The fun has just begun.....

While writing my last entry, I was dead tired and you know that it is very difficult to think straight and express yourselves. Nevertheless, I wrote something without adding on the pictures. Last night, the indicators were all down so probably indicates a down day today. Even so, I did not expect much from STI today.



Fig. 1 STI Daily Chart

I was into a great surprise to see a 40 points down for STI on opening. Of course it was due to overnight fall of the Dow (150 point smay be?. In fact, it was more than that. The world was tumbling, I noted one forumer declared that he was really in panic mode because he was holdeing a few penny stocks and as usual there are "advisors" telling him to hold on to the losing counters while cash in the profitable ones for cash (idiots do that).



Fig 2 Dow Jones Index

Anyway, I have cleared all my counters weeks ago and the stocks have been quite unattractive recently that I have chosen to sit on the side line waiting for something to happen. So only the STI marginally interests me.

It was actually quite remarkable, STI recovered at the end of the day although still falling short of touching the candle bar of previous day. This makes me wonder,"is it a good thing?"

If I am t catagorise, the best I can put is a "on neck" structure base on candelstick analysis, an indication of continuation, and in this case, "down". The only problem is that it has not even touched the neck of previous day low. There is a clear gap. If my measurement is right, the gap will lead STI to 2,572. STI is still not out of the woods yet.

The stocks I came out from are all in the red. Fuyu for example reached SGD0.095 with a gap down. It is also a foregone conclusion now that Aztech is going down, I am temperorily suspending my interest on this counter.

If it is a continuation, I will have to bet that STI will continue its journey down south. Support levels are 2,576, 2,54 and 2,521.

It has begun......?

Past weeks have been very dull, I cleared all my positions believing that either a correction or reversal is due. After I sold my last lot of Fuyu, the index was still undecided of its direction.

At the beginning of this week however gave me a different feeling, it seems like something is going to happen. There were much anticipation of an up-trend (as seen from Channel News Asia's forum) but it kept failing to break new high. So probably I might be seeing either the correction or reversal afterall.

Today, the market tumbles. STI went down by 40 over points. The indicators are all pointing down. I guess the reversal has begun.....or may be not. But one thing for sure, we would at least be seeing a short term bear. Support for STI is presently seen at 2,541-2,521.

I know not why I am sad.....(Antonio, Merchant of Venice)

Today I have decided not to paste any chart on ny entry. Seriously it is rather depressing looking at the chart right now, not that I am on the wrong side of the market. In fact I still think that I am on the right. Further more it does not matter if I am on the wrong side, as long as I correct myself early enough.

STI has indeed crossed 2,707, a level which I considered important because it was the previous high of STI. My friend SMS me telling me that the market has changed. Further to that, the newspaper continued to sell the story that the worst is over with all data shows a positive market move. So why am I depressed?

The main problem is that the indicators(RSI and Stochastic) of higher time frame is actually coming down. It should be noted that these are leading indicators, they are to me fortune tellers. The indicators displayed divergence to STI's move and have continued their downward movements.

Another thing that I see is the shooting star on formed STI the week it broke 2,707. I can't qualify it as an evening start yet because I need this week's bar or confirmation. But it is hihgly potential to confirm the direction, especially it is testing a joint resistance of Wedge envelop and horizontal level at 2,751.

So base on the set up I see, there is a very high potential of reversal eventhough STI went up strongly.

One last thing, with so much publicity on market improving, won't a contrarion be worrying should he be in the market? I mean is there a need to yell so loudly that the "WORST IS OVER"? The more positive note sent out from the mass media, the more I smell a rat in the whole thing. This is especially so from the headlines of Friday's Straits Times. The title mentioned strong rebound on world indices and they showed all the charts of recent movements. What I saw was that most charts were rounding off the tops instead of "rocketing" up (a term I learned from Channel News Asia forum, people just like the stocks to rocket). Seriously, a little too hard to accept?

DJIA crossed 10,000 mark!!!!

I have read with interest this morning that DJIA has crossed the 10,000 mark. It seems to be abig thing because 10,000 is a psychological level?



Fig. 1 DJIA Weekly chart

While looking at the chart, one question floated in my mind: So what? 10,000 point on the chart is rather insignificant because it is afterall neither a support nor resistance. It is just there. Further more, crossing the mark does not eliminate the fact that it is still inside the wedge. In fact, the extension of the envelop allow us to see the possibility of DJIA to go as high as 10,500.

Further to that, the measurement of a reverse head and shoulder still pointing DJIA to a mark of 11,300, provided it does not break down. The move between 1999 till 2002 for a single wave was 4,500 points. It should not be a shock to anyone that this wave should have relatively the same distance. But no matter what,it is still crucial not to ignore the wedge formation and when it breaks the lower envelop.

Breaking 2,707 and still not out of the wood

I was on business trip to KL for the last 2 days. I took the usual mean of transportation, by road. It is not that my company cannot afford an air-fare for me. In fact, travelling became more affordable after my company swithc from MAS to Tiger Air. The problem is the transportation needed when I run around KL. My local sales are pre-occupied most of the time and it would be better for me to handle the customers by myself.

Of course that means almost no way to up-date my charts and monitor my counters (seriously I only entered one that I think is still safe). I was pleasantly surprise 2 nights ago when I noted STI broke 2,707 ( previous high ), it stopped at 2,708. The set up I have so far was bearish due to the wedge, it seems to me now that the wedge objective is broken (supposed to head for 2,500).


Fig 1 STI Weekly chart
With STI breaking 2,707. There are 2 levels which would be of interest. First resistance I see is 2,751 which I believe STI nearly met. This resistance councide with the lower envelop of the wedge, seems to me that it would be a hard nut to crack, at least for this week. The next in line would be 2,972 which happens to be a 2/3 retracement of its down trend.

While it is moving upward, both RSI and Stochastics are still on the upper half region with Stochastic displaying divergence. I am guessing at this point that we are still not out of the wood yet. If asked if I should be going in now, I would suggest not, at the same time it is not a time to sell. So the only option left would be "Hold".

STI

I have been pondering on one question lately. Every time I see the STI on Newspaper, there is this up-ward wedge clearly visible. Yet the wedge is not found on my chart. Well, I have finally found it after some cleaning up of the lines I have drawn.


Fig 1 STI Daily chart

It was hiding inside the triangle that I have drawn earlier. It seems now that I am having more confirmation of an STI retreat. The wedge itself tells me that STI should be moving towards 2,533 minimum objective. The recent ramming of STI thus a correction of a downward movement. It is taking a breather before trending down. Its daily moves are filled with Doji patterns. It is a sign of market uncertainties.

Best I would give at this moment would be a resistance at 2,686, which is not far from now.

Zooming out of the chart, it is exhibiting a reversal behaviour. For certain, the latest high is 2,707, which is higher than the previous one. IT then fall below the previous peak, a description fitting the non-failure swing profile.

The only way which convincde me of a break down of my prediction would be STI crossing 2,707. While that is so, I am still putting 2,809 as the objective

A thought....

I was keipo-ing on ChannelNewsAsia.com Market Forum when I come across this thread "What are your paper losses/gains for those still holdings?". I feedback that I was out of the market a week ago because of bearish feelings. However, as I read on, I have found many feedback with tremendeous losses. One forumer triggered my nerve by saying that he gauged the losses (which was too painful to bare) and he did not need the money immediately, so he held on to the stock.

I was really at a lost of words because many players in the market do not have stop losses and so I feedback my frank opinion and stating that there is a high chance probability of a reversal rather than a simple correction. Seriously, in my own opinion, it is very true.

The result? I was shot back with a claim that stating of "chance" and "probability" only means such observation is rubbish and that fundamentalists have the last say. Obviously the guy who said this is a fundamentalist believer and he has no idea that what he is in is all about probability and chance. He also read too much of Straits Times.

I wonder how many of us read the Straits Time daily and noted how they describe the market performance and for what reason it does so? It was entertaining at first but it is getting boring. How can the sentiments be up because of one event on one day and went down due to another. Especially when these events are really quite insignificant. further more, do all these reports of exceuses gives any indication of market direction for the very day it is published? All I can say is that 80% of its report on market performance is useless data.

Actually, the most important factor in trading is not what technique you use, but what system you have created for trading. It does not matter if you are using Technical or Fundamental Analysis, as long as the system you adopt works for you, protect you and earn you money. Both techniques have been around for many years and definitely they have merits to survive that long. However, they are used in very different environmet. TA for trading (short term) and FA for investments (long term). Your world would like to go up-side down if you do other wise.

One final thing. Many people write off TA not because it did not work, it did not work for them. TA is an art and it is not as straight forward as spotting a pattern or blindly follow indicators using text book references.You really need to appreciate its complexity before it let you see its secrets. Many simply give up because they are in doubt that TA can delivers, they are skeptical if TA can delivers. When it went wrong for them (it always does for beginners), they label it as unreliable.

As for me, I have stuck to TA all these years and I believe it works. I still remember what my teacher said about TA, "it is not the market which is wrong, it is you who are wrong".