anytime, even before it hits 20,000".


Click 'Dow at 16,000 - Suicide Poker !' to read Matthias Chang's article.

If one can agree that the current bull run and records setting is fueled by excessive liquidity (money printing), and if one believes that this is something that is not sustainable, then one will have to agree with Matthias Chang that this is a 'Suicide Poker' game. Under this scenario, it is true that 'Dow may collapse anytime'. But as a charting technician, I believe that there should be some 'signs' that tell me to run for my life before the collapse.

Remember the banker that I have mentioned in one of my earlier articles. To him, the assets purchase is supported by solid liquidity. To balance or to absorb the excessive liquidity, the value of the assets has to move to a higher level (new equilibrium). The 'money printing' by central bankers is an unprecedented 'experiment' or 'untested new concept' of the central bankers. It is possible that they themselves also do not know this story has how many episodes and how the story is going to end. Under this scenario, the 'assets bubble' may be able to drag on for a few more years and Dow may go higher than 20,000.

A Super Wave VII scenario.


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Dow - Possible starting of mini wave 5

Dow

Dow dropped a total of 172 points (1%) on Monday and Tuesday. On Wednesday morning, Dow opened lower and reached a low of 15846 before rebounded to positive territory within the first hour.

It is possible that mini wave 4 has been completed and the rebound marked the starting of mini-wave 5 that could reach 16,400 level to complete the sub-wave iii within December.

FBMKLCI

FBMKLCI dropped 2 points to 1821 at the close of today's trading session.

I expect the index to pick up momentum very soon. Sub-wave 3 has to be more dynamic than sub-wave 1.


Mega First Corporation Bhd (MFCB) Rm 2.08

 MFCB put on 10 sen today to close at Rm2.08. It is about to break its Rm2.10 resistance. MFCB is a diversified company with businesses covering power generation, property development and limestone quarrying.

It has just announced its third quarter earning at 10.36 sen/share. Its cumulative earning for the first 3 quarters is 27.79 sen/share. NTA is Rm3.05/share. It has Rm 147 million cash in hand and its bank borrowing is Rm 53 million. MFCB has been buying back its own share for more than 5 years since early 2007 when its stock price was around Rm1.40.

Is MFCB about to break out and run ?  Wave iii of 3 has to be dynamic with high volume.

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To me, it is a bubble.

.......  many are beginning to realise we have seen this movie before, we saw it during the dotcom bubble, and we saw it during the lead up to the last financial crisis. So precisely when will the bubble burst this time? Nobody knows for sure, but without a doubt it will burst at some point. ........

Click '15 Signs That We Are Near The Peak Of An Absolutely Massive Stock Market Bubble' to find out the 15 signs.

Personally I believe an assets bubble is there and is continuously being inflated by excess liquidity generated by the central bankers, the money printers. My main concern is when will it burst?

Based on my wave count as shown below, and please bear in mind, I can be wrong too, the earliest the current run can end is when it has completed its major wave (5) and it is also the end of its mega wave 1.

By assuming sub-wave iii is about to end, what is left is mini wave 4 and 5 and sub-wave iv and v as shown below.

I expect the sub-wave v to end at 17,000 before end of March 2014. If wave (ix) has only 5 waves, that also marked the end of major wave (5) and possibly the end of mega wave 1.

However, if mega wave 1 has 9 major waves,

After major wave (5) has ended in February 2014, Dow will have the next major wave (6) correction that can take 2 to 3 months to complete before the major wave (7) starts to run and that can easily last until the middle of 2015. After that Dow still has major wave (8) and (9) to go. Still a long way to go before the bubble can burst, if mega wave 1 has 9 major wave.


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