Big Money

US indices have been losing ground over past 4 trading sessions and the chance of technical rebound is highly likely as it’s in shortterm technical oversold situation.
My target for S&P500 hitting the 1000 mark still valid despite only 50 points away (It has dropped from 1129 to 1051) over past 3 weeks.
The picture is the roadmap till end September with possible rebound from recent oversold situation with target around 1080-10100 before further downward move.

September and October are usually bearish months. With the bad economic news recently I don’t think, the market will go much higher from this level. The chance of correcting is much higher before we’re resuming our bull trend in the last quarter of the year.
Attached is my prediction I mentioned since June this year that this rebound will hit 150MA (and it happened) before correcting towards 1000 level around end of September or mid October.
4Q rally will see major short covering and it’ll create impulsive upwave by breaking into 2010 high.
 
Take a look of 2 head and shoulders formation:
1. The big H&S will fail
2. The small H&S will bring the index down in September.

Below is the seasonal period for S&P500 for the past 37 years:

Follow up from bearish rising wedge which I posted last week:

Despite gain in some stocks such as Genting and Statschipac as well as strength in Hangseng, they do not picture an improvement of market breath.
Potential of further rebound to digest recent loss is very likely but the overall sellers still outweigh buyers.

I expect August to be slow month and mostly the stock will trade within a range.
A possible bigger move could be in September and statistically this is a very bearish month.

This morning the Japanese gov just announced slower growth:
http://www.cnbc.com/id/38717422

Let’s see how market unfolds.

Hangseng is at the top of the channel and pullback is more likely than any further rally.
Personally I feel, overall market direction is dictated by Shanghai’s movement and this can be seen with my earlier posting
http://www.bigmoney.sg/?p=484

So I believe, we’ll be entering dull, sideway market in August and potentially deep retracement in September.
If we see the market action over last couple of days they’re mostly dominated by Pennies. This is rather a cautious sign that market has little room to move up.

Despite my bullishness in Shanghai technical outlook I feel recent run up needs consolidation which may stretch for 2 months till end of September.
My initial target of 2600 was breached. But after looking back into weekly chart I figure out that the 2683 level provides a better price target for this run up.

A shallow 30% or at max 50% consolidation gathers more energy for further upward push.  And I feel a consolidation towards 2485 will be good for many late comers to buy back shares at cheap before strong bull rally in the final quarter this year with immediate target close to 3000 level.

The bull market rally and correction since March 2009 have started from Shanghai instead of US.
Shanghai has been taking the lead by marking the high/low points of the market and Hangseng which is the proxy to Shanghai has been dancing well to balance its move between US and its bigger neighbour.
Shanghai has bottomed and I believe, US market has completed its corrective low.

Currently Shanghai is dancing towards medium move of 3000 level with stopover around 2600 as its initial target which has been attained recently (See Shanghai hits support and bounce with target 2600)
So I believe, US market is around short term resistance level which could last till end of this month for windows dressing (I’ll reduce position substantially before this Friday).

Can Shanghai hits above 4000?
Can Shanghai cross 4000 level as I mentioned in my newsletter in early May 2010?
Through my longterm wave analysis it is possible that Shanghai to cross above 4000 level by 1Q 2011, marking a swift bull and caught anyone by surprise as happened in March 2009.
For that to happen we need Dow Jones to cross 2010 high and attain its full longerm swing at 12600 level. At this level everyone will be very bullish and it’s the top of the bull market. As long as you hear bear noises it’s unlikely that any correction becomes a bear market.

Shanghai Longterm Target

Dow Jones Longterm Target

We’re building a pattern of continual bull market.
The current decline is within the correction level. This continual bull market should see Dow breaking April high and may hit 12600 level (will update in next newsletter).

Current Dow Resistance Levels

The rebound has been sharp and we need to know the level of resistances, as any share recovery always followed by pullback.
I do expect pullback and this time it’s unlikely to break the recent low of 9600 level.

Below are the resistance levels:
1. Stocks has high chance to hold up gain till Friday’s options expiry with immediate target around 10350 level.
2. Next resistance is 150MA or around 10480 level
3. The last resistance is the previous high of 10600 level

How big the rebound in Asian indices?
(see earlier posting: shanghai hits support and bounce).

Nikkei
Nikkei just hits the support this morning and it’s unlikely to breakdown before any meaningful bounce. A good bounce will see Nikkei towars 9800 level.

Straits Times
As I often mentioned to my clients I don’t see any bear through STI chart. It’s in fact a trading range and in fact it’s forming mini uptrend. Would it revisit the recent high at 3035? Possibility is there.

Hangseng
Hangseng despite trading in mild downsloping channel, its recent mini uptrend remains intact. We need to see whether it’s able to break 150MA as its immediate resistance.

But if US market continues its slide we might not be able to attain above target.

The correction in China has finally hit 2400 level target I set in early May  (see article: The correction is in China, not(yet) the US).
On 2nd July the China made a bullish reversal candle and for the last 3 trading days (2nd to 6th July) the index have been building strength.
The potential rebound could be heading towards 2600 level but the end of downtrend is not yet evident as technically the price need to form a higher low before an uptrend confirmation.

Shanghai slide is halting albeit temporary however I’m still waiting for sign of reversal in US market. As 2 major world economies try to sync their direction, there are only confusion and uncertainties. Traders can look only on shortterm basis as the real trend is not yet evident while investors could spot bargain if they’re able to find fundamentally strong stocks at current discount price.

I like these 3 stocks from technical and fundamental perspective: Osim, Hi-P and Goodpack

Shanghai Index
Shanghai is currently at the important defence line but it’s still long way to declare the bear in China is over.  In most optimistic view we may see accummulation around this level but a bull confirmation may need several weeks.
A simpler way to look at the new bull trend will be to look at the strength of index when the RSI(9) rise above 50 level and the price trades above 30 weeks MA.  And of course for that to happen the price will be forming higher higher (HH) and Lower High (LH) formation.
(more…)