Mudajaya - Company of Steel?

The construction sector has taken a severe blow since early 2008 falling for about 41% since the peak in January this year because of sub-prime mortgage crisis scare in the US. The peak of the construction index in January this year was at about 330 points and today it is at 192 points. It has retraced to about 70% from the up trend rally which started in January 2006 to the peak in early January this year. Yes, the bull rally in the construction industry was for about two years and the index in January 2006 was at about 127 points.

Many stocks share prices in the construction industry have also declined at least 40% since early this year or retraced at least 70% from the early 2006 bull rally. One stock that is still holding in its price is Mudajaya Group (Mudajaya). Mudajaya is an investment holding company with subsidiaries engaged in civil engineering and construction, property development, and manufacturing and trading of construction materials.

Mudajaya’s share price peak was on the 22nd of June 2007 at RM1.99 (adjusted because of share split in 1st of July 2008). Today the share price closed at RM1.25. That’s a RM0.74 or 37% decline. From the bull rally in the year 2006 to the peak in June 2007, the price has retraced 50%. Unlike other construction related counters traded in the exchange (which mostly have retraced 70%), Mudajaya’s share price held well.

Technically, the share price was steady above the long term 200-day moving average until February this year. The 200-day moving average is currently at RM1.44. Since August last year, the price was in a consolidation phase, correcting from the bull rally with a trading range between RM1.20 and RM1.65. Momentum indicators are indicating that the price is being controlled by the bear. The weekly MACD and RSI are making new lows. Weekly indication is used because there is too much noise in the daily chart. This normally happens in stocks that are not actively traded.

Yesterday, international broker Standard and Poors have issued a “strong buy” call, a report that you can get from Bursa Malaysia’s CBRS scheme available at their website for free. The recommendation was made because of strong order book value from various construction projects. Earlier in June this year, local stock broker CIMB raised its target price because the company has secured a highway project worth almost RM1billion and outstanding construction orderbook.

The experts seem to believe that this company of steel is able to stand in the bear pressure faced in the construction industry. Chartwise, the market seems to think otherwise (with the bearish trend forming and bearish momentum). It is up to you to decide as for me, I am following what the market says, as always.

Commentary and Analysis by Benny Lee

Jittery waters in equity markets caused by Political Tsunami in Malaysia and Thailand

Malaysia and Thailand has been hit by political tsunami recently. Both Prime Ministers are being pressured to step down.

In Malaysia 2 days ago, former Deputy Prime Minister and the de-facto opposition leader Anwar Ibrahim has won the "most important" by-election in one of the parliament seats which was recently vacated by his wife to pave way for him to come back into parliament after a long absent. He won with a bigger majority than his wife did in the March general election despite the ruling BN goverment heavy machinery being deployed there.


Photo taken from Rocky's Bru

There has been calls by leaders of the ruling goverment to ask the current Prime Minister Abdullah Ahmad to step down because of this defeat. The Prime Minister is already facing challenges from veteran leaders within his own party, UMNO to replace him as the president of his party. This clearly shows strong resistance to the current goverment and the presence of very vocal Anwar Ibrahim will send the parliament into more action, and thus creating more turmoil in the house of law-makers.

Investors prefer to stay in the sidelines before taking further action. The The Kuala Lumpur Composite Index (KLCI) closesd at 8.23 points on the by-election day and continue to ease further today by shedding another 2.85 points to close at 1067.65 yesterday.

In Thailand,

Thousand of protesters stormed into seven state agencies including the Government House, as the People's Alliance for Democracy (PAD) tried to bring the government of Prime Minister Samak Sundaravej to its knees yesterday. Five core leaders from PAD were arrested for causing this uprising. (This may sound very familar to the Malaysians especially the Indians). More details here on Bangkok post. Few businesses and bank branches were closed. Protests started two months ago but this is an uprising. Are we going to see the end of Samak's rule? There is a high chance.


Photo taken from www.bangkokpost.com

The protest is expected to go on for another 2 more days and the Prime Minister has already issued warning to protestes to disperse or face legal action. Unexpectedly the benchmark SET Index rose 7.07 points yesterday (1%) to close at 675.99 points, after finding support at the 660 points level once again, two days ago.

Are these protests sign of people expecting Samak's downfall. Samak has been blamed for the economic slowdown because the Thailand economy and financial markets went downhill when he took over as Prime Minister in January this year.

In Hong Kong, real natural disaster affects businesses and the stock market. The stock market was closed 2 times this month because of high-category typhoon. However, the market has rebounded well this week. The benchmark Hang Seng Index rose 408 points (1.94%) yesterday.

Hong Kong Hang Seng - Support broken, may head south

One of our expert partner, Mr. Brent Penfold was in Hong Kong recently to conduct some workshops and that time, Hong Kong has been hit by category 8 typhoon hard. Brent was stranded in a hotel and the workshop has to be postponed. Category 8 typhoons have wind speeds above 63 kilometres an hour. The stock market was halted on that day (6th of August) abd businesses were closed. Another category 9 typhoon (Typhoon Nuri) hit Hong Kong again last Friday 22nd of August which also forces the stock market and businesses to close that day.

The typhoon has also weakened investors sentiment in the stock market. The benchmark Hang Seng Index (HSI) continue to decline daily when market was re-opened the next day from 22,100 points closing price on the 7th of August to 20,392 points on 21st of August. Since that typhoon incident, the HSI fell 7.7%. The market rebounded since and as at today noon, the HSI closed at 20955.82, after managing to close above the 21,000 points support level it broke few weeks ago.


Daily HSI chart as at noon, 26th of August 2008 using NextView Advisor

The HSI support level was at 21,100 points and I have mentioned previously that markets in Asia are expected to decline. The HSI has broken below the support level and may head south to continue the down trend IF the HSI continues to stay below 21,000 points. The next support level is at 19,000 points, which is a long term up trend line established since year 2004. Major resistance remains at 23,600 points while the immediate resistance is 21,000 points (previous support level).

Commentary and Analysis by Benny Lee

US markets fell, expected fall further

The Dow Jones Industrial Average (DJI) fell by nearly 250 points yesterday, wiping out a gain of about 200 points seen Friday. Investors shifted to bonds, to the safety of government debt. The equity market was light trading.

In my previous analysis on the DJI, I mentioned that the short term up trend may hold if the DJI is able to stay above the immediate support level of 11,400 points. The DJI was below this level early last week and tried to go back into the up trend by climbing above this level on Friday. However, the DJI is now back below this 11,400 points level again, closing at 11386.25 points yesterday.

This shows that the bears are still in control and technically, the up trend momentum has started to weaken (the RSI indicator has started to fall flat). A weak momemtum in the up trend signals a possible change in trend.

With this weak momentum, and strong resistance (which is still at 11,700 points), the DJI is expected to fall further to test the support level of 10,800 points again.

Analysis and Commentary by Benny Lee

Kuala Lumpur Composite Index: Weekly Reversal Pattern

The Kuala Lumpur Composite Index (KLCI) broke the 1090 points crucial support level last week but gained its footing back once again in the second half of the week after rebounding of the low of 1064.58 points to close at 1085.60 points last Friday. However, it was still below the 1090 points support level.

Today, the KLCI opened two points lower and was weak through the morning and as at 12.30 noon, the KLCI closed at 1084.15 points. Investors were cautious and at the same time worried as the by-election in the Permatang Pauh Parliament seat is going to be held on 26th August, a date which was declared as a state holiday in Penang.

The by-election is seen to be a very important point of time in the history of Malaysian politics because the results will see whether former Deputy Prime Minister Dato Seri Anwar Ibrahim will be coming back to parliament and act as the de-facto opposition leader. Anwar's return will cause uneasiness in the ruling goverment because he (Anwar) is confident that he will be able to form a new government come 16 September. By the way, in case you do not know, Anwar was recently charged with sodomy, a charge which brought his downfall in politics many years ago.

So, the current political affairs are much more interesting than the stock market.

Last week, the KLCI action has formed a bullish reversal candlestick chart pattern called the hammer. The hammer pattern however is a weak one because of weak volume and black body. The bullish reversal can only be confirmed if the KLCI breaks above 1106 points. This is also a crucial level because this level is currently the down trend line resistance level as well.


Daily KLCI chart as at 12.30 noon, 25 August 2008 using NextView Advisor

If the bullish reversal is confirmed, only a small rally is expected because there is a strong resistance at 1160 points. Current support level is 1060 points, where the KLCI rebounded of last week. This is not a strong support level. The stronger support level is at 1030 points (a cluster of Fibonacci retracement levels).

Commentary and Analysis by Benny Lee

Singapore Stock Market : Balancing on tight rope

The Singapore benchmark Straits Times Index (STI) fell below the immediate support level of 2,800 points and broke below the crucial support level of 2,740 points last week, lowest since November 2006. The fall to this support level was expected.

The STI managed to open higher today at 2747.97 points from 2723.30 points on Friday. However, there was no follow through in the morning to push the index higher. The index closed at 2746.35 at 12.30 noon, getting back the STI above the crucial support level.

Can the STI hold at this level and is this level strong enough to cause the market to rebound?

Since the STI is at an oversold level again, a rebound is expected, a situation similar as mid July. Although rebound is expected, it may face resistance at 2,850 points, which is a down trend line resistance level. This is because the down trend is still strong in momentum (the ADX indicator is still rising and the RSI indicator is lower).


Daily STI chart as at 12.30 noon, 25 August 2008 using NextView Advisor

Immediate support level is now at 2,700 points while further support level is 2,540 points (A Fibonacci retracement support level).

Commentary and Analysis by Benny Lee

Vietnam Financial Market - Local investors remain super cautious

Last week I was privileged to be in Ho Chi Minh City by invitation, to conduct a stock market seminar. Since I was there for only three days I can hardly represent myself as an expert on Vietnam’s markets and economic condition.

I can comment, however, on what I see in price charts and what the word is ‘on the street’.

CHARTS
The HOSE Index (Ho Chi Minh City’s Stock Exchange) lost 64% of it’s value from the high of March 12/07 (1179.32) to the low of June 20/08 (364.32). Since June 20th it has gained 42% off it’s lows. That’s impressive, but it is still less than 20% of what it previously lost.

A key area to watch, to gauge the strength of the recovery, is the Resistance area around 550. A strong upside break of that area, and especially of 625., will imply a longer range rally that should at least target 750., and then 850.

THE STREET
Local investors remain super cautious about the stock market. Many were badly burned in the huge sell-off and haven’t yet worked up the courage or conviction to return. My personal view is that local investors are, as a whole, fairly inexperienced in the markets. If they had more knowledge of market structure and some advanced techniques of technical analysis, they would not have been buying, or holding, when the market was selling off.

A select few stocks have risen quite dramatically, beating the Index, however most of the rise has occurred with volume hardly registering on the volume indicator, and that hardly instills confidence in the upmoves. Brokerage firms report over all volume is down by 50%. Everyone is hoping desperately for a little good news.

My advice – Watch the charts! We’ll know good news when we see it!


Daily Bietnam Stock Exchange Index chart as at 21 August 2008, using NextVIEW Advisor

Technical Information on the HOSE Index:

Nearby resistance is between 550. – to 625. (R1)
Near by support - 427.25 (S1)
Second support – 360.00 (S2)

Analysis and Commentary by Don Schellenberg

Analysis of US Dollary against Chinese Yuan (USD/CNY)

Resistance has appeared on the chart exactly where expected. The market has been unable to close above the resistance area (R1 on the chart), that we’ve discussed in this column previously.

Another effort to close above R1 is not out of the question, but further strengthening of the RMB is far more likely in the near term.

A close below 6.8406 will confirm this suspicion. Beyond that the next level of support is around 6.8200.


Daily USD/CNY chart as at 21 August 2008, using NextVIEW Advisor

TECHNICALS

NextView RSI – quite neutral at the 50 level.
R1- 6.8635
S1 – 6.8200
S2 – 6.8004

A retest of the short term rising trend line is possible, however the chart pattern suggests that a down move in the market will happen soon.

Analysis and Commentary by Don Schellenberg

Analysis on Euro Dollar against US Dollar (EUR/USD)

I smile just a little when I hear major news reporting agencies declare that the USD is losing ground to the Euro because of inflation fears in the USA. While there may be some truth to that, it doesn’t begin to tell the whole story.

The USD has gained back nearly 40% of what it lost since the last strong Euro rally began in late 2005. What it has lost to the Euro in the last few days is hardly measurable in comparison.

From a technical perspective, easily seen on a price chart, the market is responding to mathematical support I calculated over two months ago. What I cannot guarantee is that this support will hold. The market is very stretched to the downside right now, so some upward and sideways correction of the current downtrend on the chart, will not be a surprise.


Daily EUR/USD chart as at 21 August 2008, using NextVIEW Advisor

TECHNICALS

The first significant area of resistance is around 1.5000.
It also seems that the price pattern forming on the chart is not yet complete, so we have to be aware that at some point the recent low of 1.4628 can break to the downside with a first support target at the rising trend line at 1.4500.

R1 – Nearby resistance at 1.5000
R2 – Second resistance at 1.5250
S1 – Nearby support at 1.4500
S2 – Second support at 1.4250

NextView RSI – rising from drastically oversold levels. A break above 1.4805 will aim for a first target of 1.4900 and then, potentially, 1.5000-1.5050.

MACD – a rise above 1.4805 will probably trigger a short term buy signal on the MACD.

200EMA – this moving average is generally believed to create potential support and resistance, and is now in the area of projected resistance.

Analysis and Commentary by Don Schellenberg

Uses of MACD – Short term trend reversals

The MACD indicator works well in trending markets to provide indication on short term rallies and pullbacks. The challenge is to use them in trading markets where price is choppy and generally moves sideways. When price is volatile in a trading range, it triggers the signal many times and thus providing many false signals because the expected rally did not materialize. We call these whipsaws. Traders and analysts have used various methods and indicators to overcome this whipsaw problem.

One the many signals that can be indicated by the MACD indicator is trend reversal (for the short term). The signal is derived from the relationship between the MACD and its trigger line (The 9 period EMA of the MACD). It is like a relationship between two moving averages.

The signals:

Bullish trend reversal (short term) – When the MACD crosses above the trigger line

Bearish trend reversal (short term) – When the MACD crosses below the trigger line.

Let’s say that the trader decides to make a trading decision when a trend reversal occurs because the trader is anticipating a rally/pullback. The trader makes a buy decision when there is a bullish trend reversal signal and sells when there is a bearish trend reversal signal.
The signals are illustrated in the chart below.

Note that there were whipsaws when price is in a trading range, but works well in a trending market:


Hourly Crude Palm Oil Futures contract price with MACD using NextView Advisor

Identifying trading opportunities using the MACD/EMA crossover.

Trading opportunities can be easily identified using the MACD indicator because the trader just have to wait for the MACD to cross above or below the trigger line to get a buy/sell signal. The chart below shows a chart that provides a buy signal because the MACD crosses above the trigger line.


Daily INTI chart with MACD indicator as at 20 August 2008 using MetaStock.

Can we rely on the buy signal above to make a decision to buy this counter the next day?

Historically, the signal proves to be quite remarkable in providing buy and sell signals and if we have followed the signals, we could have made some money in the above time frame.
The expected outcome is whether the price is going to rally, or it is going to go into a trading range. It is up to the trader to use other methods and indicators to confirm this, but at least we are able to identify potential stocks to trade (opportunities) from the many stocks in an exchange.

If you would like to further understand the MACD indicator and how to use it effectively with other indicators to avoid whipsaws, please attend out technical analysis workshop this Saturday (23rd August 2008) by Benny Lee and you will learn how to use MACD and other indicators to identify trading opportunities and make trading decisions. Call (603) 2770 9388 for more information and registration

Futile bull effort on Thailand market

The Stock Exchange of Thailand Index (SETI) was well supported at 660 points level. In my previous analysis of the Thailand market, I mentioned that there is only a fight back from the bulls if the SETI overcome the 700 points immediate resistance.

The SETI made rebound after testing the 660 points support level and overcame the 700 points resistance last week. However, price was having a "brain freeze" once overcoming this level. It was not able to hold above 700 points and it is now below it. The SETI closed at 691.33 points on the 19th August 2008.

Technically, the SETI is still in a down trend. However, the momentum of the down trend is deemed weak because of the bullish divergence on momentum indicators like RSI and Momentum. This indicate that there is a low chance of price breaking below the current support level which is 660 points.

The bulls effort may be futile, now that the Asian markets and other markets round the world come crumbling down. Expect the SETI to test the strong 660 points support level and like I have mentioned in my previous commentary, if SETI breaks below this support level, the next support level is at 600 points.


Daily SETI chart as at 19 August 2008, using NextView Advisor

Commentary and Analysis by Benny Lee

Suitable for Long Term Investment - AMWAY

I am not in any position to provide any investment advice and my commentary and analysis is solely based on my personal opinion and is should not be construed as any form of advice. The reason why I bring up this company (like in my other stock commentaries articles) is because it is being recommended by an investment adviser. Yes, investment advisers are licensed by the Securities Commission to provide investment advice (which is basically buy, sell or hold call and in many forms).

Yesterday, the counter AMWAY (which I think need no introduction here) was one of the counters that were being reported in the Bursa Malaysia CBRS scheme yesterday (19th of August). (The CBRS scheme is a free research reports online by various brokers, sponsored by Bursa). However, if you look at the report, it was prepared on 14th August. Hope Bursa can improve this delay problem. Old news is no news.

Why AMWAY and not the many counters, you may ask. In a market like this, I do not see many opportunities and advisers were in very difficult position because most of the time, the stock that they recommend would normally cause the price to fall. This is nothing new, actually.

So why AMWAY? You see, I am a trader and I do not like to hold long term positions. The only stock that I currently hold long term is GENTING, which is not more than 3 years now. AMWAY is not a good stock to trade because the trading range is small and trading volume is relatively low all the time.

But you see, long term investors love price that is not volatile, price that do not move in big trading range. AMWAY has been trading in a 1% trading range (or RM6.30 to RM6.90) for the past 5 years. Price of AMWAY is currently at RM6.80.

The company is fundamentally strong (Download the report from Bursa's website). Dividends were consistent and company's cash flow is strong. For the past 5 years or so, the company's share price was not affected much by any events.

Therefore, with less volatility and strong fundamentals, this company may be good for long term investing. However, a lower risk price for accumulation would be at the support level of the current trading range, which is about RM6.10 to RM6.30. Current price is a little overbought.


Weekly AMWAY chart as at 19 August 2008 using NextVIEW Advisor

Commentary and Analysis by Benny Lee

If you would like to know who you could identify tarding/investing opportunities using price charts, I will be conducting a one day workshop this weekend (23rd August 2008) for those who are still new in technical analysis and the financial markets. Please contact NextVIEW at +603 2770 9388 for details and registration.

Bears slaughtering the market while the world watches the Olympics

The Asian market was very bearish today with major indices in Asia extended the decline today. Below are the market indices performances:

Japan's Nikkei Index fell 300 points (2.3%).
Australia's All Ordinaries fell 113 points (2.2%)
Hong Kong Hang Seng Index fell 446 points (2.13% )
South Korea KOSPI fell 26.3 points (1.7%)
Singapore's STI fell 48 points (1.7%)
Kuala Lumpur Composite Index fell 15 points (1.4%)
However, the Shanghai Stock Exchange Composite Index rebounded today with 24.6 points or 1%

The weak performances in Asia has affected the European markets;
France's CAC40 Index fell 116 points (2.6%)
London's FTSE fell 130 points (2.4%)

In the US (as at 11.20am), the Dow Jones Industrial Average is 130 points lower (1.1%), while the S&P500 index is down 11.7 points (0.9%).

We expect further declines... Read US market here, Malaysian market index here and Singapore index here

Training for Trading Success

Many aspiring traders asked me how one can train to be a successful trader. To answer that question, let's consider other performance activities such as professional dance, theater, chess, athletics, and elite police (SWAT) and military (Special Forces) training. All of these fields, I maintain, have several common features:

* A high ratio of time spent in practice/rehearsal relative to actual performance;
* A structured, demanding program of realistic practice/rehearsal;
* A teacher/coach/trainer who guides practice/rehearsal by creating demands sufficient to challenge the performer, but not so overwhelming as to create frustration and failure;
* Rapid, comprehensive feedback to allow performers to learn from their practice/rehearsal and incorporate changes in future performances;
* Structured preparation for specific performances, including review of one's competition, creation of a performance plan, and active rehearsal of this plan;
* Structured review of recently completed performances to guide learning and subsequent practice;
* Recognition for superior performers and performances.

Laying out the shared features of training programs makes clear that these are technologies for accelerated learning. Combining intensive rehearsal with mentoring and feedback creates a feedback loop in which successes are reinforced and shortcomings are quickly identified and addressed.

In my previous article, I mentioned the principle of SAID: Specific Adaptation to Imposed Demands. The role of training programs is to provide the right kind of demands in the right amounts, so as to channel the specific adaptations of performers. Invariably, we define limits for ourselves that fall well short of our capabilities. The mentor's job in the rehearsal process is to push us to our real limits--again and again--until what had been extraordinary now becomes routine.

What do traders typically do to become better performers?

* They read articles, newspapers, magazines, and books.
* They attend conferences.
* They keep journals to review their trading days.
* They participate in chat rooms and bulletin boards.
* They buy new equipment: hardware and software.

What do traders typically not do to become better performers?

* They do not spend a high ratio of time in practice/rehearsal relative to actual performance;
* They do not have a structured demanding program of realistic practice/rehearsal;
* They do not have a teacher/coach/trainer who guides practice/rehearsal by creating proper demands for the trader;
* They do not have rapid, comprehensive feedback to guide learning from practice/rehearsal;
* They do not have structured preparation for specific days, including review of the markets, creation of a trading plan, and active rehearsal of this plan.

In short, traders lack a structure for generating SAID, those adaptations to imposed demands. Facing few imposed demands, they develop few adaptations.

When I came on board at a professional trading firm, I made sure the new traders had a realistic platform for simulated trading, a program to track their trading successes and failures, meetings each day to review performance, and structured, daily teaching and goal-setting. Even with all that, success was difficult to attain for all traders, impossible for some. If you are to truly succeed as a trader, you'll need at least as much as I provided my students, and you'll need at minimum many months of serious, effortful training with a mentor possessing documented qualifications and experience in your particular market.

I don't say these things to attract business; in fact, I don't provide commercial services for traders. I say these things because they're true and because it's unlikely you'll hear them from the many snake oil peddlers and self-anointed gurus who populate the industry. If you're not meant for trading, you'll find my words discouraging. If trading is for you, you'll read in my words a challenge and a call to become what you truly can be.

* This article is re-published with permission from Dr. Brett Steenbarger.

Brett N. Steenbarger, Ph.D. is Associate Clinical Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY and author of The Psychology of Trading (Wiley, 2003). As Director of Trader Development for Kingstree Trading, LLC in Chicago, he has mentored numerous professional traders and coordinated a training program for traders. An active trader of the stock indexes, Brett utilizes statistically-based pattern recognition for intraday trading. Brett does not offer commercial services to traders, but maintains an archive of articles and a trading blog at www.brettsteenbarger.com.

One more chance to find out how you can profit from the market everyday

Last Thursday, a preview was conducted by our Chief Market Strategist, Mr. Benny Lee about intraday trading and how you can find opportunities to profit from the markets everyday. Even on this preview, he shared with participants how to identify trading opportunities from the chart for the next day.

He mentioned that his trade plan was to go short on the KLCI futures contract the next day (Friday). It was simple because price was clearly at a strong resistance level. You can learn how to do this in his workshop. On Friday, the KLCI futures market declined from 1112 points to close at 1091.5 at the end of the day. That provided a 20 points profit in a single day.

How much is that? Well, if you have traded just one contract, you would have made RM1,000. If you have traded 5 contracts, you would have made RM5,000.

Here is an email from one of the participants of the Thursday preview to Benny:


The email address of the sender was intentionally blanked out to protect her privacy. Click on the email above if you can't read it.

If you would like to know how to do it, here is another chance for you to learn from Mr. Benny Lee.

Singapore Straits Times Index Analysis - on its way to crucial support level

The decline of commodities prices did not boost the confidence of investors as most are still worried about slowing economy, especially in the credit market which seems to be still happening in the US. We have not seen it coming into Asia yet, but slowly and surely, Asians will have to go through it, including this small republic country.

Some time last week, I wrote about Singapore getting ready to rebound because of the declining commodities prices and the strong rebound in the US market but the did not managed to start.

The Singapore benchmark Straits Times Index (STI) continues to slide lower for the past three weeks and closed at 2,797.50 points on 15th August 2008. The STI has tested the 2,800 points support level and managed to close below it last Friday. This looks like the STI is on its way to the crucial support level at 2,740 points, which was evident on 17th of March and 22nd of January this year.

The STI trend is down and strong. If it continues to decline and break below the crucial 2,740 points support level, then expect to see STI being pushed another 200 points lower to the next support level at 2,550 points. Immediate support level is at 2,850 while the stronger resistance level is still at 3,000 points.


Weekly STI chart as at 15 August 2008 using NextVIEW Advisor

Commentary and Analysis by Benny Lee

Kuala Lumpur Composite Index Analysis - at crucial support level

The Malaysian equity market was in a bearish mode in the past two weeks. The Kuala Lumpur Composite Index (KLCI) is currently at a crucial support level of 1,090 points. As at 15th August 2008, the KLCI closed at 1,095.05 points. Previously I mentioned that the rally in mid of July last month was likely going to be a dead cat bounce, and indeed the cat was dead.

Trend is still strong downwards and momentum in the down trend has started to get stronger as well. The Relative Strength indicator has started to make new lows in the hourly chart and this indicates that the momentum was strong downwards. This suggests that there is a high chance of KLCI testing and breaking the crucial support level and if this happens, we may see the KLCI sent to a level we have not seen since two years ago.

The next support level is between 930 to 950 points, which is my long term target. This target was established in January through the Malaysian Smart Investor magazine where I am a regular contributor since year 2004. The main resistance level is at 1,180 points while the immediate (and weak) resistance is at 1,120 points.

Despite news that commodities and crude oil prices may decline further, it did not affect the Malaysian market because Malaysia is one of the leading producers in these two commodities.


Weekly KLCI chart as at 15 August 2008 using NextVIEW Advisor

Analysis and Commentary by Benny Lee

US Dow Jones Industrial Average - Up trend may hold

The US equity market has been quite volatile in the past few weeks with mix reaction towards to declining commodities prices and strenghtening of the US Dollar but generally the US performed quite a good since last month when the benchmark Dow Jones Industrial Average (DJI) was at around 11,000 points. As at 15th August this year, the DJI closed at 11,659.90 points after testing the 11,700 points resistance level.

The DJI did managed to close above the 11,700 resistance level. for 2 days in the past two weeks but was not able to hold above it. Will the DJI continue its up trend?

In my opinion, as long as the DJI is able to stay above the short term 30 day moving average which has turned upwards recently, it may climb higher to test the next resistance level at 12,200 to 12,300 points, where the long term down trend resistance level is. This is also because momentum indicators like RSI are supporting the current short term up trend.

Yes, the DJI and the rest of the markets around the world are still in a down trend (in the longer term) and more positive catalyst are needed in the equity markets before it can challenge the down trend.

Immediate support level is at the 30 day moving average and it is currently at 11,400 points while stronger support level (crucial support level) is at 10,800 points.


Daily DJI chart as at 15 August 2008 using NextVIEW Advisor

Commentary and Analysis by Benny Lee

Analysis of Gold price

Today I’m beginning a series of commentaries on gold. Some of my previous public forecasts on this market were made in Hong Kong in September and October 2007, when I predicted upside moves and the mid-term top at around $1,020.

Gold is now undergoing its’ largest correction in several years. Potentially strong support exists at 800, however the price pattern in the chart suggests that this support level could be broken to the downside after a period of consolidation, with additional support levels appearing at $780., then at around $720-740.

Daily Gold chart as at 14 August 2008 using NextVIEW Advisor

TECHNICALS

R1 – 860. - $870.
S1 - $800. - $780.
S2 – (not shown on the chart) $720 -$740.
Chart Pattern – Wave “C” (of the Elliott Wave Principle) does not appear to be complete.
NextView RSI – oversold – and also implying that the major uptrend is at least temporarily halted and has become a down trend.

Commentary and Analysis by Don Schellenberg

Currencies - EUR/USD and USD/CNY

Euro Dollar / US Dollar (EUR/USD)

The 318 pip drop in the Euro dollar on August 8/08 was the largest one day move either up or down for this currency pair in years.

The move down was not a surprise to me but the speed of it was. I had expected at least some kind of upward bounce at the natural support level at the bottom of the 3 month trading range around 1.5300 and the 200 day moving average.

Since the one day huge drop the market has moved tentatively down to the second area I mentioned in last weeks column, around 1.5000. A spike down encountered Euro buyers at 1.4812.

This week should produce more consolidation, which will be sideways and moderate upside movement, from around it’s present value (1.4900 at time of writing), to an anticipated maximum of 1.5260-1.5300, where there is strong resistance. A close above 1.5040 will suggest that such a correction is underway. Otherwise the main pressure will be down.

Eventually the support between 1.4800 – 1.4900 may erode resulting in a drop to the next major support level between 1.4350 – 1.4450.

Daily EUR/USD chart as at 14 August 2008 using NextVIEW Advisor

TECHNICALS

NextView RSI – this indicator is well below its’ 20 level (oversold), for the first time in 10 years.
MACD – oversold – this does not necessarily mean that a strong upward move will result. Generally, however, a period of consolidation occurs following major moves of the market.

Trend Line – the 2 ½ year rising trend line may also become a support target as it rises to the 1.4400+ area over the next several days.

Li’s Pivot Predictor (exclusive to NextView charts) supports my view that nearby resistance is around 1.5300.

R1 – 1.5230 – 1.5300
S1 – 1.4800
S2 – 1.4350=1.4450 (not shown on chart)

US Dollar / Chinese Yuan (USD/CNY)

The RMB currency has remained surprisingly resilient against the USD, the latter making only modest gains compared with the huge gains against several other major currencies.

Resistance at 6.9592 has not yet broken, but will likely be tested again soon.

A convincing close above R1 could eventually target the R2 area around 6.90 – 6.93.

Daily EUR/USD chart as at 14 August 2008 using NextVIEW Advisor

TECHNICALS

MACD – in positive territory, but weakening.

Commentary and Analysis by Don Schellenberg

Learn about Intraday Trading on Futures

Private trader, trading coach and regular contributor to N.I.N.E., Benny Lee will be conducting a workshop preview about intraday trading - "Opportunities to Profit Everyday" tomorrow, 14th of August 2008 from 7.30pm to 9.30 pm. Click here for details.

He will teach you methods on how to trade intraday, without having to monitor the markets all the time but only when price reaches a certain level pre-determined before the market opens.

Below is an example of a trading opportunity on Monday (11 August 2008) using one of the methods he will teach you in the main workshop. 10 points profit in half a day (RM500 trading one KL Composite Inde futures contract).

Attend this workshop and Benny will teach you how to profit from intraday trading like the one above. Click here to see the previous opportunity published in N.I.N.E last week.

What Happens After the Olympics?

The year 1997 was the Asian financial crisis and stock markets in Asia were sent tumbling down like humpty dumpty. We see a recovery in the year 1998.

In the year 1987, Those who are already investing that year would probably remember "Black Monday" which is remembered as the largest one-day drop in the history of the New York Stock Exchange (NYSE) and this sent shivers to stock markets all over the world. Again it made a slower recovery in 1998.

A 10 year cycle? It is now year 2008. The year 2007 was the market peak, which was also peak 10 years ago. Therefore is the year 2008 going to be the recovery?

Few years ago, market pundits have forecasted the big correction in the financial markets to happen in the year 2008, after the Olympic Games. The Olympic Games has already started. Markets have already gone into a correction.

In the US, The Dow Jones Industrial Average is already down 21% from the high in 2007. The US market was not really affected in 2007 as the crisis was in the Asia region.

In Japan, the Nikkei 225 Index already fell 28% from the high in 2007. 27% in Hong Kong. 26% in Australia, Singapore and Malaysia, 25% in Korea and 16% in UK.

The biggest correction was in China, the SSEC index fell 58% from the high last year.

So, are we going to see a recovery after the olympics, or the correction is not over? Will other markets follow China's suit?

We will be interviewing some experts to get their opinion and we will publish it next week, so stay tuned.

Cyclepoint on KLCI 15 August 2008

Successful private trader, author and trading coach Mr. Brent Penfold was in Kuala Lumpur recently and presented for 3 hours in Bursa Malaysia last Saturday about how important it is to go back to basics if traders want to trade succesfully. His principle in trading has always been "Keep it Simple, Keep it Real".

His presentation opened the eyes of investors about trading and how to trade and make profits even in a weak market through futures trading. The presentation is so appropriate in today's market. If you have missed him last Saturday, he will be back this weekend to conduct a 2 days seminar with 90-days live mentoring. Details here or you can contact NextVIEW at 03-2770 9388.

In the presentation last Saturday, he used one of his proprietry tool called Cyclepoint, a tool used to determine market cycles dynamically and forecast turning points. He will also teach Cyclepoint as a bonus in the coming 2 days seminar this weekend. A cyclepoint (turning point) was detected on the KLCI futures on the 15th August.

"To use Cyclepoint effectively, a trader must know what to do when they see a Cyclepoint" Brent advises. "CyclePoint is just a tool to help you make better decisions by alerting you beforehand and with high level of accuracy, you need to use it with other indicators to confirm a trade setup" explains Brent further.

If you would like to know how Brent trades for a living using these tools, here is a rare opportunity to learn from him in the coming 2 days workshop called "Index Futures and forex Trading" this weekend 16th and 17th August 2008.

Interview with Stock Market Wizard, Mr. Mark D. Cook

Private trader, author and trading coach from Autralia, Stuart McPhee had the privilege of interviewing a stock market wizard, Mr. Mark D. Cook who is in Australia for a series of presentation there.

Mr. Mark D. Cook (portrait on the left) is a trader of 28 years from his family's 1870s farmhouse in East Sparta, Ohio, US. Mark developed the Cook Cumulative TickSM indicator and gained acclaim by winning the 1992 U.S. Investment Championship with an astounding 563.8% return. He was one of the traders featured in Jack Shwagger's Stock Market Wizards. You can find more information about him on his website here.

The video interview is divided into 2 parts:

Part 1:


Part 2:


A big thank you Stuart McPhee, for sharing this interview with N.I.N.E.

KL Composite Index and Singapore ST Index updates

Kuala Lumpur Composite Index : Range Bound

Not much changes on the KLCI since my last analysis. The KLCI remained weak throughout last week. However, like other Asian markets, we may expect the KLCI to gap up today because of the sharp increase in Dow Jones Industrial Average last Friday. The Dow climbed 302.89 points or 2.65% to close at 11,734.32 points.

However, the rally is expecte to be shortlived because the equity market rallied because of declining commodity prices and not other factors. Some heavyweight component index stocks deal with commodities and the decline in price of commodities do not favour their bottom line. Therefore the KLCI is expected to have strong resistance. The KLCI is expected to sontinue to trade in a range of 1,090 points to 1,180 points. It may test the 1,180 points, but unlikely going to break above it, in my opinion.

Singapore Straits Times Index (STI): Short term rally

From my previous analysis, I mentioned that the STI is expected to test the support level at 2,800 points and the STI is now at this level (2807.54 points close last Friday). This oversold situation in the STI may cause the STI to rebound and with the increase in the Dow and declining commodity prices, a rally is also expected in the short term. It may find strong resistance at 3,000 points. The market is still bearish in the long term, like any other markets.

Analysis and Commentary by Benny Lee

EUR/USD and USD/CNY commentary and analysis

Let's take a look at two currency pairs this week namely UERO/US Dollar (EUR/USD) and US Dollar / Chinese Yuan (USD/CNY).

EUR/USD

A week ago there was some ambiguity in the pattern of the down trend of this currency pair. There was little doubt that the ideal downside target is around 1.5300, which I have stated already for several weeks.

There was a possibility of a larger correction to the upside. In fact there was an attempt on July 31st, which failed, and the EURUSD has moved quite smoothly downwards since then.

On Wednesday, August 7th, price dipped briefly below 1.5400 to 1.5394. As I write the down trend has encountered minor support. The ideal target on the down side still remains at around 1.5300. This target could be reached quite quickly or within the next few days, but a modest upside correction is more likely to occur first. This could last several days and should be relatively flat, moving into the area around 1.5600. Only short term trading opportunities should be considered until the market exceeds major support, or until a new uptrend is clear.

If the market rises to or around the target indicated (R1 on the chart), the next move should be down, to reach or slightly exceed the target of 1.5300.

EUR/USD daily chart as at 7 August 2008 using NextVIEW Advisor

TECHNICALS
NextView RSI is near its’ 30 level from which upward bounces have typically occurred during the last two years.

Stochastic – is in oversold territory and beginning to rise slightly.
Channel – this is the three week old channel in which price has moved downwards.
R1 – near term resistance at 1.5600
R2 – this is a zone of resistance between 1.5730 to 1.5780 which is significant for the continuing of the down trend.
R3 – top of the consolidation area at 1.6038.
S1 – 1.5300. A strong upward bounce is likely to occur from around this area.
S2 – 1.5000 (not shown on the chart, but could come into play if support at 1.5300 does not hold.)

If subsequent rallies cannot exceed and hold above 1.5800, more down side action will follow.

USD/CNY

As was pointed out in last week’s commentary, downward momentum had slowed considerably, price was hugging the down sloping trend line, and a break of the trend line in an upward correction was a distinct possibility.

The break of the trend line did occur during the past week and the market moved above the previous R1 resistance zone at 6.8350. The new R1 is at 6.8592. A test of this level is very likely.
So far the rising price pattern looks very much like a minor correction which is likely to halt it’s advance at or near the R1 area.

If more bullish strength enters the market, which would be indicated by a close above 6.8592 and follow through to the upside, the next main resistance area is 6.9385.

USD/CNY daily chart as at 7 August 2008 using NextVIEW Advisor

TECHNICALS

R1 – nearby resistance around 6.8592
R2 – the second resistance area around 6.9385.
S1 – nearby support at 6.8004.

NextView RSI – is distinctly in positive territory for the first time in many weeks.

Ichimoku Kinko Hyo – This odd-looking indicator is comprised of several different lines. The ones of particular interest to us now are the vertical lines above the current market, which is called the ‘cloud’. This implies an area of resistance which conforms to our resistance as marked on the chart at R1.

Commentary and Analysis by Don Schellenberg

Markets in Asia expected to decline today

The Olympic is beginning today and although today may be a very auspicious date for the Chinese (8/8/08) because 8 means wealth, stock markets in Asia is expected to decline. The extreme storm in Hong Kong shifted to US, literally.



The Dow Jones industrial Average fell 224.64 points or 1.92% to close at 11,431.43 points yesterday as there are concerns in the financial sector, higher unemployment and lackluster retail sale. New concerns in the economy has arised as oil price has stop declining yesterday. Price of bonds increased as investors seek a more safer bet.

Investors in Singapore were already worried yesterday. The Singapore Straits Times Index was fell 1.84% yesterday and is expected to continue to fall today, expected to test support level at 2,800 points.

In Malaysia, stocks fell lower and market volume was relatively lower as all eyes and years were on former deputy prime minister Anwar Ibrahim being charged in court yesterday for alleged sodomy case. The benchmark composite index fell 0.35% yesterday. The KLCI may decline further and have more room to move downward because support level is at 1,090 points.

In Hong Kong, where market was suspended for one day on wednesday because of extreme storm climbed 0.7% higher yesterday but performance was rather weak because it closed lower than it closed about 300 points lower than the opening price. The HSI is currently in between the support and resistance level and is expected to fall heavily today.

There was a strong rebound in Thailand yesterday as SET index rose 4.3% or 29 points yesterday to close at the high of the day with 705.35 points, after finding support at 660 points, close to the support level of 664 points I established for SETI earlier. The SETI find support after price of oil starts to fall, cooling off the fear of rising inflation.

Brokers pointed out that the increase was in response to falling world oil prices and an influx of foreign funds. Probably US president's George visit to Bangkok encouraged some speculation to the Thai stock market. However, I expect this to be very short term and with the fall in the DJI, investors may lock in profits and this may send the SETI down aggressively.

Commentary and Analysis by Benny Lee

COMMODITIES: Bubble Burst or Correction?

Prices of commodities has been declining in the past few weeks. While many analysts forecasting a commodities bubble burst as early as end of this year, is it already happening? The US Fed has decided to maintain the interest rates and this spurred the equity market. Let's take a look at some major commodities prices traded in futures exchanges.

Crude oil fell as much as 17.9 percent to US$118 a barrel yesterday, from the high of US$145 in July. It is its lowest since May this year.

In LME, Gold fell 10.2% to US$881.80 an ounce from US$980 in July, its lowest since June.

Price of rubber in TOCOM fell 9.5 percent to 316.7 Japanese yen per kg from the high of 350 yen in July, its lowest in two months.

Price of Crude Palm Oil fell 22.5 percent to RM2,790 from RM3,600 in July, 35 percent from RM4,300 in March. Other edible oils like soyoil are facing the same situation.

From the charts above, the prices are still in a correction. Support levels are established using a simple long term trend line (blue line on the charts), and these are levels where the prices of these commodities may find support. Therefore, technically the bubble has not burst, except for the price of Crude Palm Oil, which may head to RM2,000 per barrel.

Commentary and Analysis by Benny Lee