Saturday, March 13, 2010

Straits Times Index & SGX Update

Straits Times Index (STI)

Since the last World Markets Update calling for an upwards breakout, STI has moved up almost 5%. The suggested target was 2880 & a reversal. Friday's action saw it close at 2881.

Will it go all the way to the highs of 2950? Nothing is impossible in the world of stock markets, but we can expect some sorta struggle around here. Will it make new highs and keep going upwards? Unlikely, as the fall from 2950 was in 5-waves. Expecting consolidation next week before anymore big moves.

Singapore Exchange (SGX)

The barometer stock! Since my last post SGX short-term: Ready for liftoff! at 7.60, prices have moved up handsomely on relatively higher volume to a high of 7.88.

So what's next? 7.9 area is stiff resistance, so expecting a struggle here. Will we go all the way to the upper trend channel? Watch the consolidation. If it moves sideways and not sharply downwards, a move higher becomes likely. A break below channel line however, makes a move towards 6.8 more likely.

SGX - A Barometer or a Warrant?

Now for the fun part. Those following my posts have observed, that i refer to SGX as a barometer for the financial weather of Singapore. Simply because, activity on Singapore stock market is directly proportional to the growth of the economy. Higher activity is higher revenue for SGX, and vice versa. Also, have a look at the chart below:

SGX tends to act like a leveraged warrant on the STI - at least in the recent past. Based on that observation, might be fun to keep this chart handy. SGX has crossed below STI for now, whatever that means!


There might be upside left for STI & SGX, but in the very short-term expecting consolidation. I will present an elliott wave review of SGX at a future date, once there's enough evidence.

Good luck, and your views are always welcome!

CAUTION: Refer to the last part of this earlier post, for caveats as to why technical analysis on SGX might not always be reliable.

Thursday, March 11, 2010

S&P500 & Russell2000: Tortoise & Hare

Looking at the two charts, it's not difficult to tell who's who. While the SPX muddles along towards its previous high, the RUT's running circles around it. And it's not alone - many other sectors(including some dodgy ones) have done the same! Technology, Retail, Real Estate, Financials are some of them.

The previous high on these indices now becomes support. Is that a sign of strength or what?

Other signs of Strength Short-Term
  • Markets have been overbought for a while now, and still plodding along higher
  • Lower trendline supports yet to be broken
  • Low volume on the rise could indicate low retailer participation & skepticism - Sentiment readings confirm this
  • Inverse H&S target (1180) for SPX yet to be fulfilled
Please add if you can think of anything else.

Very Short-Term Top

Having listed all the above reasons to go higher short-term, i still think we're gonna reach a top in the very short-term. As you can see in the RUT chart, the range is narrowing and we're super duper overbought. But, not expecting a P3 or big plunge at this point. SPX will probably drop to the 1130 area, followed by 1116 area. RUT has strong support around 650. It all depends on the nature of the correction.

Will the Toroise reach the finish line(1150) and rest? Or will it try and catch the Hare? Always fun to read these classics.

All the best folks!

Wednesday, March 10, 2010

KOSPI 200 medium-term

Not all indices are born equal. The KOSPI 200 index of Korean stocks seems to suggest that. Just like Bombay SENSEX, Kospi fell in 3 waves from 2008, and has retraced in 3 waves so far. Currently consolidating in a 4th wave, 200-225 range.

Primary view: A break above 225 will target 245 in a 5th wave up. (May require more sideways movement, through the black uptrend channel before a break upwards.)
Alternate view: the 5th wave is already complete, and a breakdown out of the range is next. Support at 185.

Tuesday, March 9, 2010

S&P500 short-term: Still overbought

While the wave structure in the current rebound is unclear, what is clear is that the market is showing strength. This is also evidenced by the performance of Financials & Transports - they've been leading the charge so far. It does not mean one should be going long(unless one is a daytrader), as the market is still very much overbought.

Yesterday's sideways action did relieve the excess on the 5-min chart, opening the possibility of at least one more spike higher. Any selling at the open should be absorbed by the 1133 level, which is now horizontal support(black) as well as trendline support(red&blue). IMHO, we will turn higher from there to set up a bigger reversal later this week or next. One of my earlier posts posited a target of around 1153 based on W-X-Y. That looks more likely now. Will post again once we get there, if we get there!

Meanwhile, i'm gonna sit on my hands, and wait for at least one negative divergence on the dailies, or a reversal bar before taking action.

All the best!

Sunday, March 7, 2010

SPX short-term: Overbought!

The most important message of this post is in the title - this market is OVERBOUGHT, and very much so. Sure - it is also a sign of strength. But one thing's for sure - it is not the time to go long this market from a risk-reward perspective.

Very Short-Term
So, will we hit the high 1150s on Monday? Many folks are calling it a sure thing - after Friday, so it might not happen! But, anything is possible. Markets can sometimes stay overbought for longer than we're prepared for. Among the list of probable scenarios,  i favour sideways consolidation or a sharp pullback here, to an immediate thrust above Jan highs.

Supports are 1130, followed by 1126.

General direction is up, and we are far from the uptrendlines, which means the bias is to the upside on any pullbacks. However, the oscillators are big time overbought. So, i would have tight stops on shorts, or any existing longs. Or better yet, wait out this period until the haze clears.

Inverse Head & Shoulders Update
For folks who are following the IHS, the target can be worked out to be around 1180spx, but we may take a while to get there.

Shanghai Connection Update - one last time!
And for readers who've followed my early Shanghai Connection Theory - which enabled me to call the 1045spx turning point, along with some other indicators - here're the updated charts.

As you can surmise, after the initial copycat drop and rise (offset by about 5 months) - the correlation's dropped off now. Shanghai has been struggling to make upside since its blowoff top, whereas SPX has been relentless. This may be the last update on this theory, but do check back once in a while!

As an aside - for Orient-oriented folks, Shanghai could be developing a bullish medium term pattern.


You probably noticed that most of my updates are short-term in nature, as this phase of the market has no clear bullish or bearish direction medium term (at least to me), unless we move decisively either ways. So stay nimble if you can, or just sit it out! Monday could probably open slightly higher and drop thereafter. Will be watching the nature of the consolidation thereafter. A sideways consolidation would mean higher highs are ahead. A sharp drop instead to test the uptrendlines, would be very interesting.

All the best for the week ahead!

SGX short-term: Ready for liftoff!

Refer to my last post on SGX: Analysis of Singapore's barometer. I did a long and medium term Elliott Wave analysis, with a bearish primary and bullish alternate view. It's time for a review!

Coupled with action on other world indices, beginning to prefer the bullish alternate view - though i admit its too early to tell. For now, i will present just the short-term picture, and review the wave structure at a later time. Here's the short-term chart:

In the last post, i suggested 7.6 and 7.8 as general areas of support and resistance, which have held, more or less. Noted also was the channel (cyan), which is increasingly looking like a bull flag.

And here's why i think SGX is headed higher:
  1. SGX is sitting right on channel support.
  2. General drop in volume between the lows
  3. Positive divergence in the RSI between the lows
Target & Supports

Short-term target will be in the 8.3 region, or wherever price meets upper trendline. There's a hurdle around 7.8. Above view will be negated if we fall below the lower channel line. Next support 6.8 region.

All the best, and alternate views are appreciated!