Dow (25,445) - The Crucial 25,000 Level

Dow plunged 710 points (-2.72%) to 25,445 level after Florida and California reported record high one-day tallies for new confirmed Covid-19 cases at 5,508 and 7,149 respectively on Wednesday. Arizona reported record high new cases of 3,591 on Tuesday.

With this 710 points drop, Dow has another 445 points to go before breaking the crucial 25,000 level to confirm its journey of no return to the South.

But Dow still have its slim chance to struggle for a while for its unlikely mega wave (3) scenario if it can stay above the crucial 25,000 level. But I am not that pessimistic even though technically it remains as a possible alternative wave count because I expect the Covid-19 figure to move higher with more opening up of businesses.

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Is the USD collapsing ?

Federal Reserve Balance Sheet

With an all out effort to support the US economy, the Federal Reserve besides keeping the interest rates close to zero, it has started its unlimited 'Quantitative Easing' by printing more USD in an unprecedented manner. As a result its total assets went up from $ 3.77 trillion to $7.169 trillion within 9 months from 9 September 2019 to 8 June 2020.

On Monday, 15 June, when the Dow opened with a plunge to 24,854 level, losing 751 points, Federal Reserve announced that it will begin purchases of up to $250 billion individual corporate bonds. That will expand its total assets to $7.419 trillion.

Federal Reserve was created on 23 December 1913. From 1913 to 2008 over a period of 95 years, its assets purchased added up to only $0.925 trillion.

Due to the 2008 financial crisis, in a series of 'Quantitative Easing' program, its assets added $3.565 trillion within 6 years from 2008 to 2014.

And now due to Covid-19 pandemic unlimited QE policy, the total assets of Federal Reserve has gone up by $3.399 trillion within 9 months. Soon it will add another $250 billion to its assets.

National Debts to GDP

US's total public debt as a percentage of its GDP has reached a staggering 106.77% by end of 2019. In 1981 it was only 30.6%. It reached 65.3% by 1995 but dropped to 54% by 2001. From second quarter of 2008 of 64.11%, after a series of QE programs since then it finally reach a record high of 106.77% by end of 2019.

GDP is expected to drop by 12-15% by Q2 of 2020 and at the same time Federal Reserve is buying Treasury bonds and mortgage-backed securities at unprecedented speed. By end of 2020 how high the percentage will reach?

USD Vs other currencies

Looking at the long term monthly chart of USD/EUR, USD/GBP, USD/AUD, USD/SGD and USD/MYR, by comparing the performance of USD to that of Euro, Britain pound, Australian and Singaporean dollars and lastly Malaysian ringgit, it appeared to me that USD has already started its long journey to the South. In all the cases, USD is currently forming its wave C down trend.

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Dow (25,605) - Rebounded 1.9% on Friday.

Dow regained 477 points or 1.9% on Friday after plunging 1,861 points (-6.9%) on Thursday with very high volume of 647 million, plenty of selling, panic selling.

Friday's rebound is likely to be the wave ii rebound of the wave C. The next wave iii drop is expected to be more damaging with even higher volume.

If the current rebound is able to move above the previous high of 27,574, the wave (iii) of B may take the form of a diagonal wave to complete the wave B with a 'double-top' reversal pattern as shown below.

The unlikely mega wave (3) option still cannot be ruled out at this moment especially if Dow is able to hold above its wave (i) high of 24,764 to form a a-b-c wave (iv).

This mega wave (3) option will be ruled out the moment Dow drops below the top of wave (i) of 24,764 level.

USD/MYR (4.2705) - Is the USD Collapsing

Malaysian Ringgit has improved from its March 23 low of Rm4.4455 to 1US$ to today's exchange rate of Rm4.2705 to 1US$. Looking at the monthly USD/MYR chart below, a 'triple-top' or 'head and shoulders' with the 'head' protruding slightly above the left and right 'shoulders' was completed. Very likely the wave (iii) of C has started. The US Federal Reserve's monetary policy to support a post COVID-19 economic recovery by keeping rate at near-zero and by unlimited 'Quantitative Easing' QE4. Is the USD collapsing? Is Malaysian Ringgit heading for Rm2.50 to 1USD?

The unlimited printing of US$ will very soon increase the total assets of the Federal Reserve to $9 trillion in its balance sheet by 2021. In 2008 it was less than $1 trillion.

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Dow (25,128) plunged 1,861 points or 6.9%

Dow plunged on Thursday following the Federal Reserve's monetary policy decision, in which policymakers highlighted the ongoing economic concerns spurred by the Covid-19 pandemic and measures taken to contain it.

Dow dropped a massive 1,861 points or 6.9%. From its Monday's high of 27,574, Dow has dropped 8.8%, a magnitude equivalent to that of its wave (ii) pullback of 8%. With this drop, the Monday's high has to be the end of its wave (iii).

At this moment Dow Future has rebounded 200 points. However if Dow were to continue with its down trend movement in the next few trading sessions and to go below its wave (i)'s high of 24,764 level, it is very likely that its wave (iii)'s high of 27,574 is the end of wave B and Dow has started its wave C.

How about the fundamentally unlikely option of mega wave (3) scenario that I mentioned previously? can it be ruled out with Thursday's plunge?

At this moment and for the next few trading sessions, as long as Dow can hold above its wave (i) level of 24,764, technically I still cannot rule out the mega wave (3) option.

Technically there is this possibility that the current correction is the wave (iv) of major wave 1 of the mega wave (3) as long as the Dow does not go below its wave (i).

Just keep the fingers crossed for the next few trading sessions and for the next few weeks.

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Dow (27,110) - Surged 829 points with high volume

Dow surged 829 points (+3.15%) on Friday with quite high volume of 543 million (+31%). Dow has reached a junction that can be the end of wave B, especially if Dow starts to drop sharply next week.

But if Dow can continue to move higher, it is possible that wave B is extended and is heading for a 'Double-Top' reversal pattern.

Friday's volume has improved by 31% to 543 million with the 829 points surge. If Dow can continue to surge next week with volume exceeding 600 million, then the fundamentally unlikely mega wave (3) option might be able to nullify the wave B option.

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Dow (25,383) - High Volume on Friday

Dow dropped 17 points on Friday, a negligible drop but with high volume of 527.62 million. It is interesting to note that 30.9% volume of the day, 163.26 million was executed during the last 5 minutes of Friday's trading session.

The candlestick for the last 5 minutes is a green candle, it opened with a gap down at 25,366 level but closed higher at 25,383 level. There were big sellers (163 million) started to dump shares at 15.55pm creating a 'gap-down' but there were equally big buyers emerged to not only able to absorb all the selling, the buyers were able to buy their way 'up' to have a green candlestick for this last candlestick of the day. It will be interesting to see how deep is the buyers' pocket in the next trading session on Monday.

I have been looking for big volume of at least 550 million or 600 million and a surge in Dow with dynamic trading to turn the impossible mega wave (3) scenario into a reality. The big volume and dynamism took place during the last 5 minute of the trading session on Friday minus the surge in price forming only a short, very short-body green candlestick, sigh!

If the buyers do not have enough financial resources and if their support during the last 5 minutes on Friday is a 'desperate support' and had used up almost all their bullets, the buying will fizzle out next Monday and Dow will remain in its wave B formation with a weak low volume mini wave 5 run-up.

However if the buyers can continue their active buying support into next Monday's trading session with dynamism and high volume and a surge in price, then the run-up could be the minor wave iii of mini wave 3 of wave (iii) of major wave 1 of mega wave (3).

Pray hard. Amen.