Happy Chinese New Year 2014

To all my friends and all visitors to my blog

.

FBMKLCI

Following the 2% drop by Dow on last Friday, Nikkei 225 and Hang Seng dropped more than 2% on Monday.

Singapore STI dropped only 1%, Malaysia FBMKLCI dropped about 1.3%.

On last Friday, German Dax and French CAC 40, that closed their tradings ahead of US, dropped 2.5% and 2.8% respectively. FTSE dropped only 1.6%.

To catch up with the rest, FTSE has dropped about 3% at this moment, whereas Dow, Dax and CAC 40 dropped about 0.5%.

As usual, US market is the 'Taiko' (Big brother). It is up to the rich and powerful in US to decide when the assets bubble will burst and I believe they will try to hold on to the assets bubble as long as they can and they will try to look for an alternative outlet if possible.

Refer to my yesterday posting, we are lucky if the current correction for Dow is about 7% (15400 level) or 11% (14750 level).

FBMKLCI

My long-term reading for FBMKLCI remained the same, mega wave (1), (2), (3) and (4) and major wave 1 and 2 as shown below.

With today's 1.3% drop, the current correction can no longer be sub-wave iv as I have mentioned in my earlier articles. It is possible that sub-wave v and wave (v) as well as major wave 3 has ended if major wave 3 has only 5 waves.

If major wave 3 has ended, then the current correction has to be major wave 4. I am looking at a 16% pullback for FBMKLCI to 1570 level within the next 6 months

However if major wave 3 has more than 5 waves, then the current pullback can be wave (vi) correction, about 6%. That will bring the index to 1750 level, another 28 points drop.

Summary


The current pullback can either be
1. Wave (vi), 6% correction if the index can hold above 1750. Or
2. Major wave 4, 16% correction. Or
3. Something else.


.

Dow - wave (ix) has ended

Dow dropped 318 points or about 2% to 15,879 on Friday. With this sharp drop, the current pullback can no longer be the mini-wave 4 correction as mentioned in my previous posts.

A revised wave count is as shown above. It is more likely that wave (ix) has been completed. It is also possible that major wave (5) has also been completed unless major wave (5) has more than 9 waves.

If major wave (5) has more than 9 waves, then the current drop is wave (x) and it is likely to stop at 15,400 level, another 500 points to go, nothing to worry if it is wave (x).

However, it is also possible that major wave (5) has only 9 waves and it has ended, especially if Dow goes below 15,400. Under this scenario I can see two possible outcomes.

Possibility No. 1 - Mega wave 1 has 9 major waves.

Mega wave 1 has more that 5 major waves as shown below. The current sharp drop is the major wave (6) and it is likely to reach 14,750 level for a 11% correction, another 1,000 points to go.

However, if Dow goes below 14,750 level, it is possible that the bubble has burst.

Possibility No. 2 - Bubble has burst. 


Mega wave 1 has only 5 major waves and has ended as shown below.

Mega wave 2 may stop at 10,655 for a 35% drop. But if the bubble has burst, it is more likely that mega wave 2 will go to 6,547, the starting point of mega wave 1 for a 100% retracement.

Summary 

At this moment the current pullback can be

1. Wave (x) of major wave (5), Dow may drop to 15,400 level for a 7% correction.
2. Major wave (6) of mega wave 1. Dow may go to 14,750 level for an 11% correction.
3. Mega wave 2 of super wave VII. Dow may go all the way to 6,547 level for a 100% retracement. The bubble has burst.


.

Dow - Last journey for mini wave 4

Dow

Dow dropped 1% or about 170 points to 16,200 after 2 hours of trading on Thursday morning. 

Dow has broken its lower support line at this moment. The next support level for wave c of mini wave 4 is the top of mini-wave 1, the 16,097 level as shown above. If Dow goes below this level, I will have to revise my above wave count.

Farms Best Bhd (Rm 0.62)

Farms Best dropped another 3 sens to rest on top of the lower support line at 62 sens level. If it goes for 100% retracement, it will drop to 58 sens, the starting point of wave (i).


.

Farms Best Bhd

Farms Best dropped 6.5 sens or 9% to 66.5 sens today, it is a higher degree correction. It is possible that the current drop is the wave (ii) of major wave 3. If the price can hold above the lower support line, the triple ascending pattern within an up-trend channel is rather bullish, especially if the next up can break the upper resistance line with high volume, then the next up is the wave (iii) of major wave 3 of mega wave (3). I hope I am right.

Assets Bubble

Jesse Colombo has written a series of articles on assets bubble in Asean countries. Click on the following to read them.

'Why Singapore's Economy is Heading for an Iceland-Style Meltdown'.

'Malaise is Ahead for Malaysia's Bubble Economy'.

'Thailand's Bubble Economy is Heading for 1997's Style Crash'.

'Why The Worst Is Yet To Come For Indonesia Epic Bubble Economy'.

'Here's Why The Philippines' Economic Miracle Is Really A Bubble In Disguise'.

I too, also believe the assets bubble will burst one day. That is also why i-Capital is holding more than 50% of cash. The question here is when will the bubble burst? 1st half of 2014?, 2nd half of 2014? or in 2015? or 2016? How high Dow and FBMKLCI can go before the bubble burst?

These are questions that can be answered only when the bubble ultimately burst.

Bernard Baruch (1870-1965), a multi-millionaire through stock market operation, once said, " ..... what actually registers in the stock market's fluctuations are not the events themselves, but the human reactions to these events. ........ in another words, the stock market is people. ..."

The stock index moment is the result of people's reaction (judgement, hopes, fears, greeds, optimism, pessimism, etc, etc) to changes in economic/financial policies, political events, economic data and any other news that affect the market.

Based on the belief that human nature does not change, nor does its pattern, Elliott discovered the repetitious phenomena in chart patterns in both bull and bear markets. So hopefully the repetitive chart patterns can provide hints or warnings when the bubble is about to burst.

Dow dropped 142 points (0.8%) to 16,316 after 2 hours of trading on Tuesday morning. It is likely that this is the wave c of mini-wave 4 as shown in the chart above.

Farms Best, KSL Holdings and Land & General

Farms Best Bhd (Rm 0.73)

Farms Best gained 6 sens (9%) with very high volume. Mini-waves 3 of sub-wave iii of wave (iii) has started. Hopefully it can break its upper resistant line tomorrow with high volume at around 78 sens level.

KSL Holdings Bhd (Rm2.30)

KSL is about to finish its wave (iv). Its wave (v) run-up is about to start.

Land & General Bhd (Rm 0.48)

Land & General is either forming the sub-wave vii of its wave (iii) of its major wave 3 as shown below.

 

Or it is forming the wave c its wave (ii) as shown below.

.

Dow and FBMKLCI

Dow

Dow is either forming its mini-wave 5, which can be completed by end of January or early February

Or it is forming the wave b of its mini-wave 4. Under this possibility, mini-wave 5 can only be completed by mid February.

For both cases, mini-wave 5 is likely to reach 17,100 level. If mini-wave 5 is the end of sub-wave iii, the following sub-wave iv may have a 5% or about 1,000 points pullback as shown in the following chart.

For the above cases where sub-wave iii has only 5 mini-waves, sub-wave v may end by late April or early May. And if that is also the end of wave (ix) and major wave (5) and the mega wave 1 as shown above, the worst case scenario for mega wave 2 correction is the 100% pullback to the 6,547 level for Dow. The bubble has burst.

However, if sub-wave iii has 9 mini-waves as shown below, the mini-wave 6 correction is likely to be about 400 points to be followed by mini-wave 7,8 and 9, the starting of mega wave 2 correction may be postponed to July or August.

FBMKLCI

Sub-wave iv correction may be completed by next week to be followed by sub-wave v of wave (v). The next question is whether wave (v) has 5 or 9 sub-waves.

.