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Current Dow Concerns

Dow may need to find a less steeper ladder to scale equities mountain

While our key support of 7,500 did manage to trigger a rebound in the Dow, the Dow’s performance last night raised some fresh concerns.

Dow Exhausted ?
The Dow burst out through the gates and went up as much as over 200 points last night, before losing some ground to chart an only positive 86.9 point gain. The last 2 hours dip of the Dow has raised concerns that traders are generally not optimistic about the Dow in the near term.

The Dow has now charted two consecutive days of lower highs, which points to the possibility of a mini downtrend forming. Taking about downtrends, the Dow is also still stuck in a downtrend channel that originates from the end of last year.

The key to the Dow bulls’ reluctance : Negative US Employment Data this Friday What could possibly be the trigger for the bull’s reluctance? The possible trigger for the bulls’ reluctance could possibly be the critical US employment data which is due this Friday. Economists polled by Bloomberg are expecting the unemployment rate to worsen to 8.5% in March compared to 8.1% in February. The upcoming negativity of the employment data could adversely affect the Dow in the next few days.

Strategy : Downgrade to cautionary positive view of Dow

Although we still maintain our positive view of the Dow, the technical cautions that we detected in the charts necessitates a downgrade of our view of the Dow to Cautionary Positive. We expect the Dow to face another wave of correction in the next 1-2 days leading to the release of the US employment data. We expect the Dow to correct to the 7,000-7,250 support zone. The near term correction of the Dow will drag the KLCI 20-30 points lower in the next 2 days.

We think that the Dow bulls have to find another new and less steeper ladder or uptrend line that is easier to sustain to scale the proverbial equities mountain. We think that the 7,000-7,250 support zone will be a fine area for the bulls to plant this new uptrend ladder.

FKLI Market Outlook 01 April 2009

FKLI Market Outlook:
US MARKETLed by the gains in Europe, the overnight DJIA secured 86 points to finish in positive territory, up 1.16%.

This meaningful finished relief us as we can maintain our call of the uptrend market, at least for short term. The rally in global equities markets was helped by the speculation that banks have more eager to lend.

With the marginal increased in overnight Dow, there is higher chance that the Dow will re-test the 8000 level. The support still remains at the 7550 level (MA 50). [Reminder: US will release its ISM Manufacturing (Survey 36 Vs Prior 35.8) & Pending Home Sales data (Survey 0% Vs Prior –7.7%) later tonight]

FKLI

Green comeback for cash composite after it rose about 3.21points to ended higher at 872.55 yesterday. The gains were support by finance and construction sector which gained about 1.25% and 1.05% respectively. Total 382M shares valued at RM759M traded amid the end of 1st quarter of the year.

Meanwhile March contract gained about 4points to 871 and April contract surged about 12.5points to 875. Total volume shrinks from 19,323 to 11,327 while open interest was reduced from 59,187 to 25,432 due to final trading day for March contract. Regional market slightly recover from recent drop amid concern government stimulus plans worldwide will take longer than expected to revive the economy. The Nikkei dropped about 126 points to 8,109. HSI recovered about 119points to 13,576.
Market might expect range bound trading within 860 - 880 judging on mixed index performance on regional market and unclear market indicator based on technical. Current RSI for new spot month April is hovering at neutral zone while little negative divergence on MACD still presence, indicating bearish crossover. Immediate resistance can be seen at 877 (MA 50), followed by 880 – 885 levels, while support level would be 862 (Bollinger middle band).

In view of the overnight support in Dow, we are more optimistic in the upward movement in the FKLI for short term trading, but we remain our long-term negative bias towards the market.

Mark Mobius Speaks

The next “bull-market” rally has begun and there are bargains in every emerging market following a record slump in stocks, Templeton Asset Management Ltd.’s Mark Mobius said.

The MSCI Emerging Markets Index has jumped 23% since reaching a four-year low on Oct 27 2008, outperforming the 2.5% drop in the MSCI World Index and 9.5% decline in the Standard & Poor’s 500 Index.

Emerging markets made up the 10 best-performing benchmark gauges this year (2009), led by the 26% gain for China ’s Shanghai Composite Index.

“You have to be careful not to miss the opportunity,” said Mobius, who helps oversee about US$20 billion of emerging- market assets as executive chairman at San Mateo , California- based Templeton. “With all the negative news, there is a tendency to hold back.”

Emerging markets are in “better shape” than developed economies, Mobius said. The fund is looking for companies that are “cash-rich,” have low debt and higher dividend yields, or those that can invest for future growth yet have cash left to pay shareholders, he said.

“You are going to see a lot of bouncing off the bottom because there’s a tremendous amount of uncertainty in the market,” Mobius said, “But I have a feeling we’re at the bottom and now (March 2009) we’re building a base for the next bull market.”

Mobius correctly predicted in December 2008 that emerging markets will rebound before developed nations.

Re: WCT -can take a look?

--- On Tue, 3/31/09, ABCD wrote:

From: ABCD XXXXX2020@yahoo.com

Subject: WCT -can take a look?

To: zhugel@ymail.com

Date: Tuesday, March 31, 2009, 2:53 PM

Hi ZL, >>> (ZL's reply in RED)

I has been chatted in ur blog quite some times and very appreciate your kindness as giving BT chatters has a space to do discussion.
TQVM u r welcome friend

Just a short introduce myself ..my trading experience was not really long..and just lately start to learn the TA..I have drew a chart for WCT..may u take some of your precious time to comment it??

Thanks in advance..my yellow dot line is descending triangle --> is it correct? CORRECT

The blue line is a immediately resistance (coz gap down on 7 Jan 09) ..so the gap can be drew as future resistance right? A gap is always a support / resistance depending on the prices of that issue. Correct again

The doji was formed on 27 March..is it should be northern doji? 27th Mar is Friday or profit taking (PT) day. A follow-up doji formation is not an option but the norm - nothing unusual there.

*Regarding this i have done some researched..it say "If you see a doji at the top of a rally (Northern doji) or at the bottom of a decline (Southern doji) then there is a chance that the market would reverse or enter a sideways movement for a while. You may therefore consider exiting or partially exiting your current position." ZL agree partially with but not entirely becoz u r refering to a stock price from 0.93 >>> 1.18 and spreaded over 18 trading days which in ZL's opinion is a price "reversal" rather than a rally and in all probabilities due to better sentiments in Wall St. (DJIA) the last 2 weeks. But still some profit takings after a @25sen gains for a pennystock can be considered under any circumstances - which is most likely what WCT trading-buyers are doing these few days.

2. The bollinger band also getting very narrow??As this chart, should consider it as current BB is the trigger to watch for a price breakout or breakdown? As mentioned earlier some PT by traders and some contraction by BB after a 25 sen difference (off low) is conservative trading considering the weak sentiments of the local bourse. This is Bukit Kewangan (Bursa) and not Wall St. (NYSE). We do not hv the volumes that is needed to sustain. Therefore, in ZL's view, is the main reason for that doji u mentioned above.

Nevertheless, the BB is also consolidating - which usually happens after the prices recovered somewhat. WCT candles is positioned LOWER BAND and any price improvement will be hindered or obstructed by the Middle BB which is always the immediate resistance if you select this indicator.

3. Stochastic is heading to south which showing profit take? but if profit taking then price should be drop alot but it is trading side way..so, how to read it?? This is where the stock showed it's ability to absorb distributions. The lower volume can affect the stoch in some ways especially during profit takings. No big deal .

4 For the MAcd, it seems trying to heading +0 zone..but histogram is red..So, my overall conclusion for this stock..it is stay aside and wait the clear direction such as the MACD and the BB showing is expanding either up or down? Kindly please comment...The BB will expand upon more activities in this stock or else BB keeps contracting until something happens here. The sentiments will depends where the BB is still contracting and most likely in a narrow neck or channel formation after candles sits >>> aboce or below the Middle Bollinger. MACD is the slowest of all indicators but sensitive no doubts. The profit takings from 27/3 and the 16+ pts loss by KLCI the following Monday inevitably affect the MACD a little sensitively. This may be due to the big red bear which caused many stocks to dive on Monday.

thanks.regards,

ABCD

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ZL have included 2 WCT charts below - a daily & a weekly for your perusal ....

In both charts ZL did not use any Bollinger Bands. THis is to highlight >>> THERE ARE MANY WAYS TO SKIN A CAT

Take a closer look at the moving averages parameters defined.

Can you get a different "FEEL" in WCT now?

They say " A picture is worth a thousand words" So 2 pictures worth 2 thousand words lah??? TQVM >>> HAPPY TRENDING !!!