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Tuesday, July 28, 2009

Time to lighten !

The current market reminds me of 1st week of May where no resistance could deter its advancement !
Being too cautious under the guidance of wave theory will either result to early exit of old long or failure to enter new long while watching the market continues to rally. This can be quite frustrating ! Anyway, Elliot Wave echos the popular saying "If you stand inside a jungle, you see only one tree trunk. If you stand outside the jungle, you see the whole jungle". The aftermath big picture ( outside the jungle ) is always correct but as the market is still unfolding, the fine details ( inside the jungle, ie: sub-wave count ) keep changing ( recount ).

PS: 5(v) has shown up in my Elliot Wave chart but recount is possible ( probably to 5iii as what I have suggested ). Regardless of 5v or 5iii, market topping is not too far away. Time to lighten up !
Once again : ā€œIā€™d rather be out of a market (or stock) wishing I was in, than in a market wishing I was out.ā€.


Sunday, July 26, 2009

Straits Times Index - Wave 5

Straight to the point : STI is currently trading at Wave 5 in Elliot wave count. Using Wave 1 as a rough guide to estimate Wave 5 ( assuming Wave 1 = Wave 5 ), Wave 5 target shall be 2,661. Using Fibonacci retracement as a mean to determine key resistance, 2,580 ~ 2,680 are Fibo 50% ~ 61.8% resistance zone for two time frames ( highlighted in yellow ). Additionally, 2,600 is a key psychological resistance cum a chart resistance point traced back to Sept 2008.

Over the past two weeks, STI has gained 275 points without any significant pull back. The index is now overbought in RSI ( 14 ) and CCI ( 5 ). I think some pull back is likely to take place next week. Many people have expected the pull back to be shallow and are probably waiting at 2,424 for entry. I agree 2,424 is likely to be a strong support since the index has taken more than 6 weeks to penetrate this level when it was the resistance point. The only challenge when trading in Wave 5 is that you never know whether it is a short term pull back or a full scale reversal. Unlike if we are in Wave 1 or Wave 3, if we are caught by Wave 2 or Wave 4 corrections we can hold our breath and ride it out until we see Wave 3 or Wave 5. Now that we are in Wave 5, it is more risky as the correction is likely to be deep.

Above is a zoom-in view of Wave 5. If my wave count is correct, we are in 5(iii) now. Any pull back will be 5(iv) and then there is a final leg to complete 5(v) which is around 2,660. This is only my speculation though !

What happen when Wave 5 target is met? My view is that Wave 5 target marks WAVE 1 of a higher degree ( primary wave ). But looking around, almost everyone else ( including brokerage firms & even 'experts' from the US ) are saying end of Wave 5 marks the end of Primary WAVE B bear market rally. That suggest we will be heading toward bear market WAVE C instead of my Bull Market WAVE 2. Why I can't subscribe to their thinking is that if we are in for bear market WAVE C. By the time we reach WAVE C target, STI will probably be 210 !!! I can't accept that !!!


Thursday, July 16, 2009

Market Remains Cautious !

2,424 has proven to be a strong resistance. Six weeks after the initial attempt, it is still unable to close above it ( only intraday penetration, not good enough ). Profit taking is likely to set in after two days of strong gains. If the pull back is shallow and thereafter it is able to make a new high, we may expect to see 2,600. If the pull back is hard, the last two days rally was probably a bull trap instead of a euphoria.
Wave 5 label has appeared in my Elliot Wave chart. Although this may not be the ultimate Wave 5 position due to possible recount, we ought to stay cautious because it can be ( the ultimate position ) if it wants to ( as a failed Wave 5 ). Now that Wave 5 label has appeared, the market is even more dangerous than few days ago before the strong rally ( where we were worried about the H&S ). The terminal of Wave 5 will be a vicious A, B, C correction which may bring the index back to near the onset of Wave 1. So this is really not the time to add new long....


Wednesday, July 15, 2009

Chart Lied !

All TA practitioners who look too hard at the chart were fooled ! This applied not only to local analysts but to analysts across the pacific ocean in the US who stared too hard at the Dow chart. The strong rally has changed the technical landscape of the chart overnight !
Last night, I told myself not to be too subjective and stubborn. So I removed the H&S lines from my chart and replaced it with two trend lines ( the blue ones ).
I told myself those are the level STI needs to break in order to turn bullish and invalidate the H&S. I did not quite believe it will happen or it will break both blue lines within one day. Obviously, I was dead wrong. However, this is a good mistake for me as I have been net long. I am sorry to those who shorted the market on the basis of 'short on bounce, long on dip'.


Sunday, July 12, 2009

Straits Times Index - Complex Head & Shoulder

When I was trying to trace the left shoulder in the previous chart, I was pretty confused by the two small peaks formed on May 8 & 20. What I did was I negate the May 20 minor peak. On July 9, STI staged a rebound after violated the neckline. I have initially thought it was a throw back but the rebound was so strong that prices went back to neckline. This leads me to think that we are in for a complex Head & Shoulder pattern instead of a simple Head & Shoulder. That mean, there is 2 left shoulders and 2 right shoulders. Regardless of simple or complex, the forecasting implication remains the same - target 1985. Since the formation spins over early May through July ( 3 months ) so the target is likely to spin over the same length of time from the point where the neckline is penetrated decisively.

PS: Actually, the target may not be 1,985. The neckline is titling up. Depending on when the neckline is broken, we shall subtract 270 points from the point of penetration so the target may be 2,000 or 2,050.


Wednesday, July 8, 2009

STI, DJIA, S&P500 Joint Venture

All selling Shampoo together !
Here is the consolation : While the indices may continue to pull back in the near term, the final top of the rally ( wave 5 ) still lies ahead ( 2500 ~ 2600 ) in the intermediate term. - quote from EWI


H&S Neckline Breached

[ 11:00am ] I am watching the market very closely. The neckline of the Head & Shoulder pattern was broken this morning. However, it was penetrated marginally at light volume. This is not how a H&S breakdown supposed to be, unless the real show is in the afternoon !?

I have the opportunity to view the professional Elliot Wave report from EWI. Although their wave count differs from my, the conclusion remains : the last leg of the current wave ( wave 5 ) should terminate at around 2,500 ~ 2,600.


Monday, July 6, 2009

Shampoo Time ?

STI is at the verge of breaking the Head & Shoulder neckline. Once this takes place, get ready for a nice shampoo and look to 2,000 as minimum target ( maximum target can be back to 1,450 but unlikely ). What is interesting is that I did not alter the trendline per last post, prices just filled in nicely within the trendline. Head & Shoulder has a success rate of 93% ( pretty high indeed ) but that mean we still have 7% chance of failed or false H&S pattern. Let's see if the odds are on our side and will salvage the plunge.

The triangle view mentioned on July 1 is invalidated. By now, prices have exceeded 3/4 of the triangle and is too close to the Apex for a valid breakout.

I was tempted to join in the herd of property buying wave. My entire weekend plus today were filled with viewing appointments. I am looking for a condo as 2nd property for investment purpose. Unfortunately, it seems like both the resale owners and developers are pricing the properties ahead of the economic recovery. Resales owners are asking for $50K above valuation. Meanwhile, developers have quietly repriced the unsold units versus those sold 1 ~ 2 months ago ( Transaction records in URA website unveals this. eg: $840K units are being marketed at $918K now ). A property agent friend told me I am late in the entry by about 4 months. Prices have rallied since Feb/Mar. Er.... it seems that I am always late. A year ago ( when the property market was still bullish ), I attempted to cash out the profit from my landed home and was told too late as prices have begun to fall !
Sunday Times warns the recent rally is not sustainable. I am hoping this can be true ....

PS: I am looking for the updated property index chart like this one. If anyone has it, I would appreciate if you can share that with me, thanks!


Thursday, July 2, 2009

101 Ways To Chart a Pattern

As stated in my post yesterday, I am certain about the intermediate move of the index ( ie: it will break 2,400 and reach 2,600 and beyond ) guided by Elliot Wave but I am not certain about the near term move ( will it first go down to touch 2,100 before moving up or straight away move up from here ).
There is 101 ways to visualize chart pattern depending on your imagination & creativity. One version shared yesterday was a symmetrical triangle. This is a bullish scenario and look valid to me. Another version is a possible Head & Shoulder pattern. This is a bearish scenario and look valid to me too. It all depend on how you juggle with the trendline and the time frame you use. Volume for both patterns are valid.
If trendline violation is as unforgiven as I believed, then H&S may be more likely ? H&S breakdown target is appropriately 2,000 ~ 2,100. Quite the same as my original target for trendline violation.


Wednesday, July 1, 2009


This one looks like coming too ! Entry: $1.30. Broad market sentiment is the key to whether the breakout will take place.


Kepland Update

This counter is really 'pain in the butt' ! But I think it is 'coming' at the mercy of broad market sentiment. ROC is turning positive ( the key word is 'turning', not 'turned' yet ). Parabolic SAR buy phrase is tracking the prices closer and closer.



I was looking at this counter yesterday. I should have posted it here yesterday but I guess it is never too late. A fresh position trade buy signal surfaced today.


Frustrating Moment !

Sideways movement is the most frustrating part of the three trends the market has, namely Uptrend, Downtrend & Sideways. Unfortunately, we have one third of the time we must live with sideways movement.
Based on my Elliot Wave count, I am certain that the index will break 2,400 in the intermediate term ( unless it is a failed Wave 5 ) and probably hit 2,600 ~ 2,800 to complete wave 5 ( which is the primary wave 1 ). The only thing I am not certain is whether wave 4 target has been met or must we head down to 2,180 ~ 2,100 to complete wave 4 before embarking our journey to wave 5. Once wave 5 target is met ( Primary Wave 1 ), we should expect a vicious correction ( Primary Wave 2 ) that may bring the index back to almost the onset of Wave 1 ( 1,600 ~ 1,800, gut feel only, haven't look at Fibonacci yet ).
In the daily chart, Parabolic SAR is still in the buy phrase so that has given us some degrees of assurance of bullish bias. Based on Dow Theory, we have HL ( Higher Low ) and HH ( Higher High ) scored recently reversing the LH ( Lower High ) & LL ( Lower Low ). Therefore, 2,304 ( the recent Higher Low ) become quite important and should not be broken. If broken, then we can only hope 2,211 to hold because that is the last significant low and will mark a new Lower Low once that is taken.

Another way to look at the STI chart is a possible formation of a symmetrical triangle. Volume has been contracting and seem to support this argument. I did not originate this view but I have picked it up from my remisier which I thought make sense. The target of the symmetrical triangle points to 2,600.