Update on US and Asian Indices 11 May 2008

Dow Jones Industrial Index

The Dow closed at the level where the downward trend line from Oct 2007 cuts the upward trend line from the March 2008 low. This level coincides with the 25 day moving average.

This is a support level and we shall see how the Dow goes on Monday. From the USO chart it looks like oil might have topped out on Friday. How will stocks move if oil prices retreat on Monday given that the latest focus and “reason” for the fall in the Dow last week was due to high oil prices?

It is still possible that this drop might be more of a correction than the continuation of a bear trend. One good point supporting this is that the falls in the markets recently have been due to rising oil prices rather than credit crunch and recession fears. This is not exactly new type of bad news and I think that the oil price rise will be dealt with very soon. The USD$ has strengthen quite a bit, hence that is no longer a reason for higher oil prices. Supplies have been hit by events around the world but I get the feeling speculators and traders have been the ones driving oil prices up.

No shorting for me just yet.

S&P 500

The S&P 500 similarly closed at the level where the downward trend line from Oct 2007 cuts the upward trend line from the March 2008 low.

I would like to see more confirmatory signals before calling for shorts at this point in time.

It feels like this might be a correction of the recent rally rather than the continuation of a bear trend.

However all this would change come Monday.

NASDAQ Composite Index

The NASDAQ has been a lot stronger than the Dow and the broader S&P 500. Are investors taking some money off the table from energy and agricultural counters and putting them in technology stocks?

If broad markets were to fall, it looks like technology counters would be the ones with a lot more meat to short.

Straits Times Index

The STI closed on the 25 day moving average. There is however bearish divergence between the index and RSI peaks. Confirmation would be a close below the Friday lows. Support tipped at 50 day moving average and 3000 level (necktie of 25 and 50 MA).

However we must wait for confirmation on both the STI as well as the Dow before shorting. It could very well also be the STI taking a breather before making an attempt to test the 200 day moving average for the first time since the start of the decline since Oct 2007.

Hang Seng Index

The HIS closed on the 25 day moving average similar to the STI. The key psychological level however is the 25000 level. And the HIS managed to eke out a close above it still.

25 and 200 MA are very close together. A rise in markets on Monday (due to a fall in oil?) would have them crossover forming a key area of support/resistance at 25000. Hence not only as a round number psychological level, but also a technical one.

In the event of a fall 23400 would be a support level.

Shanghai Stock Exchange

The SSE has been trading in a range with the 50 MA as the resistance. We will have to watch how the SSE performs over the next week.

Nikkei 225

The Nikkei closed below the upward trendline. Support tipped at the 25 day moving average.

Update on Asian Market Indices 3 May 2008

Straits Times Index

The Straits Times Index has confirmed the double bottom chart pattern. It closed above the 3170 resistance level strongly on Friday 2 May 2008.

Moving in an uptrend. RSI is however getting close to overbought levels. This might be hit come Monday. I will be expecting a throwback soon as well.

Support levels are 3170 and 3000.

SMA/EMA crossover shows uptrend and the SMA and EMA lines are more or less parallel. Still has upside potential but prepare for a pullback once the lines diverge.

Hang Seng Index


The HSI has been trading above the 200 MA for several days now. Also in uptrend. RSI in overbought territory.

Expect a throwback towards the 200 MA.

SMA/EMA crossover shows uptrend. Lines are more or less parallel like for the STI.

Shanghai Stock Exchange

The SSE gapped up and is trading between the 25 and 50 day moving averages. Expect the 25 and 50 MA to be support and resistance respectively.

RSI not yet in overbought territory. More upside noted.


SMA/EMA crossover has not indicated a trend change yet. However the lines appear to be starting to turn upwards.

Nikkei 225


The Nikkei is in an uptrend. But it has not broken above the highs of Feb 2008. RSI in overbought territory. A throwback is to be expected.


SMA/EMA crossover shows upward trend. 10 SMA is starting to diverge a bit more from the EMAs. Still some upside but throwback to follow shortly.

Update on COSCO 1 May 2008

COSCO announced their 1Q 2008 earnings yesterday.

Points in brief

1) Turnover and net profit doubled
................................Q1 FY2008 ...........Q1 FY2007 .........Chg
....................................S$’000 ...............S$’000
Turnover .....................717,656.............. 355,786........ +102%
Gross profit................. 200,622................ 92,490 ........+117%
Pre-tax profit ...............148,660 ................67,450........ +120%
Net profit .....................127,555 ................60,818 .......+110%
Net profit attributable ......83,884 ................41,954....... +100%
to equity holders
EPS fully diluted (cents) .....3.73.................. 1.88 ............+98%
................................31 Mar 2008 ...............31 Dec 2007
NAV (cents) ......................45.26................ 42.00 ............+8%

2) However the net profit for the three months ended Mar. 31 of S$84 million from S$42 million a year earlier fell short of the S$117 million forecast by a Dow Jones Newswires poll of analysts

3) COSCO also said that it has received down payments totaling US$280 million for seven ships that had been outstanding earlier in April.

"We have got down payment for all of our order book and in the future we will announce and book orders only after we receive down payments from our customers," Cosco President Ji Hai Sheng told reporters.

4) Gross Profit Margins increased and are better than peers listed in SGX.

.........................GPM....... Reporting period
Cosco ...............28%................1Q2008
YZJ....................20.9%.............1Q2008
Kepel O & M........9.9%...............1Q2008
Sembmarine........9.1%...............FY2007**

** 1Q 2008 results not out yet....

5) China COSCO Holdings Company Limited yesterday announced that they were going to order nine 57,000 DWT dry bulk vessels worth US$348.9 million from COSCO Shipyard Group Co., Ltd
which COSCO Corp owns 51%. This order is however subject to the approval of a general meeting of shareholders.

2 reasons why COSCO Corp did not announce this yesterday is because the order still needs approval from China COSCO shareholders as well as COSCO's new policy of announcing new orders only after they have received the initial payments. But I am sure this announcement will be coming out in the coming weeks.


In terms of the technicals......


COSCO was sold off going into earnings. The original event that caused the sell off down to 2.79 was due to worries about cancellations of orders and not collecting any deposit. This has been resolved by the management as they have collected the initial payments from all their clients now.

COSCO's sell off going into earnings was probably because COSCO fell short of extremely high expectations on earnings. Is this sell off overdone?

From the chart the price closed below the downward trendline on 29 April 2008 but closed above it again on 30 April 2008. It also closed above the 61.8% fibonacci retracement level.

There is actually bullish divergence between the price and RSI trends.

COSCO has found it hard to break above the 50 day moving average in the past 2 attempts.

What will be (if any) the catalyst that could cause it to do so? Most likely new earnings or new announcements. Over the next few days this does not seem to be likely.

From the techinicals however, I would want to see whether COSCO can keep it's price closing above the downward trendline over the next few days. Hopefully it can consolidate and form a triple bottom formation for which to build the next rally from.

Update on STI 12 April 2008

On Monday 7th April 2008, the STI closed above the 3170 level "confirming" the double bottom based on chart pattern. However it must be noted that volume was light on that day and candlestick wise it had formed a "hanging man". These 2 features pointed towards tiring momentum and a possible reversal point rather than a true confirmation of a bullish double bottom reversal pattern.

True enough, the subsequent days confirmed the bearish "Hanging man" reversal candlestick. As my friend so eloquently put it : "Yesterday we hanged the man, and today we bury him."

It is interesting to note however that the candlesticks of the last 3 days (ie 9-11 April 2008) form a "morning star" pattern. This can be viewed as a bullish reversal sign. The Candlestick on 11th April is also a "bullish belt hold". Signs were pointing towards a good run on Monday. However the US market folded on Friday night! Which is rather frustrating because sometimes you wonder if reading STI charts are worth anything at all if they are just going to follow the US market movements?

Note the break in trend line for the RSI levels. The more gradual upward trendline though is still far away.

Key support level would be 3000. Likely where the 25 and 50 day moving averages will crossover. If 3000 gives way, it will represent a shorting opportunity where the STI will cover all those gaps made 2 weeks ago and probably test the 2745 lows made in Jan and March 2008.

Key resistance would be 3170. However a strong high volume break and close above 3170 would most likely see STI rally to 3300 (most likely where the 200 day moving average will be)

I will correlate this on a time based factor later when I analyze the US charts.



I have started to use an additional tool to look for major trend changes. This is the crossover points of the 10 SMA , 20 EMA and 30 EMA I had previously mentioned on a blog entry this week.

If you look at the above chart you can see that the moving averages had indeed crossed over recently. This signifies a mid term trend change to the upside. However as the lines move further apart, it usually signals that the momentum of the trend is weakening and there might be pullbacks or even reversals of the trend.

We can see that on the STI the 10 SMA has pulled too far away from the 20 EMA and 30 EMA. Hence I do expect a pull back coming.

Conclusion : Expect STI to fall on Monday and test 3000 level. Expect 3000 level to hold.

Elliot Wave Analysis for STI 7th April 2008

Hi, I was wondering if I could get Elliot Wave technicians to come here to discuss Elliot Wave counts for the STI corrective phase?

Well let's start with the view Ritesh Menon at OCBC as well as some other EWT technicians have about the STI:

View number ONE : Wave A in 5 impulses but flat or Diagonal Wave B and C?


In this pattern we are now in the wave a of Wave B. 5 wave impulse pattern on Wave A is clear. The view seems to be thought that Wave C will not be as steep as Wave A. From what I have read though, if Wave A is a 5 wave impulse then it is likely to be a Zig Zag steep decline where Wave B is short and small and Wave C is a powerful extended steep decline in 5 waves.

That would mean it will look more like this :

View number TWO :Zig Zag 5-3-5 Corrective Phase


The STI would most likely drop below 2000 in that case!!!!

The last view I can think of is that we are in a 3-3-5 Flat corrective wave :

View number THREE :Flat 3-3-5 corrective wave


This would be an in between view I suppose. In Flat patterns the Wave B can even go as high as the beginning of Wave A. This would be more positive for investors.

So which pattern would you choose? And why?

I think the key thing right now is to look at the fundamentals and correlate.

Is the USA going to have a very severe recession? If so then I think view number TWO would be the correct one.

Or has the Fed's actions and government stimulus package done enough to stave off a severe recession? Then perhaps views ONE and THREE would be correct.

Lastly, is Asia' growth strong enough to prop up the global economy? If so then view number THREE would be the case and we have indeed reached a bottom (although we will test it again).

From a fundamental point of view it seems that View Number ONE might be the right one. However I am not too comfortable with the Elliot Wave counts for View number ONE.

Dow fibonacci retracement?

Was just reading about midtrend entry and pyramiding and one of the strategies was to use fibonacci retracement levels to enter the market again.

I had a though at decided to see how the Dow chart looks with a fibonacci retracement level drawn in.

The big move started in mid July 2006 and ended in Oct 2007.

Looking at the fibo levels, 12000 is the 61.8% level. Usually strong moves beyond this level would mean big trend reversals than retracements. From the chart, we can see that the Dow is currently flirting with the 12000 level.

In fact it breached the 12000 level in Jan and March but could not follow through. 12000 is definitely the inflection point for the Dow.


Similarly for the STI, 2900 is the 61.8% fibonacci retracement level which was breached in Jan and March.

Update on Asian Market Indices

STI

The Straits Times Index is strong. Strong uptrendline holding. Close above the 50 day MA. Very close to confirming double bottom pattern with close above 3170.

Fundamental news wise the Singapore's investment banking fees for the first quarter this year rose 39 per cent year on year to US$203.6 million, the highest first-quarter fee volume on record. This is despite a fall in the total number of deals managed in the first quarter to 124 from 172 in last year's first quarter. The rise in investment banking fees also contrasts with a 5.4 per cent year-on-year slump in investment banking fees generated in Asia Pacific ex-Japan over the same period, data from Thomson Financial shows.

Looks like the Singapore banks are going to rally on Monday! STI will shoot up!



NIKKEI 225
The Nikkei 225 is trading in a descending broadening wedge pattern. It attemtped to test the 25 day moving average. It already tested the 50 day MA once. 2nd time lucky?



SSE
The Shanghai Stock Exchange has a bullish engulfing candle. Is this the reversal? News out that although China's consumer price inflation hit an 11-year high of 8.7 per cent in February, the central bank was prepared to ease monetary policy if necessary to prevent a slowing global economy from cutting Chinese growth sharply later this year.



HSI
The Hang Seng Index broke out of the descending triangle on Friday. Going to test the 50 day MA? Note the possible double bottom formation as well.



KOSPI
The KOSPI has broken out of a descending triangle pattern. It also looks very close to confirming a double bottom pattern. A close above 222 would confirm it.


Overall it looks like the Asian bourses are all looking bullish from the charts as well as the news over the weekend. Is there going to be a major rally next week? Let's wait and see!

US and Singapore index charts

DOW JONES INDUSTRIAL INDEX

The Dow looks like a possible double bottom formation. Confirmation would be a breakout upwards above 12765.

Notice also the upward channel the Dow is currently trading in. Also the downward trendline from January is nearby. Breakouts above the channel and the trendline would be bullish signals.

13365 would be a very key resistance level in the event a double bottom reversal is confirmed.



US S&P 500

The S&P looks like a double bottom formation as well. A breakout above 1396 would confirm this reversal pattern. However there is a HCR right at that level. Watch the 25 day moving average. A break above it would be a bullish sign near term.


NASDAQ COMPOSITE

The NASDAQ has an interesting chart. Recent lows took out the January lows. This looks more like a descending right angled triangle formation to me. False breakouts are noted recently. A breakout above the downsloping trendline would confirm this as a busted pattern and usually powerful upwards moves are observed. However there is a HCR from 2425-2500 range.
Neckties are noted at 2615.



STRAITS TIMES INDEX

The STI is still on track for a double bottom pattern. A break above 3170 would confirm it. There is a necktie at 3500.

STI chart

Was just looking at the STI chart and it seems like there might be a chance of a double bottom pattern. Thomas Bulkowski calls this the Adam (left narrow and sharp bottom) and Eve (right rounder bottom) bottom formation.

I haven't updated my chart with the candle for 17 March. But it does look like the low of 2746 was not tested. And possibly a pipe bottom might have formed. In any case pipe bottom on the daily chart do not perform well and there isn't any on the weekly chart (preferred)

In any case we are still VERY FAR off from seeing a confirmation on this bottom pattern. But I guess it's good practice to analyze charts as they go.