Dow Vs Bond Yield

Dow continued its uptrend by closing positive (+20 points) on Monday. Volume declined further to 4.1 billions. It is wave 5 unless Dow starts to jump with high volume. Investor's mood can change very fast, all you need is Dow to put on 300 to 400 points for 2 days with volumes of 7 to 8 billions. It appears unlikely at this moment.

The relationship between stock market movement and bond yield has been widely studied. Investors usually buy stocks in anticipation of good economy and buy bonds to lock in a fixed interest return in anticipation of poor economy. Bond yield has an inverse relationship with bond. When bond price moves up due to heavy buying when investors decided to switch from stocks to bonds, its yield will drop correspondingly. Similarly when investors decided to switch from bonds to stocks, stock prices go up, bond prices come down and bond yields move up. It simply means stocks and bond yields generally moved in the same direction. However, stocks and bond yields can move in an opposite directions as shown below.

During second half of 2006, due to excess liquidity, investors moved into both stocks and bonds, it caused a divergence between Dow and bond yield. 4 months before the October 2007 market peak, divergence appeared, bond yield started to move lower 3 months ahead of Dow. In January 2009, again the bond yield started to move up 3 months ahead of Dow, another divergence. The latest divergence started in early August when bond yield started to move lower whereas Dow continued to move upwards until yesterday. Unless the bond yields can reverse from downtrend to uptrend pretty soon, it will ultimately pull the Dow southward. The question is when.

Dow - Looked more like wave 5 of major (III)

Dow closed at 9864 on Friday, a new closing height since March's low. The previous closing height was 9829 on September 22. The volume was a great disappointment at 4.3 billions, well below its last 10-day average of 5.7 billions. In the last few sessions, while the prices were trending upwards, the volumes were shrinking, I don't think Dow has the momentum to break the upper trend line, it is likely that the current run-up is the wave 5 of the major wave (III) as shown above. Dow may or may not reach the upper trend line. Be careful.

As shown by the chart below, it is possible that Dow is at sub-wave iii of wave 5. First 3 days of next week may see the completion of sub-waves iii and iv.

Wave 5 sometimes can be quite uncertain. It may have its sub-wave v missing or it may have its wave being extended to sub-wave vi, vii, viii and ix. Whatever it may be, Dow is at its last journey of its wave 5 unless Dow can turn its current run-up into a dynamic surge with high volume of 7 to 8 billion and break its upper trend line in the coming week, then I will have to recount the wave. The question is how likely is this possibility.

Power and money

In this bolehland, politic is all about power and money. It is sickening to hear and to see all sorts of nonsense from our representatives. Today is the final showdown for the power game in MCA, another sickening thing.
Chuang Tzu (369BC-286BC) was a great philosopher in China during the 'Warring States Period'. On power and money, this is what he said, "Sky and land (the earth) is only an insignificant dust in the universe, human is just a dust within a dust, life is like the bubble surrounding the dust, power and money in nothing but the colours of the bubble".

My prayer

Hear my prayer, O God, incline Thine ear !

Please don't send an old grandpa actor to lead the Chinese, Amen.

Dow - Gained 244 points in 2 days

Dow has managed to move above the support line again. The next thing to watch is whether Dow can break the upper trend line. If Dow can break the upper trend line, a possible wave count is as shown below. Trading volume is expected to improve, sub-wave iii of wave 3 should be dynamic, with high volume and unmistakable.

However, if Dow is unable to break the upper trend line and volume remains low, possible wave count is as shown below. On completion of wave 5, a higher degree major wave (IV) correction will follow.

Dow - Indecision "Doji" on Friday

Dow formed a "Doji" candlestick on Friday as shown below. A "Doji" can be a reversal candlestick but needs confirmation.
On a daily basis, Dow on Friday has punched through the lower support line and went back to touch the resistance line at the close. By next Monday if Dow is unable to complete its reversal pattern, the down trend will be continued. This outcome is one that I have rated as unlikely. However, straightly technical, Dow has broken its short-term support, it should continue to move towards its longer-term support line as has been discussed previously.

Mid Autumn Festival in Kuantan

After many years of celebrating this festival in KL, taking the opportunity that this year's Mooncake Festival fell on Saturday, I brought my whole family back to Kuantan to celebrate the festival with my father.

After the family dinner, the highlight for the children was lighting the lanterns at night

My father with a table of mooncakes and chinese tea

My father's house. It used to be the most eye-catching house amongst the attap houses in the 1960's

My father, enjoying his mooncake and chinese tea with all his children and grandchildren. I think he really enjoyed the night, after all this festival is supposed to be a day of family reunion .