Market Diary:
World Indices:

Sunday, November 29, 2009

Dow Jones Industrial Average

Global indices plummeted on November 26 & 27 on Dubai’s proposal to delay debt repayments triggering a run for safety to bonds and credit swaps.

Dow was closed on November 26 due to Thanksgiving holiday. It reopened half day on November 27 and plunged by 154.48 points or 1.48%. Hang Seng was downed by 1,075.91 or 4.84%. STI was closed by to Hari Raya Haji holiday.

On the chart, a bearish divergence between RSI & the underlying price trend has developed since August. Although the uptrend is still intact, the bearish divergence is sending us an early warning that the potency of the uptrend is in question!

Since early September, Dow has developed a “cycle” that ties to the calendar month ( see blue arrows ). The cycle low is at every calendar month end. If this is true, then we are now at the cycle low and may see Dow retesting the up trendline, which is at 10,000 in the coming week.

Locally, while many analysts believe STI was salvaged by the public holiday from a blood bath. I remain skeptical because STI has a track record of being unforgiving. I have been very mindful about the RSI bearish divergence for a long time. However, as a trader, we trade what we see and not what we think. Therefore, despite the RSI warning, there has been regular buy calls. The important thing is once we are wrong, we get out. If not, we may end up staying at the sidelines 10 months out of 12 months.