Middle of nowhere

Straits Times Index did not rally back to the resistive trendline that connected the previous 3 peaks or rather, it has not return back to test the resistive trendline yet. Gaps can act as technical levels of support and resistance. For the STI, it can be seen from the chart that the gap up is acting as a resistance and the gap down is acting as a support level and STI seems to be sandwiched between both gaps. Furthermore, the gap down is at the psychological level of 3000 points where a lot of speculators are sentimental towards this level. The trend can only be judged depending on whether STI breaks it's support or resistance level. However, i am still bearish since the rally a few days ago was a false one since it was done with declining volume.

Straits Times Index:

Weekend review of STI and DJIA

This time i am using the weekly chart for the Dow Jones. This is because the minor trend is too volatile and it's hard to gauge the trend of the market. A weekly chart will give more confirmation on the major trend.

On the weekly chart, we can see that there is a well-tested trendline which has been acting as a resistance for 2 peaks and 1 time as a support level. It broke this trendline recently and there is a fair chance that it will go back to test this trendline as a resistance by showing a long wick on the candlestick before plunging again.

Dow Jones Industrial Average Weekly:


For the minor trend of the Straits Times Index, it seems to be bullish since it covered back the gap down as seen on the chart. Currently it is heading north on a very steep channel support line and i am expecting it to test the orange trendline which is similar to the DJIA. If it fails to break this trendline, things will be more bearish.

Straits Times Index:


Personally, if we think that last week was the worse that we have seen, i think it's probably wrong going by the sentiment i percieved so far. There was an article in the New Paper last week which did a sentiment poll on the speculators in the market. The result was that most speculators are still quite hopeful on the outcome of the market. We know that the bear market will end when most speculators feels totally hopeless about the market and they are unusually pessimistic so the worse is yet to come. If u look at the market from a 10 year view, this current correction is just like a small blip. A bear market lasts for around a year to two so i believe the onslaught will still continue.

Maybe i will just quote what one of my friends said,

" So stop hoping for a rebound and accept the fact that we are going down, maybe you'll feel better. Start saving up for the bigger picture!"


Ferrochina seems like a prime candidate to short at around $1.48. This is due to the following technical factors,

1. $1.46 was the level of the August low
2. There was a gap down at around that region
3. It correspond with a fibbonacci retracement of 50%

Ferrochina:

Market reversal

Today, a lot of technical factors suggest that a market reversal has taken place. For the Dow Jones, it appears to pierce the February support level but it formed a hammer candlestick with a very long tail. This hammer was formed with very heavy volume and this increases the probability of it being a technical indicator showing a market reversal.

Dow Jones Industrial Average:


The Straits Times Index gap down on 2 closings ago and it opened with a gap up today. The gap down acted as a resistance technically and today's closing covered back this gap down and this is bullish. Furthermore, by candlestick theory, an morning star formation has been formed with heavy volume and this is bullish too. For the technical indicators that i have chosen, both the RSI and the A/D line are showing bullish divergence.

Straits Times Index:


Technically speaking, i am quite convinced that the market has reversed or is already reversing. Right now, i am just waiting for a higher high and a higher low. But i cannot forecast whether this will be the next bull run or just a longer term technical rebound simply because technical analysis is not a crystal ball which allows you to gaze into the future. Thus it is better to be cautious still. Personally, i don't think that the subprime issue is something that will go away easily and i believe it will still be an issue for this year so i am still expecting turmoil on the markets.

Weekend review of DJIA, STI and HSI

Volume is an essential tool in technical analysis since in technical analysis, volume confirms price action and this was important tool for market action for the past week.

For the Dow Jones, it broke the August closing support level and is now heading towards the February support level. The striking thing about the chart is that as the index action plunges down all the way, the volume increases with this action and that is confirmation of a very bearish trend.

Dow Jones Industrial Average:


I took a look at the weekly chart and the chart reveals quite a number of things. A trendline was drawn connecting the peaks in 2006 and this trendline was a resistive trendline which turned into a supportive trendline for 2007. This trendline support was broken this week with very heavy volume and currently it is landing on the February support. Let's see whether this support will hold.

Dow Jones Industrial Average Weekly:


Since the Straits Times Index has been revamped with the addition of new components and a downsizing of the total number of components, i am playing safe by choosing only to evaluate the STI after the 10th Jan. The new STI in my opinion is less useful since it has less components though there are other new indices which were created along with the revamp of the STI which can overcome the shortcomings of the new STI. However, STI still plays a huge part since most speculators are still sentimental towards the STI. This can be seen in forums where people suggest that 3300 is an important support level though the STI has been revamped.

There was a gap down on 3 closings ago which can act as a resistance technically and this gap was not covered back so things are still bearish.

Straits Times Index:


The same goes for the Hang Seng Index which had a gap down but this gap was not covered back at all. However, HSI seems to be resting on the 200d MA.

Hang Seng Index:


Overall, i am still bearish on the indices. There is still no higher highs and higher lows for the indices. Furthermore, the volume has not decline yet although i must say that the market is getting used to the downfall. Barring a market capitulation, i believe in my humble opinion that there is still some more downfall to go.

Downtrend in process

Today was another red day for the STI. Most counters were not spared and plunged heavily. However, there is always hope in this plunge as a lot of counters which are overvalued are starting to look cheaper and it's a great time to pick up counters. There is nothing technical about this. Times of crisis are always a good time to pick up fundamentally strong counters and even if one knows nuts about fundamental or technical analysis, there are still profits to be made.

Well, this blog is about technical analysis so i gonna give some my analysis on the current situation technically.

1. Today's volume is still very heavy for the counters in my watchlist. This shows that the selling momentum has not ceased yet thus this downtrend is far from over.

2. There were 3 days of intensive selling so i believe a technical rebound is on the way thus one may short on the day of technical rebound.

3. For price action wise, most counters broke their August lows and this is ominous to me. Most counters did not even attempt to test their August lows as a support level.

Personally, I do not try to pick a market bottom as the probability of me getting it correct is very low. It is much better to go long after the bottom has been confirmed technically. A bottom is probably near when,

1. The volume is getting lighter; Sellers are decreasing and there are signs of accumulation

2. Indices forming a higher high and a higher low.

A bottom is also considered to be over when market capitulation occurs. This is confirmed technically when the candlestick shows a hammer or a doji with a very long tail. U can take a look at the old STI for the August correction and this was what happened but i believe capitulation is a rare event.

Weekend review of STI and DJIA

For the Dow Jones, the current channel resistance seems to be broken. However, the volume still remains to be very heavy so one should be prudent. DJIA seems to be building a base as we notice that the low of friday was higher den the low of on wednesday. As of now, it is better to wait for subsequent closings before deciding whether the bottom has been reached technically.

Dow Jones Industrial Average:


As for the Straits Times Index, chartnexus is not uploading the latest data anymore until further notice due to a revamp in the components of the STI. I'm not sure how long this will take though i am expecting the uploading of the data to be resumed in a few weeks time. Meanwhile, i am trying hard to find online charts of the new STI so if there is any websites showing the STI chart, do tell me about it.

A lot of charts broke their support on Friday's poor closing. There is one interesting counter though and that is yangzijiang. It is interesting because it is a fundamentally sound counter yet it plunged down with the rest of the counters on Friday.

It broke out of it's descending triangle formation with heavy volume. Notice that $1.86 has been a strong level of support so once this support is broken, there is heavy selling. The price objective approximated by the descending triangle formation is around $1.51. Coincidentally, $1.51 was the lowest closing support level in August thus $1.51 is likely to remain as a strong support technically given the confluence of the above two technical factors.

Yangzijiang:

November support breached for DJIA

Dow Jones breached it's November support level on the latest closing with heavy volume and that is very bearish. We gotta wait and see whether it will hold the lows of August. But notice that if we consider the close only, it has already breached both the closings of August and November.

Dow Jones Industrial Average:

Weekend review of STI and DJIA

Dow Jones did not hold the trendline dat i posted for my last post. It broke the trendline convincingly and now we are looking at at the Aug and Nov correction support levels again.

The level of around 12710 is the level for the prior corrections as seen on the chart and we shall see how DJIA approach this level. This level is a very significant level so there is some chance that it will bounce off this level by showing a hammer candlestick perhaps. If it breaks this level, it will be very bearish since this will result in a lower low according by Dow theory.

Notice that the trendline for the A/D has been breached and there is also a MACD crossover.

Dow Jones Industrial Average:


For the Straits Times Index, it rebounded off the resistive trendline. Similar to the DJIA,
the level of around 3300 will be a crucial level since it was the support levels for the August and Novemeber correction levels thus this level is likely to act as a support. We shall see how STI test this level too.

One thing is for certain and that is STI will gap down for the opening on Monday since DJIA closed so badly on Friday.

Straits Times Index:


Lian Beng broke out of it's historical closing level on last thursday and we saw a doji on friday. The candlesticks were unshaven which implies that they did not close near their highs so this does not give a good signal of a strong breakout. It is likely we may see some retracement back to $0.78 before the start of any other movement. $0.78 is a significant level since by technical analysis, resistance levels often converts to support levels. It was a resistance level twice thus now it has turn to become a support level. Notice also dat the volume has become light again.

Lian Beng:


For ChipEngS, it's hard to determine where it is heading. It is falling with declining volume and that is very typical of a flag formation. Gotta see what this develops into.

ChipEngS:


ChinaXLX broke out of it's resistive trendline on friday. This counter has been under my watchlist for a long time. It should land around the 50% fibbonacci retracement level which is also near the resistive turn support trendline.

ChinaXLX:

Construction sector in play ?

I noted ChipEngS aka CES on the top movers section today. It closed with a white candlestick with heavy volume. As seen in the chart, CES broke the resistive trendlines today. It seems to me that this looks like a triangle formation.

ChipEngS:


Another counter is Lian Beng which is approaching it's historical closing level. It closed with a shaven white candlestick with it's volume picking up but failed to break above it's historical level. On the weekly chart which i din post it, it seems to me that the volume has been decreasing steadily and dat looks suspect to me.

Lian Beng:



Both counters are trending on breakouts so DJIA's performance tonight will be important. A positive closing of more than around 1% for the DJIA will signify that the counters will gap up tomolo on opening and it may be possible to ride on the momentum.

DJIA is holding on the trendline drawn in my chart for the last post but contary to my expectations, it fell through the 200d MA. Like what Decipher said in his blog, DJIA may be poised for a rebound from this trendline so let's see how DJIA close tonight.

Start of the new year !

This will be my 1st post of the new year ! :) Quite excited about it though i can't say the same for the markets now.

For the Straits Times Index, it closed well with a shaven white candlestick with a heavy volume. Notice that STI only opened for half a day, so i consider that volume to be relatively heavy.

However, STI broke it's channel support 2 closings ago and notice that it rebounded off the resistive trendline. We shall see whether STI will break this trendline in subsequent closings. Meanwhile, STI is still forming a higher high and a higher low.

Straits Times Index: