Weekly Update

 
Dow (19,827)

Dow will take 2 to 3 months to complete its wave (vi).

FBMKLCI (1,664)

KLCI will have one more down to 1,650 to complete its sub-wave ii.

Insas Bhd (Rm 0.76)

Insas is forming its wave (iii) of major wave 3.

From its 6-Month Chart, Insas has one more up to complete the mini wave 5 of its sub-wave iii of wave (iii).

EG Industries Bhd (Rm 0.865)

EG is forming the sub-wave iii of its major wave 5.

From its 6-Month chart, EG is about to complete its mini wave 2. It should move up strongly with high volume next week to form the mini wave 3 of its sub-wave iii.

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CLSA 2017 Feng Shui Index

CLSA has published its feng shui index indicating the possible pattern and relative magnitude of the Hang Seng Index's monthly movement for the year of Fire Rooster. 

Hang Seng index is expected to move side way until end of March before it starts to move higher in April and peak by end of June. There will be a month of correction in July. It will then move side way to slightly higher until November. It will then go downhill until end of the Rooster year.

As the 2016 year of the Monkey is about to end, it is time to have a look at the CLSA 2016 feng shui index with respect to the actual performance of Hang Seng Index in 2016. 

On a monthly comparison, only 5 out of 12 months is correct. The peak of feng shui index is in March but Hang Seng actually peaked in September, 6 months later.

Its 2015 forecast was not that good too, but the shape is there except timing and the magnitude of decline. Feng shui index is supposed to end the year with a net gain but Hang Seng actually ended 2015 with a 25% net loss.

The 2014 forecast was excellent, perfect.

2013's forecast was bad.

For 2012 the general shape is there except timing is out. On a monthly comparison, the score is 50-50.

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Abe Asia Tour

I guess Abe is worried about Trump's 'America First' policy and Trump's decision to withdraw from Trans-Pacific Partnership that may lead to a scale down of US influence in the South Pacific.

Abe is also worried about the new Philippines-China relationship. In October when Rodrigo Duterte visited China, he announced in public his separation from the US and his realignment with China as the two had agreed to resolve their South China Sea dispute through talks.

With Malaysia abandoning his golfing buddy and going straight into China's arms for many 'reasons'. Abe has no choice but to cement ties with these countries to counter China's rapid military buildup in South China Sea.

But Abe did not include Malaysia in his Asia Tour, why? Think about it. Abe visited Vietnam, the Philippines and Indonesia but not Malaysia.

Abe knows very well South China Sea is the throat of the Western Pacific and Indian Oceans. Statistically more than 50% of the world's annual merchant fleet tonnage passes through this 'throat'.

The oil transported through the Strait of Malacca is triple the amount that passes through the Suez Canal and is fifteen times the amount that passes through the Panama Canal.

Roughly 66% of South Korea's energy supplies, nearly 60% of Japan's and Taiwan's energy supplies and 80% of China crude oil import go through the South China Sea.

In addition to the above, South China Sea itself has proven oil reserves of 130 billion barrels and 900 trillion cubic feet of natural gas. Some called the South China Sea "the second Persian Gulf".

During his last week 6-day trip, Abe agreed with the four countries that US commitment is essential for the prosperity, peace and stability of the Asia-Pacific region.

As expected Abe promised to provide more newly built patrol vessels to Vietnam and the Philippines 'at their request' to strengthen  security and defence cooperation. So most likely, the Japanese is hoping that under the name of 'defence cooperation' their military vessels can sail into the South China Sea at the request of .............

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The Yellow The Red

Click 'Overcome our Fear or go quietly into the Dark Night that Awaits Us' for an interesting article by Dennis Ignatius.

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Crude Oil WTI more likely to end at US$60 a barrel

Crude Oil WTI (US$52.55)

I have revised downward the possible target for its current wave (iv) rebound from US$ 72 mentioned in my previous post to US$ 60 based on semi-logarithmic scale plotting. The previous value of US$ 72 was based on linear scale plotting.

On a semi-log chart, wave (iv) to end at the top of its sub-wave iv rebound appeared to have a more  appropriate shape in term of magnitude and duration when compared to its wave (ii) rebound.

And of course as long as wave (iv) does not overlap with wave (i) it still can go to US$ 72 and is still acceptable except that the magnitude looks too big on a semi-log scale.

Dow (19,885)

Dow is likely to move side way to lower to form its wave (vi) in the next 3 months.

I expect the major wave (7) to have 9 waves.

FBMKLCI (1,672)

If sub-wave i of KLCI has only 5 waves, very likely sub-wave ii has started. I expect the correction to be less than 15 points.

Berjaya Corporation Bhd (Rm 0.37)

Since reaching its peak in 2010, BJCorp has been in a long decline for close to 5 years from above Rm 1.70 to its November 2016's low of Rm 0.31. Can this 31 sen low be the final end of BJCorp's 5-year correction ?

In August 2015 at Rm 0.34 when BJCorp formed its sub-wave v of C, I thought that was the end . But it proceeded to form its sub-wave vi-vii-viii and ix. So, hard to say.

But from its 2-year chart, I noticed an OBV divergence. That means a net accumulation of stock over the last 12-month of decline. If the 31 sens low is indeed the end of the wave C of its mega wave (2), I expect BJCorp to move higher along my projected path. This can be a gold mine.

BJCorp latest quarterly earning is 3.27 sens a share with NTA at Rm 1.54.

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If FBMKLCI is forming the wave (iii) of its major wave 5

FBMKLCI (1,677)

Assuming KLCI is on course for its major wave 5 and is currently forming the wave (iii) of 5.

Then it is about to complete the sub-wave i of its wave (iii).

Under this scenario, it is also possible that many individual stocks have completed their respective major correction and have either started or about to start their next up-trend.

Insas Bhd (Rm 0.765)

Insas is on course to form its mega wave (5).

Currently it is forming the sub-wave iii of its wave (iii).

EG Industries Bhd (Rm 0.90)

EG is on course for its major wave 5.

Sub-wave iii is about to complete.

Lee Swee Kiat Group Bhd (Rm 0.28)

Leesk, after 16 months of consolidation to complete its major wave 4, it has started to form the major wave 5 of its mega wave (3).

Kronology Asia Bhd (Rm 0.34)

Krono is currently forming the sub-wave iii of its wave (iii).

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World Bourses 2017

US Dow (19,963)

Dow continues with its major wave (7) formation. Since the third wave, wave (iii), can never be the shortest wave, major wave (7) is expected to have 9 waves.

It is possible that Dow has completed its wave (v) and has started to form its wave (vi).  At 19,963 Dow is 39.5% higher than its 2007 historical peak of 14,164. From its 2009 low of 6,547 Dow has gained 193.8%

UK FTSE 100 (7,210)

FTSE at 7,210 is only 7.2% above its 2007 high of 6,659 and is only 3.7% above its 1999 historical peak of 6,950. From its 2009 bottom of 3,512, FTSE has gained only 103%, very much less than that of Dow.

FTSE is likely to continue with its major wave 5 formation with more new historical highs.

German DAX (11,599)

Dax has performed better than Dow in the last 7 years. At 11,599 Dax is 42.3% higher than its 2007 historical high of 8,067. From its 2009 low of 3,690, it has gained 211%.

Same as FTSE, Dax is likely to continue with its major wave 5 formation.

Japanese Nikkei 225 (19,454)

Nikkei historical peak is its 1989 December peak of 38,957. Its 2007 high of 18,297 is still 53% below its 1989 peak. Nikkei dropped a massive 82% from 38,957 to 7,603 after its asset bubble burst in 1989.

At the peak of its asset bubble in 1988, Japan's theoretical land value was 4 times the total land value of all land in the US. In fact the land value of Tokyo alone is more that that of the whole of US. From another real estate bulletin 'the calculated cash value of a single ward in downtown Tokyo-Chiyoda-Ku could purchase all of Canada'. 

Actually how high is the land in Tokyo in 1988 ? From a report land in Tokyo Ginza area was selling at US$250,000/sq.m. At currently USD/MYR of 4.46, a 1,000 sq. ft. apartment would cost Rm111.50 million !

Click 'Japanese Asset Bubble' for the article.

I am taking the 2009 low of 7,021 as the end of wave A. Since then Nikkei has completed the wave 1-2-3-4 of its wave B. in 2017 it is expected to continue with its wave 5-6-7 to completed its wave B.

Shanghai SSEC (3,154)

SSEC at 3,154 is 49% lower than its 2007 historical high of 6,092.

It is likely that SSEC has completed its wave B in 2015 at 5,166 level. I expect SSEC to continue with its wave C formation in 2017.

But if I looked at its 158% run-up within 13 months from April 2014 to May 2015, Shanghai market behaved more like a casino at that time with lots of cash at the sideline. Chinese gamblers are ever ready to jump in at anytime for a fast gain. For this reason and also the reason that it is a market tightly control by the Chinese Government, I have a bullish alternative for SSEC as shown below. But I think is unlikely.

A bullish wave 3 of (3) in 2017.

Hong Kong HS (22,503)

HS is likely to continue with its major wave 5 formation.

Its current level is still 26% below its 2007 peak of 30,468.

Singapore STI (2,962)

STI at Friday closing of 2,962 level, is 25.4% below its 2007 historical peak of 3,865.

From its 2007 peak of 3,865, STI plunged downwards forming a 5-wave wave A at 1,485. From there STI has completed a diagonal major wave (1). It completed its major wave (2) in January 2016. I expect STI to continue with its up-trend in 2017 to complete the major wave (3) of its wave B.

FBMKLCI (1,675)

KLCI may or may not move in tandem with the rest of the major world bourses depending on the political situation in this country and 1MDB development oversea.

From the chart shown below, in the last 30 years, KLCI has indeed moving very closely with the Dow except during period of Asian Currency Crisis and in 2016.

Another factor affecting the KLCI is the strength of our Ringgit with respect to USD. My reading is - USD/MYR hit its peak in 1998. It has formed its wave A in 2011 and since then it has been forming its wave B. Currently it is forming the last wave of B, the wave (vii).

From the USD/MYR weekly chart shown below, very likely it has complete the sub-wave iii of (vii). If well behaved, Ringgit will improve to about 4.3 to 1USD to complete the sub-wave iv. Sub-wave v is likely to bring Ringgit to 4.5 to 1USD to complete the wave (vii) as well as the wave B.

The last sub-wave can be quite unpredictable, it can be missing and there can also be a panic, climax  sell out.

For KLCI, there are 3 likely scenarios.

a) the most unlikely scenario at this moment. Very bearish. Major wave (5) is completed with a failure wave 5. KLCI has only one direction - down all the way in 2017.

b) a less likely scenario. Bullish. KLCI has just completed its wave 4 and wave 5 has started. The duration and magnitude of wave 4 is too big when compared to wave 2, but is still possible.

c) a more likely scenario. Bullish. KLCI is forming the wave (iii) of 5 of (5).

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