Correction to Hang Seng's Wave Count

Anonymous (Oct 28) has pointed out that the bottom to the 2008 bear run was set on October 2008 and not on March 2009. A check on the daily chart (instead of the weekly chart that I have been using) has clearly shown that the bottom is indeed set on October 27 of 2008 at 11,015. The wave count has been revised based on October 2008's low.

(Click on the chart to enlarge)

Until the November 2010 high, Hang Seng has indeed completed 5 waves as pointed by Anonymous

With this revised wave count, there are 2 likely options for Hang Seng at this moment. A very bullish wave count as shown below, a wave (3) of major wave (III) on the run. This run-up is usually very dynamic with very high volume.



OR Hang Seng has yet to complete its major wave B. there will be a short-term run up to complete the wave (3) as shown below before the starting of major wave C.


To enable Hang Seng to have a strong run-up, Dow is likely to extend its current run-up from 5 waves to 9 waves. Hang Seng won't be able to run if Dow started to move lower rapidly.




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Dow - Is wave 2 of C completed ?

Some experts are simply calling this European debt crisis solution as little more than convoluted. Rather than solve an ongoing crisis, it may only get the European markets through the holidays, prolonging "its day of reckoning" - by Brittany Stepniak

The surge in stock prices in the last few days has brought Dow nearer to its April high of 12,810. In fact, it is possible for wave 2 to have a 100% retracement to 12,810 to form a 'double tops' reversal pattern.


Looking at the chart below, in the last 2 weeks, Dow has completed 5 mini waves i-ii-iii-iv-v. Wave 2 will end at this level if it has only 5 mini waves.

However, if it has 9 mini waves, it will continue with its current run-up to form its mini waves vi-vii-viii-ix, that may bring the index to the 12,810 level.


Next week's development will tell whether wave 2 has been completed.



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Listen to the Guru

On the problem of leveraging up the European Financial Stability Facility (EFSF) I like the analogy given by Cullen Roche.

"This is like having 10 mortally wounded gunshot victims rushed into the ER and using the 9 to transfuse new blood into the 1 victim on his/her deathbed. And when you realize he/she can't be save you use the 8 to help the 1. So on and so forth until you recognize that the victims need is an outside blood transfusion".

The next question is whether Europe is able to entice Asian and Middle East investors to put money into investments that are linked to the bailout fund.

To read a Guru's comment on the newly formulated plan click Europe buys some time

Friday night with Sarah Brightman

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World bourses rally as European leaders clinched deal

European leaders managed to finalize a deal that they hope will mark a turning point in their debt crisis.

After more than 8 hours of tense negotiations on Wednesday night, the leaders were able to close a deal with banks and insurers, requiring them to accept a 50% losses on the Greek bonds when they swap their bonds in January 2012. This is practically a default on its debts by Greece. In addition to this, Greece will be given another new euro 100 billion loan.

To cushion the losses, banks and insurers were asked to raise euro 106 billions by June 2012.

The last measure is to reinforced the bailout fund to effectively put up a euro one trillion firewall to prevent Italy and Spain from being dragged into the crisis.

It is hard for an engineer like me to understand why stocks should rally because:-

1) Greece is allowed to default on its debts
2) More money is given to Greece
3) To standby one trillion euro to bailout Italy and Spain when need arises.

I prefer to look at the chart to gauge what is the most probable outcome.


The French CAC40 shows that the higher degree 500 points wave 2 of the major C rebound is almost there. This surge can be the last kick to end the wave 2.


German DAX is telling the same story. The down trend since the April peak has great similarity to that of the decline from 2007's peak.



FTSE 100's wave 4 rebound has reach an acceptable magnitude for a rebound wave. Watch out for a 'Head and Shoulders' formation.

Even with the latest surge in the indices, the major wave C formation remains intact. However, once the magnitude of the current run-up becomes too big to be a wave 2 or wave 4, I will really have to look for alternative wave counts.



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Fiddler on the Roof

One of my favorite movie. The first time I watched the movie was in 1972, that was 39 years ago.



The story centers on Tevye, a poor milkman, the father of five daughters, and his attempts to maintain his family and Jewish religious traditions while outside influences encroach upon their lives.

He must cope with both the strong-willed actions of his three older daughters and with the edict of the Tsar that evicts the Jews from their village.




The story took place in the Jewish village of Anatevka in westernmost Tsarist Russia in 1905.

For the story click "Story Guide".

The bottle dance - I like the music and the dance

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Hang Seng - Still in major wave C ?

Colmar Germany

Hang Seng Index gained 746 points (4.14%) today to close at 18,771. This is a big gain and it gave me an uneasy feeling. Am I too bearish? Can the worst be over? It prompted me to recount the waves for Hang Seng.



The run up from March 2009's low has only 3 waves, it has to be the major wave B. The down trend since the 8th November 2010's high of 24,964 has to be the major wave C. Everything looked OK, Hang Seng remains in its major wave C formation. the current rebound is the wave 4 of C. This wave 4 rebound can even go to as high as 22,000 before the starting of wave 5 that can have a 10,000 points drop to 12,000.

Amazing Grace by II Divo

II Divo ("divine male performer" in Italian) is a multinational operatic pop vocal group created by Simon Cowell (one of the judges for American Idol)

Con te Partiro (Time to Say Goodbye) by Andrea Bocelli

With Sarah Brightman

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Dow - Major wave C remains intact.

Indian Innovation

After completing its sub-wave (v) on 3rd October at 10,655, Dow has put on 10% so far to close at 11,808 on last Friday.

Dow is about to complete its wave 2 rebound. I am expecting the next wave 3 down trend to lose at least 3,500 points (1.618 times of wave 1) to below 8,500 level. Major wave C remains intact so far.

Bursa Malaysia

There is a possibility that the Bursa Malaysia industrial Index is forming a 'head & shoulders' pattern as shown above. Hopefully the major wave C can be completed in 2012.



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