More rate cuts expected

After new home sales fell 8.3% in August (its worst price plunge since 1970s), the market expects another rate cut in the pipeline. The US market ended at its highest since July. Dow was up 35pts while S&P500 added 6pts. A retest of the 14,000 mark again for the Dow seem likely now.

STI is at its new all time high. Should continue to see more upside today but gains would likely be capped by pre-weekend profit taking activities. Also note that, there is a slight divergence between the STI and the SESALL, the broad-based index for the Spore market.

The KLCI still lags the regional markets. It is now just trading slightly above the 76% Fibonacci retracement. Momentum indicators are starting to improving further. Yesterday's volume was decent enough to start a run. Could test 1,340-1,345 today. Also note, similar to Spore, the KLCI and FBM Emas index diverge slightly. However, the divergence is not as clear cut as Spore's.

Overall, I am not too convinced that the bull has started again but I could be wrong. It appears the index is approaching or already at its critical level. It the market continue to hold steady at current levels or higher, there is a very good chance that I am wrong in my forecast. I still expect the market to correct again, at least to about the 1,200 level.. BUT... only time will tell...

Strong close on Wall Street

Dow surged 99.5pts to end at 13,878 while S&P500 added 8pts to close at 1525. Wall Street was boosted by rumours that billionaire Warren Buffet is keen on taking up a stake in Bear Stearns. Is this the BIG one? I think not or I believe that this is not the BIGgie... The market breath is still weak and has formed a negative divergence. How much more upside? Only the market can tell... :)

STI and KLCI should continue to test their recent highs. STI to test 3,688 while KLCI to test 100-day SMA at 1,333. Happy Trading ppl but remain cautious!!

Another flat & boring day ahead!

Markets in the US were mostly flat yesterday. Dow was up 19pts while S&P500 lost 0.5pts. European markets were mostly lower though. Today's markets would likely be lacklustre as there are still no leads to lift the markets. STI should be slightly higher today possibly testing the 3,688 levels while KLCI would be testing the 1,320 level again.

Yawn!! Better go watch Chelsea play! Hahaha...

Silver Bird (7136) - Flying high

There seems to be new substantial shareholders every other day. Lembaga Tabung Haji (LTH) raised its stake to 21.6% after buying 4m Silver Bird (7136) shares on 17-19 Sep. Meanwhile, Sydney-based CVC Ltd emerged as a substantial shareholder in Silver Bird on 13 Sep with 12.8% folllowing a private placement and open-market purchases. Silver Bird's current substantial shareholders are LTH (21.6%), Dato' Tan Han Kook (19.1%), CVC (12.8%), Perkasa Normandy (9.3%) and Tan Sri Vincent Tan (6.2%). CVC and Perkasa Normandy are JV partners. Something is brewing here but I do not know what. CIMB reckons that LTH or anyone else could take it private at 1.5x P/BV at RM0.75.

Technically, the stock looks very interesting. The stock has broken out of its LT bullish wedge pattern. This is a very good signal that the stock has bottomed out and is now ready to rally higher over the course of a few months. Investors may want to buy nearer to the breakout level of RM0.475. In fact, anywhere close to the psychological RM0.50 is a good level to accumulate.

May have hit a wall

Wall Street retreated slightly last night as financials led the markets lower. Dow ended 61pts lower lower while S&P500 lost 8pts. Why would I say that the market may have hit a wall? Using the Gartley Pattern of correction, the Dow is poised for a correction soon. Is it really coming? I think so.

What about the rest of the markets especially the KLCI and STI? KLCI is starting to cover the gap at 1,316-1,320. There is still a minor chance that it can cover the 1,324-1,332 gap. But investors ought to sell into strength rather than buy (even though the sentiment feels bullish). STI is also the same. 3,688 is just a stone throw away. It may surpass it slightly to 3,700 but do not take it a buy signal yet. Right now, it may be best to stand aside and watch the market.

Close but not yet...

Well, US markets continue to climb higher above the 13,800 level. We could see the index retest the 14,000 level again this week. Do not be too bullish right now as the Dow approaches the 14,000 level again. It needs to break the 14,015 with strong volume before we can confirm that the August low was the end of Wave-4. Right now, trade with caution.

STI is expected to retest the 3,688 levels again. A break above the high with strong volume would likely suggest that Wave-5 is in progress. As for the KLCI, it looks a tad weaker. There are lots of resistance ahead - gap resistance at 1,316-1,320 and 1,324-1,332. The 100-day MA at 1,334 also would likely prove to be a critical resistance. A break above the 100-day MA, then I would likely change my negative view on the KLCI. For now, trade cautiously ppl.

Two days away from the computer

Wow!! 2 days being away from the computer and see what happened to the markets!! :)
The FED cut 50 basis points and global markets rallied strongly. Like I mentioned in my previous note, we may have to see if the dollar tanks. If the dollar tanks, then US markets may undergo a sharp correction. As of now, the US dollar has only eased a little since the cut. Investors may have to track the dollar carefully. For now, the US markets are expected to stay range-bound as funds digest the 50 basis points cut. For the Dow, a break to a new all time high suggest that this correction could be over. Howwever, it is still possible for its to break below the 12517 level. So, keep a look out for 14,021 and 12,517 for the Dow.

Regional market are expected to stay bouyant for another week at least. The momentum indicators are still buoyant. STI could possibly retest the old high 3,688 but some weakness is starting to show. KLCI looks positive for now (my indicators have turned positive again, suggesting to close out shorts) but it has lagged its counter parts across the region. So, I reckon the KLCI is just playing catch up. Upside strong resistance is at 1,330-1,335. Only after a break above the 1,335, I would then change my view from being bearish to bullish. Otherwise, I am still a bear, at least for the short-to-medium term.

Why am I still a bear? There is a lot of differences between the Feb correction and the current one. The most important issue is that the volume on this current 'rally' has been a lot weaker. Volume is the fuel for the bullish train. Without volume, the upward journey would not last. And besides, LT indicators have yet to turn bullish. I believe that the correction is not over. Only 2 weeks of correction after a rally of about 4.7years - very unlikely. So, be prepared for more downside volatility.

US Markets still uncertain

The US markets are still uncertain as most investors would be waiting patiently for the outcome of tonight's FOMC meeting. Will cut 25 or 50 basis points? If the FED cut too much or don't cut at all, then the markets could tank straight away. If they cut 25 basis points, the market could ease slowly. If they cut 50, then the markets could run up a couple of days before it reverses its course (actually once the dollar starts to depreciate sharply). So, we will all have to wait and see. The dollar index is now trading below the crucial 80.00 pts mark. If it continues to stay below it for the next few weeks, the dollar could tank very soon.

The KLCI has actually started to decline and the close below 1,284 yesterday triggered a sell signal. I have a 'sell' signal on one of my indicator, the 10-MA indicator. Unload now if you have yet to do so.

The STI also had a reversal pattern on its daily chart. The index closed below its opening for the past 4 trading days. This usually shows that the bears are stronger than the bulls. Although prices has yet to fall, get ready for a (possible) plunge soon. Its Stochastics indicators are overbought while its RSI failed to break the 60-pts mark. In bear markets, rallies usually ends when the RSI fails to breach the 60-pts mark. STI actually turned after hitting the 60-pts mark and starting to ease. Are we going to see more downside? Yes, I believe so. Sell now.

US rallies summore

The US markets continues to rally last night. Dow added 133 to 13,424 while S&P500 added 12pts to 1,483. This was on the back of Countrywide Financial Corp. secured new credit lines and investors speculated that financing for businesses and takeovers is becoming more available. If so, then this wave-b up could possibly be an extended one. However, for Dow, this wave-b should not rally past 13,700. If it does, then my preferred count is incorrect. The alternative count is that the downtrend corrective Wave 4 is over and it could be on its way to a new uptrend Wave 5 is already underway. Until then, I still think that wave 4 correction is far from over.

KLCI has been lacklustre for the past couple of days. I expect it to remain so as there is a lack of catalyst to give it a kick in the @$$. However, for the STI, bullish sentiments are slowly coming back especially in the property counters. The index still needs to beat the 3,517 and 3,545 level before it can get out of this bearish woods. KLCI needs to beat 1,300 and 1,332 for it to turn bullish again. Until then, sell out and stay out!!

Cut or Don't Cut

Why am I saying that the Fed is in a dilemma? Come Sept18, the market expects the Fed to cut rates by 25 basis points with 2 more rate cuts thereafter. Now the big question - what if the Fed DO NOT cut rates? Simple - the market would likely fall sharply. If they cut rates by 25 or 50 basis points (within market expectations), chances are, the market would likely fall too but at a slower rate. Why? Buy on rumour, sell on fact! The markets have been rallying on expectations of a rate cut. I expect profit taking to set in should the Fed cut 25 or 50 basis pts of the rates.

So, where is the dilemma? The US Dollar!!! Fed cuts rates by more than 50basis, the US Dollar will plunge. The US dollar is starting to weaken against other major currencies as I write this mini piece. Would the Fed want a weak dollar when it is printing so much money. High debts would then become higher debts!!!

How does it affect the stock market? If the US dollar weakens, would fund managers wanna hold US stocks? In Euro terms, these stocks would be worth much less if US dollar depreciates. As US dollar weakens, then Fund managers would likely move the fund to other regions like Europe or Asia. Weak dollar drives away foreign investments. What would the Fed do next? Cut or Don't Cut?

Calm before the storm

There was little action over in the US. The Dow was a mere 16pts lower while S&P500 was unchanged. Everyone seems to be waiting for the FED to show their hand. Although expectations are for a 25basis pts cut in rates next week and another in October, I believe that it could all be priced in already. Unless, the FED does the unthinkable and cut rates by 50 basis pts or more, I do not see the stock markets rallying from here.

For KLCI and STI, what can I say? Another dull day ahead unless markets are worried by the quakes in Sumatra (yesterday) and Jakarta(this morning). I am not sure if there is a quake in Jakarta but some of my colleagues over there has decided to take cover after feeling the windows tremble.

I also received a Tsunami warning last night to stay away from beaches but was later withdrawn. I guess there will be no sun tanners on the beach today, huh? :)

Wall Street regains some of its losses

Dow surged 181pts while S&P500 was up almost 20pts. Both indices regained some of its losses since Sept 4. The Dow is now trading just below its 61.8% Fibonacci levels. If my wave count is correct, then the upside would likely be limited from here and it should start to turn downwards from here. I may have to revised my counts should Dow rallies to close another 50-80pts higher. For now, I am sticking to my call that Wave-C down leg has indeed begun and it should continue lower from here.

For KLCI, it could continue to stay range bound between 1,280-1,300 today even though it may open higher due to Dow. Spore's STI is still rising but the upside would likely be capped too. I do not expect it to breach 3,517 and 3,545. If it does, then I may need to revised the wave count for STI. Right now, maintain the sell on strength strategy.

More consolidation in store

There were little change over the pacific yesterday. The US markets closed relatively flat as investors still adjusting their portfolios after the scare over the state of the US economy. Semicon stocks helped keep the indices afloat after Intel increased revenue forecast from $9bn to $9.6bn. Dow ended 14pts higher while S&P500 lost 1.85pts.

KLCI and STI is expected to be rangebound today. Sell if u have not sold. Otherwise, stay away for this week at least :).

Summary of budget goodies

The Budget announced last Friday was good especially for the stocks and the economy. It was not really an election budget per se. Some of the goodies are:-

1. 1% corporated tax cut for 2009 to 25% is good for the market.
2. Lower transaction cost for internet trading - (cheaper trades and more convenient)
3. More broking licences to attract the middle east funds
4. Property - to allow monthly withdrawal from the EPF account for housing

The budget could help boost the Malaysian stock market but with the US suffering a scare in labour payrolls, I really doubt there is any upside left.

Tighten your seat belts!!

US Payrolls were down 4,000 but main street economists were expecting a rise of about 110,000. Wall Street had been awaiting the report all week as it sought to determine how well the economy was holding up under the weight of a faltering housing market, a rise in mortgage defaults and tightening availability of credit. That is a huge difference and Wall Street are saying that US economy could go into recession now. The talk on the Street is that FED could even cut rates before the scheduled Sep 18 FED meeting. Dow was 249pts lower while S&P500 lost 25pts. As I mentioned before last Thursday, Wave-C could have started. And now, it has indeed taking place. With the anniversary of the Sept 11 looming, volatility is also expected to be very high this week.

KLCI and STI should see strong selling from today onwards. Sell, Sell, Sell is still the way to go for both of these markets. Those who have sold their shareholdings up to last week would likely be laughing to the bank :) or at least would likely loose less. Stay away from the markets would be the best option for this week. Tighten your seat belts!!!

Goodies for potential property buyers

In the Star today, the newspaper reported that the budget could have goodies for the potential property buyers. A home for every Malaysian - that will be the main agenda for Budget 2008 that will be unveiled by the PM Datuk Seri Abdullah Ahmad Badawi at the Dewan Rakyat today.
A home-financing scheme is expected to be announced to allow wider house ownership. It is regarded as the Government's commitment to ease the housing burden of Malaysians, especially for the lower and middle-income groups. The home-financing scheme could possibly be made through monthly deductions through the EPF. There could be further cuts in stamp duties as well, which made up a substantial amount of expenses for buyers.

My 2 cents - These are real goodies especially for those who are potential first-time buyers (like me!! :) ). The move to allow deduction from EPF bodes well with the buyers as well as the developers. If it turns into reality, then property counters would see a boost in their coffers for the long run. Note that property counters for the past week have been rising steadily. I guess, long term players could start accumulating on weakness.

Budget day for Malaysia

With Dow climbing slightly last night, the KLCI is expected to open stronger today. However, there is still a possibility that there could be selling in the afternoon when the Budget 08 is being read. Today's range is expexted to between 1,2,88-1,305. Penny stocks would remain in play today but trade cautiously. The STI could also be range-bound today. Still the upside is not expected to be great. Capped at the 3,517-3,545 level.

The start of wave-C?

Wall Street fell after more concerns on the housing slump in the US. Dow fell 143pts while S&P500 lost 17pts. Both the indices turned when they hit their 61.8% Fibonacci retracements. If my wave count is right, which is wave-c is equal to 0.618x of wave-a, then this corrective wave-B is now over. Wave-C would likely have just started.

S&P500 hit a high of 1,496 (1,499 is 0.618x of the difference of 1,370 and 1,479) and then turned. 1,485 is the 61.8% Fibonacci retracement. A break below the 1,450-1,455 level would confirm that wave-C is on the way.

How bout the KLCI? KLCI also hit 1,296.44, its 61.8% Fibonacci retracement, yesterday. Like I mentioned before, the KLCI's upside would likely capped at 1,332 or its 0.618x its wave-a. 1,333 is also its 76.4% Fibonacci retracement. KLCI needs to break below 1,277 to confirm its downtrend has begun.

STI surpassed its 61.8% Fibonacci at 2,411. Its 76.4% is at 3,517. Still, the upside would likely be capped around the 3,545 level (also its 0.618x of wave-a).

Could this be the start of a new downtrend (Wave-C)? We will have to wait and see. :)

Another kicker today!

Dow Jones continued where it left off on Friday after the Labour celebrations. Dow closed 91pts higher while S&P500 added 15pts. So, this would be another kicker for both the indices today.

As I mentioned on Monday, this week could be an 'up' week. However, the upside would likely be capped. For KLCI, I am looking at about 1,332 as the cap. On the other side of the border, the STI would likely be capped around the 3,545 level. I am a believer that there is going to be another wave-C down. This wave-C has potential to be as bad as 1987. It may still be best to unload on rallies.

Note: It is starting to 'feel' bullish again. There are many 'positive' reports coming out of the main street. Signs of a bull trap (wave-B)? I believe so.

This week's strategy is...

With Wall Street closing higher on Friday, the markets around this region is expected to post more upside today. Dow closed 119pts higher while S&P500 jumped 16pts.

The KLCI would likely opened with a gap, possibly hitting the 1,300 level. Upside would be limited to the 1,332 level, its 0.618x of wave-a. As for the STI, it could rally to test 3,545, also its 0.618x of wave-a. This run would likely complete the corrective wave-B. Do note that, wave-B are usually a 'bull trap'. The whole market sentiment would likely be 'bullish' but the matter of fact is the smart money are unloading their stocks. We would wanna be on the 'smart' money's side. Hence, the strategy is still the same as last week's. Sell on strength.