Dow - Diagonal (v) continues

Lavender Field, France

Dow dropped 72 points on Friday. Over the week, it dropped 233 points (1.48%). Dow is forming the wave c of its sub-wave ii of wave (v).

I am assuming that wave (v) is a 3-3-3-3-3 diagonal wave. In this case wave 5/(v) will have only three waves and sub-wave iii may end in August to complete wave (v) and also major wave (5).

If the asset bubble is not expected to burst so soon, at least not before Bernanke completes his term as the Chairman of Federal Reserve in January 2014, the next pullback is possibly a major wave (6) correction, expected to be less than 15%.

However, if the next pullback drops below the lower trend-line, it can be a mega wave 2 correction with minimum 30% drop.

Safely Jingu, Kyoto

.

FBMKLCI - A Small Head & Shoulders

Mt Rainier National Park, USA

My chart reading for FBMKLCI remains the same as that posted on 31st July, last Wednesday. FBMKLCI is forming its major wave 3 currently.

It has finished wave (i), (ii) and (iii) of its major wave 3. It is forming the wave (iv) at the moment.

It has also completed its wave a and b of its wave (iv) and is currently forming the wave c.

The small rebound in the last four trading sessions can be the sub-wave ii of wave c.
If the index goes below the 1775 level in the next few trading sessions, a small 'Head & Shoulders' will be formed. The sub-wave iii can be quite sharp, it may go to 1720 level before the sub-wave iv rebound. Ultimately the wave c of major wave (iv) may end somewhere near 1680 level.

 .

Bursa Malaysia - Two Stocks with Double-Bottom Reversal

Perak Corporation Bhd (Rm 3.32)

Refer to my 9th May posting, at that time at Rm 1.68, Perak Corp. was about to break its neckline to form the double-bottom reversal pattern.

With the market talk that Perak Corp will either be privatised or be taken over in a reverse takeover (as reported by The Edge), its price continued to move higher and it added another 19 sens today to close at Rm 3.32.

It is forming its wave 3 at this moment. Judging by the wave count below, it still has a long way to go. It is about to complete its little wave 5 to complete its sub-wave (iii).

Gunung Capital Bhd (Rm 0.90)

Received a SMS from an old friend on this stock today. After looking at the chart my SMS to him was "Aiyah, should have alerted me last week".

Still not too late, it has completed its major wave (1) - (2) and is currently forming its wave 1 of its major wave (3).

 

To be exact, it is currently forming the mini wave iii of sub-wave (iii) of wave 1 of major wave (3). There is still a long way to go. It gained 6.5 sen today with very high volume of 4.8 million shares.

It announced its 2nd quarter earning of 4.3 sen/share in July. For the first two quarters from January to June, its earning is 8.6 sen.

.
.

Dow - Mini wave iii of sub wave 5/(v) has started

Dow gained 128 points (+0.83%) at the close of Thursday trading. If Dow is forming a diagonal wave (v), then this is the mini wave iii of the sub-wave 5/(v), the last wave to go to end the major wave (5) before a minimum 12% pullback, the major wave (6).

.

FBMKLCI - Sharply lower

FBMKLCI dropped 22 points (-1.25%) today as investors reacted to  anxiously to the Fitch's downgrading Malaysia's sovereign credit rating outlook from 'Stable' to 'Negative'.

To read the view of others on Fitch's move, click ' Market Weakness '.

My long-term reading on FBMKLCI remains the same. Since the 1998's low, the index has completed its mega wave (1), (2), (3) and (4) and major wave 1 and 2 as shown below.

From the 5-year chart as shown below, major wave 1-2 and wave (i)-(ii) remain the same.

The wave count from May until today will have to be changed. Before today's drop, I have considered the current pullback as a mini wave 4 correction. With today's 22 points drop, the magnitude is too big to be a mini wave 4. Without this mini wave 4, the earlier run-up since end of June has only three mini waves, 1,2 and 3 as shown, the run-up has to be wave b of wave (iv) and the current down is the wave c of wave (iv).
 

This wave c, in an expanding a-b-c wave (iv), it may drop to 1700 level, another 4% to go.

Rapeseed Field

 

If you visit Luoping on Eastern Yunan in China during spring, this is what you will see, miles and miles of rapeseed flowers. The best time to visit is from mid February to April.

In UK, Hambledon, Hampshire has picturesque landscape of rapeseed fields dotted with traditional English cottages.

 

.

Dow - Assuming a diagonal wave (v) formation

The current major wave (5) started in October 2011 from 10655 level. If wave (v) can reach 16000 level, the gain for the major wave (5) over 22 months is 5300 points or 50%.

Sub-wave 5/(v) will have three waves. Dow is currently forming the mini wave 2 with low volume. The mini wave 3 is expected to reach 16000 level in August and if it reaches there with a half-dead volume and in a half-dead manner, be prepared for a sharp correction of around 12% to 15%, the major wave (6) pullback.

Lavender

Summer is also a time to walk the lavender field with your love one. In Hokkaido, lavender usually starts blooming in late June and reaches its peak from mid July to early August. Now is the best time to have your honeymoon or your second or third or fourth .....  honeymoon at Furano in Hokkaido.

Click 'Furano' for more information.

.

No sign so far for a Euphoric run.

As long as the volume doesn't pick up, I will assume that Dow is forming a diagonal wave (v) and it can end pretty soon. That also mark the end of major wave (5).

Then the next question is whether the Mega wave 1 has 5 or 9 major wave.

(a) Mega wave 1 has 9 major waves.

Dow will have a 12% to 15% major wave (6) correction as shown below.

This will tie in quite well with Paul Schatz, President of Heritage Capital, has in mind. He is bullish but expecting a near term pullback.

"I do think we are building towards a peak that will mark a 10% to 20% decline." He think a new market top could be set in the coming August or September.

"If we do have a decline, I think it will bottom in October, and possibly it will lead to another rally ......."

Click 'Heading for a 1987-style crash ?' for the report by Matt Nesto.

(b) Mega wave 1 has only 5 major waves.

Under this scenario, the end of the diagonal wave (v) also mark the end of the mega wave 1.

A mega wave 2 correction can be very damaging. Minimum target is the bottom of major wave (4) at 10655 level, a 33% pullback. The worst case scenario is a 100% retracement to March 2009's low of 6547 level - the bubble has burst.

As I have mentioned before, I don't expect the asset bubble to burst without going through a dynamic, high volume, speculative euphoric run. If Dow does form a diagonal wave (v) to end the major wave (5), I expect the next correction to be a major wave (6) pullback with magnitude not exceeding 15%.

Summer is the best time to see sunflowers. Whenever I see sunflower, I think of Van Gogh and his Sunflowers.

 And then his starry starry night

 

.

.