Market Diary:
World Indices:

Sunday, July 31, 2011

Market View - What is in the pot for August?

I understand some traders are bearish about the month of August. Their rationale are based on:

1. Calendar effect - Historically, August is one of the worst performing months in a year
2. US debt ceiling deadline - If US is unable to raise the debt ceiling by Aug 2, it will has an adverse effect on the stock market

Technically, there is no evidence suggesting August should be bearish. On the contrary, STI has been very bullish and resilient. However, item 2 above is a valid concern. Therefore, it may be wise to stay at the sidelines until August 2.

The Straits Times Index :

Based on Point and Figure chart, STI is quite bullish. In fact, another 20 points up will generate a fresh strong buy signal. However, Dow Jones is very uncertain. It may jeopardize the performance of STI :

STI Point and Figure Chart:

Dow Jones Industrial Average :

The DJIA appears to be tracing a Head and Shoulder chart pattern. We need to watch whether the neckline will be broken. When it occurs, we will be looking at 10,750. The validity of H&S pattern rely heavily on volume. Unfortunately, volume is not available in my MetaStock. Therefore, please take this with a pinch of salt.

DJIA Daily Chart :

Yahoo Finance expected the stock market to tumble by 30% if US is unable to resolve the debt ceiling crisis which will result to a downgrade of credit rating from the current AAA.