Weekly Summary

Dow (24,242)

Dow surged 704 points(+2.99%) on Friday over report of a drug from Gilead Sciences that appeared to be effective in Covid-19 treatment.

Dow continued with its wave B formation. 

Wave C of super wave VIII is likely to drop to about 14,200 level for a 52% pullback which is about the same magnitude as that of the super wave VI (54%) and super wave II (52%). Super wave IV correction is slightly smaller at 42% but it has a much much longer duration.

Another fundamentally unbelievable but technically possible option that I have mentioned before is the mega wave (3) of the super wave VII option.

The March intra-day low of 18,213 (-38%) is about the same magnitude as that of the mega wave (2) (-36%) and mega wave (4) (-35.6%) of the super wave V.

FBMKLCI (1,407)

From its low recorded on March 19 of 1,219, KLCI has rebounded 15.4% to 1,407 on Friday. This magnitude of 15.4% is much bigger than all its previous 4 rebounds of 9.6%, 5.4%, 5.7% and 4.1% and all together 9 waves have been formed for this wave C, there is a possibility that KLCI has completed the wave C of the mega wave (6).

Is it possible that KLCI has already started its mega wave (7)?

Similar to the mega wave (3) option for Dow, fundamentally it looked absurd at this moment in view of the Covid-19 situation and the world economy that many gurus said may turn from recession to a great depression.

 Even if KLCI is forming the major wave 1 of its mega wave (7), don't forget that major wave 2 can always go for a 100% retracement to retest the 1,219 level again to form a 'double bottom' reversal pattern.

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Dow (22,680) - Jumped 7.73%

At the close of Monday trading Dow surged 1,627 points or a fantastic 7.73% for the day. If Dow can move higher from here this week, it is on its wave (iii) of B.

But if Dow losses steam and starts to move lower starting tomorrow, then most likely it is not yet out of its wave (ii) of B formation.

There is this very unlikely option at this moment and some said 'zero possibility' in view of the Covid-19 pandemic that has the capability of turning a recession into a great depression, but technically still can be considered as an option - the mega wave (3) scenario that I mentioned previously.

The magnitude of pullback is 38.4% at its March 23's low of 18,213.

But looking at the long-term chart the plotting was based on closing price, the March 23 closing price was 18,591 that gave a 37% correction that is about the magnitude of the previous mega wave (ii) (-36.1%) and mega wave (iv) (-35.6%) corrections of the super wave V uptrend.

The mega wave (3) of the super wave V began after the famous 19 October 1987's 'Black Monday Crush'. From its low of 1,738 level, Dow moved to its mega wave (3) high of 11,750 for a 576% gain over a 13-year bull run from October 1987 to September 2000.

Another factor that needs to be looked into is the reasons the caused the October 1987 crash and the reasons for the current crash, they are of very much difference nature.

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Dow (20,943) - wave (ii) of B completed?

Dow dropped 973 points (-4.44%) on Wednesday, magnitude wise it is possible that it has completed its wave (ii) of B. The next up trend will be the wave (iii) of B. This is assuming that Dow is forming its super wave VIII.

A bullish but unlikely fundamentally (due to Covid-19 pandemic and its impact on world economy) at this moment is a mega wave (1)-(2)formation for Dow.

Under this scenario. the next up trend is the wave (iii) of the major wave 1 of its mega wave (3).

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Dow, FBMKLCI and Covid-19

Dow (21,636)

Dow dropped 915 points or about 4% on Friday. It has completed its wave (i) of B. Further pullback is expected until wave (ii) of B is completed.

FBMKLCI (1,343)

Very likely KLCI has completed its sub-wave viii rebound. The next drop will be the sub-wave ix of the wave (iii) of C. 

Covid-19

I started to monitor the situation of Covid-19 on 4 February for some major countries. Until 28 March I have collected about 2 months of data on the cumulative cases for each individual country. To monitor the rate of change of the number of cases each day, I computed the 10-day average of the daily cumulative cases and the rate of change in percentage of the 10-day average.

For China, I should have started the monitoring in January to have a more complete picture. On 4 February the cumulative number of cases has already reached 24,292. By end of February the cumulative figure and the 10-day average figure has merged indicating the Covid-19 was under controlled. By 28 March the rate of change has dropped to 0.11%. Life can be back to normal very soon.

For South Korea, the period covered illustrated a complete episode of Covid-19. By 28 March the 10-day average line and the cumulative line begin to merge and the rate of change has dropped to 1.31%. By end of April, with their current tight control, the rate should be able to drop to 0.1% and their commercial and social activities should return to normal.

For Italy, the gap between the 10-day average line and the cumulative line is still wide with the rate of change at 9.3%. With better control by the Italian government hopefully by end of April the two lines can begin to merge with the rate of change dropping to 1.3% like that of South Korea at this moment.

For France, the rate of change is 14.9% on 28 March, lagging behind Italy's 9.3%. More effort is needed by the French government.

For the US, the rate of change is at 25.7%, very bad, it will take many months for the figure to drop below 1%.

For Malaysia, the situation is much better than the US with the rate of change at 10.3%. WE may need another 2 months of tight control to bring the rate to 1%.

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Dow (21,200) - Optimism Improved.

Dow went to an intra-day high of 22,019 (+20.5%) before closing Wednesday session at at 21,200 level. The current rebound of 20.5% is too big to be a wave (iv) as compared to the9.8% wave (ii) rebound. If Dow can continue to move higher to form the mini wave 5  on Thursday, it is possible that the last low of 18,230 is the end of the wave A of the super wave VIII with a 3-3-5 ABC super wave VIII formation.

Another very optimistic possibility is that seemed to be impossible at this moment option that I have mentioned previously, the mega wave (2) option. That means the last low of 18,230 marked the end of the mega wave (2) and Dow has started its mega wave (3) formation. I myself find it hard to go for this option but technically it is one possibility.

Let's swing to the other end of extreme pessimism.

Last Monday Joachim Fels of PIMCO (a global investment management firm with US$1.91 trillion worth of assets under its management), issued a note to clients :

At this moment, basing on the current form of Dow, I am unable to develop an option with this possibility. A temporary good news.

Dow (20,669) - How big the correction is going to be?

Dow jumped 2,112 points (+11.37%) on Tuesday and confirmed that wave (iii) has ended. With that if wave A of the super wave VIII has only three waves, then wave A has ended and the current rebound has to be the wave B of VIII. At this moment Dow is forming the wave (i) of B that can be quite high. It can form a double top.

Under this scenario, Dow is going for a 3-3-5, ABC corrective super wave VIII, not so damaging.

But if wave A is going for five waves formation, then the super wave VIII will take the form of a zig-zag 5-3-5, ABC corrective wave. This is more damaging and the wave B rebound will have a much smaller magnitude.

If this is going to be the case, the current rebound is the wave (iv) of A, which is about to finish. Next down will be the wave (v) of A.

As I have mentioned before, there is this unlikely (due to the current out of control Covid-19 situation) but technically possible scenario of a mega wave (2) formation. Nobody at this moment, under the current world economic condition will think that the correction has ended and the Dow is on its mega wave (3) bull run.

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Dow (18,591) - Has the wave A ended ?

As I have mentioned in my previous article, very likely Dow is forming its super wave VIII in view of the Covid-19 and the volatile crude oil price.

On Monday, Dow touched an intra-day low of 18,230 followed by a 2% or 361 points rebound to close at 18,591 level. Dow future at this moment has gained 800 points reaching 19,300 level. The question now is whether Dow has completed the wave A of its super wave VIII?

Looking at the 4-Days 15-minute interval chart the 18,230 level has the possibility of being the end of sub-wave v of wave (iii). And if wave A has only 3 waves, it is possible that the 18,230 level marked the end of wave A. The rebound before the market closed could be the mini wave 1-2 of B.

But if wave A is going for 5 waves then the coming rebound is more likely to be the wave (iv) of A 0f about 10% gain. Dow will have another wave (v) down to complete its wave A.

I have also mentioned in my previous article an unlikely but technically possible scenario that the current correction is a degree lower mega wave (2) correction of about 36% pullback.

At Monday's low of 18,230 the pullback is about 38%

In view of the current situation of Covid-19 in Europe and America, it is hard to believe that mega wave (3) has started.

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