Dow - The Outcome

Dow has decided its outcome on Friday with a 496 points (-2%) drop to 24,100 level that punched through the lower support line. No more A-B-C-D-E, major wave 8 formation.

Another 1,000 points drop next week will put beyond doubt for this wave count. With this latest wave formation, the 23,000 level that I have mentioned months ago as the possible end for the wave C of Dow's major wave 8 appeared to be too optimistic unless Trump started to tweet some positive things on US-China trade war.

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Dow - At critical junction.

Dow (24,388)

Dow has a very volatile 4-day week. 5th December was declared as National Day of Mourning to honor the death of US's 41st President, George H.W. Bush.

Dow gained 288 points on December 3 and plunged 799 points on December 4. On December 6 Dow plunged 787 points within the first two hours of trading followed by a surge of 700 points to close the day with a net loss of 80 points. On December 7 Dow gave up 558 points (-2.28%) to close the week at 24,288 for a net loss of 1,150 points or -4.5%.

Despite the volatility, it remained possible that Dow is forming its A-B-C-D-E major wave 8 correction as mentioned in my previous post, provided Dow does not drop below the lower trend line.

Once Dow dropped below the lower trend line next week, I will have to abandon my above wave count and have no choice but to go for the following more bearish wave count.

 And this time around Dow may not stop at 23,000 level.

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Dow plunged 799 points (-3.1%)

Stocks fell sharply on Tuesday as investor worried about a bond-market phenomenon signaling a possible economic slowdown.The phenomenon happened on Monday when the 3-year bond yield moved higher than the 5-year bond yield.

Under normal circumstances longer term bond yields is higher than the shorter term bond yields as shown below.

When more and more investors are worried about an economy slowdown with expectation of lower interest rate, funds will be buying into longer term bond to locked-in a certain guaranteed return. Demand will drive the bond prices higher and that will lower the yields. At the same time when demand for the shorter-term bonds is lower that will push down the bond price and yield will go higher correspondingly. We will have a yield curve inversion.

Stocks began falling on Tuesday when Jeffrey Gundlach, CEO of Doubleline Capital, who oversees more than US$123 billion in assets told Reuters that this inversion signals a weakening economy. When the benchmark S&P 500 fell below its 200-day moving average, it triggered more selling activated by algorithmic trading (an automatic computer programed driven selling).

Last Monday was the first time in the last few years when 5-year bond yield dropped below the 3-year bond yield.

It may be good to look at impact of 'yield curve inversion' on the previous market's plunge, the 2007's 53% major correction where Dow dropped from 14,093 to 6,626 level.

 Around 8 October 2007 when Dow peaked at 14093, we can see the yields going lower for the 1-year and 2-year bonds.

But further checking revealed that this partial yield curve inversion was there in 2007 and was there for the whole of 2006. In fact the first time it appeared was on 28 November 2005 when Dow was at 10,877 level.

Dow was able to move from 10,877 on 28 November 2005 to 14,093 on 8 October 2007 (22 months period) gaining 3,216 points or 29.5% before Dow finally collapsed and plunged to 6,626.

My guess is within the next two years Dow will completed its major wave 8 and 9 before the final plunge.

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Malaysian Ringgit - Is the worst over ?

USD/MYR (4.1448)

Looking at the latest monthly chart for USD/MYR, I noticed that the November candlestick is a 'Doji', a key trend reversal indicator and it was followed by a red December candlestick so far. If the December candlestick does not turned green until end of the month, there is great possibility that the wave ii of C has been completed and wave iii has started and that is going to sent USD/MYR exchange rate to 3.20 level to mark the end of wave iii.

Hopefully mega wave (2) can go for a 100% retracement to the 2.43 level.

Venus

Venus is emerging into the morning Kuala Lumpur sky at this time of the year, rising from the eastern horizon 2 hours before the sun. This photo was taken two days ago at about 6.45am in the morning.

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Bursa - Where is the bottom

After US and China agreed to a 90-day ceasefire on their trade war at the G-20 Summit over the weekend, Dow future jumped 460 points (+1.8%).

All Asian markets closed strong on Monday.

European market at this moment also traded higher.

The question now is whether US and China will call off the trade war at the end of the 90 days?

FBMKLCI (1,699)

KLCI gained about 20 points or 1.2% on Monday

As I have mentioned in my earlier post, I have 2 possible wave counts for KLCI at this moment.

First possibility is major wave 5 of mega wave (5) formation.

Second possibility is the wave C of mega wave (6) formation.

Hopefully more confirmation from now on is for the first possibility.

Inari Amertron Bhd (Rm 1.88)

Inari moved up strongly today gaining 23 sens (+14%) at the close. Wave B of its mega wave (2) has started. It may or may not go back to its previous high to form a 'head and shoulder' reversal pattern and go for a simple A-B-C mega wave (2).

Or it may go for a complex A-B-C-D-E mega wave (2).

Insas Bhd (Rm 0.74)

The current rebound for Insas can be the wave 4 of C of its mega wave (4).

But if Insas can start to move up consistently, another possibility is the starting of major wave 3 of its mega wave (5). This is a bullish option that is yet to be confirmed at this moment.

I am looking for more confirmation.

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Dow - A diffrent form for mega wave 8

Dow (25,538)

Dow gained 1,252 points (+5.15%) last week. The strong surge has changed the wave form from a simple A-B-C to a more complex A-B-C-D-E major wave 8 formation.

With this change, major wave 8 may take a longer duration to complete but the good thing is we can forget about the projected 23,000 level for the completion of the wave C of the major wave 8. The wave E may end at around 24,500 level.

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Orion - The mighty hunter

Last night I went to my garden at around midnight. After many nights of cloudy sky without stars, I finally managed to see Orion, the most prominent constellation at this time of the year.

It is located not exactly overhead but slightly on the eastern side. Stand facing east and look up at 80 degree from horizon.

Orion, the mighty hunter, accompanied by his two dogs (Canis Major and Canis Minor) at the back, awaiting the charging Bull (Taurus) from the front.

The most obvious stars of Orion are the red Betelgeuse that marks his right shoulder, the blue Rigel that marks his left foot and the three stars located mid-way between Betelgeuse and Rigel that form Orion's belt. Three fainter stars below the belt represent his sword.

The principle star of Canis Major, the Greater dog, is Sirius, notable as being the brightest star, is also the nearest star. Sirius and Betelgeuse together with Procyon in Canis Minor, the little dog, they form an almost perfect equilateral triangle.

A line from Sirius through the three stars of Orion's belt leads one way roughly to the Aldebaran, the red eye of the Bull (Taurus).

In December and January in a moonless and cloudless night we can see 10 out of the 20 brightest stars in the sky.

Sirius is the brightest. Another three stars are not shown. They are the second brightest star, Canopus (2)  above the south horizon, Achernar (9) above the south-west horizon and Fomalhaut (18) above the west horizon.

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