Tuesday, September 30, 2008

Bush's US$ 700billion bail out plan for struggling banks did not get the House vote and this has sent US stocks tumbiling down like humpty dumpty. The Dow Jones Industrial Average (DJI) made its biggest single day fall ever with 777.68 points or 7% to close at 10,365.45. The S&P500 index plunged deeper with 106.62 points or 8.8% to close at 1106.39. NASDAQ fell 9.1%.

The biggest losers are finance stocks and most of them fell at least 40% and above. Below worst performing stocks (Source from Yahoo Finance, visit for more stocks list).



In Asia, after falling heavily yesterday, markets continue to plunge deeper, especially in the morning opening session. Most markets have rebounded. Below are the major indices performances today (Source from NextVIEW Advisor):







For analysis and commentaries in these markets, click on the country link below:

1. US
2. Hong Kong
3. Japan
4. Singapore
5. Malaysia
6. Thailand
The price of crude oil futures in US tumbled to close below US$100 per barrel again, second time this month. The crude oil futures settled nearly 10 percent lower on Monday closing at US$96.37 per barrel. Traders were concerned about a slowing economy amid the failure of the US House of Representatives to vote for the US$700billion bailout package for ailing finance companies. The US dollar strength against the Euro put further resistance on oil prices.



Last week, NINE published an article by market expert Daryl Guppy that there is a chance of oil finding support between US87 to US$100 per barrel. Click HERE to read the article.

Monday, September 29, 2008

Markets in Asia declined on Monday as confidence in the US bailout plan dims. They are loosing confidence that President Bush and his team is able to gain support from US lawmakers. The house in voting on the US700 billion (That's US$700,000,000,000) bailout for troubled financial mega companies.

Lawmakers in both ruling and oppposition parties who are facing re-election were a little worried aout adopting such a costly plan. Furthermore the plan is being proposed by a President that's gaining less popular. Theymost fear that this may benefit companies that got rich off bad debts.

Below are the performances of Asian markets at 17:30pm Malaysian time:

Hong Kong Hang Seng Index closed 801.41 points or 4.3% lower to 17,880.68 points
Bombay Stock Exchange Sensex closed 504.60 points or 3.8% lower to 12,600 points at current time.
Thailand SET Index closed 19.57 points or 3.2% lower to 598.59 points
Singapore Straits Times Index closed 50.12 points or 2.1% lower to 2,361.34 points
Australia All Ordinaries closed 95.40 points or 1.9% lower to 4,839.20 points
Japan Nikkei 225 closed 149.55 points or 1.25% lower to 11,743.61 points
Korean KOSPI closed 19.97 points or 1.35% lower to 1,456.36 points.

China markets, including Taiwan not traded today for holiday. The Malaysian market is rather quiet because of a two-day public holiday on Wednesday and Thursday for Eid ul-Fitr celebrations.

The Mini Dow Jones Industrial Average December Futures contract (mini Dow $5) at current time is 184 points or 1.7% lower. The futures contract traded on CBOT is currently at 10,956 points

All eyes will be on the US house vote on the bailout plan... keep watch because if Bush fails to get support, it may accelerate the down trend process. If he succeeds, I believe that it may just provide some support for the short term. I am still bearish in the longer term.

Commentary and analysis by Benny Lee

Friday, September 26, 2008

I believe that there are two kinds of traders. One tends to trade the market based on visual patterns and often needs to rein in emotional disruptions to decision-making. The other is more analytical and bases trading decisions on tested models and/or historical/statistical patterns, but often needs to ramp up risk-taking in order to fully take advantage of edges in the marketplace.

These two kinds of traders naturally lead to two core strategies for helping traders. The first is to eliminate or reduce unwanted, negative patterns. The second is to initiate or augment desired, positive patterns.

A major, major reason why change efforts fail is that people try to accomplish the second (developing positive patterns) by tackling the first (trying to rid themselves of negatives).

The achievement of positives can never be reduced to a reduction or elimination of negatives. Yes, it’s a good thing to stop arguing with a spouse or eliminate holding positions beyond stop-loss points. A reduction of arguments, however, will not in itself create a loving, trusting marriage. Nor will a stopping out of losses in itself create opportunities in the marketplace.

(My experience, FWIW, is that a shocking proportion of the people who hold themselves out as coaches and mentors of traders lack training and experience in differentiating when presenting concerns require problem-reduction methods, solution-enhancement strategies, or both. Nor do they have experience coordinating the two modalities when each is necessary to address a situation. As a result, they tend to take a “one size fits all” approach to trading problems, emphasizing well-worn self-help techniques that can be found on the pop-psych shelves of any bookstore. Too often, what passes for normal practice among “coaches” meets the formal definition of malpractice among psychologists).

The psychologist, as I mentioned in my book, typically fills two roles: comforting the afflicted and afflicting the comfortable. The first role is relevant when people are swamped by their negative patterns of thought, feeling, or behavior. Helping people reduce those destructive patterns can indeed bring relief. For instance, a psychologist might help a stressed trader challenge and reduce overly ambitious expectations that contribute to the performance pressure.

Other times, traders are too comfortable with the status quo and need to have their comfort afflicted. Such is often the case with those analytical traders who have found an edge and are now comfortable trading it without putting too much capital at risk. No market edge lasts forever, and changing market cycles ensure that what was once a profitable niche will eventually fade away. The failure to exploit an edge when it is present leads to lost income no less than the attempt to exploit patterns without an edge. Because these losses do not show up as debits on the P/L sheet, however, they are less likely to disrupt a trader’s comfort.

Psychologists try to afflict a person’s comfort because they know that most people will pursue the time and effort of change only when it’s necessary. We’re much more likely to address a trading problem when it’s put us in the red than when we’ve left money on the table.

That, however, almost ensures that we will only make changes after those changing markets have left us behind.

So there you have one of the best applications of trading psychology: Making changes by building positives and staying ahead of ever-changing markets. “What am I doing wrong?” is not necessarily the most important question to ask the psychologist. Rather, you might also ask, “What am I doing right, and how can I do it more often and make the most of it?”

Average traders change when they need to. Great traders, like great companies, seek improvement before things have gone wrong. That is the meaning and significance of Nietzsche’s observation: “Under peaceful conditions, the warlike man turns upon himself”.

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.

Thursday, September 25, 2008

The collapse of the American DOW Jones Index to below 11200 is not a surprise. The head and shoulder chart pattern forecast this result in 2008 January.

The DOW Jones Index has achieved the downside target created by the long term head and shoulder pattern. This target was located at 11200. In a bear market this is the minimum downside target. There was a small rebound from this target level. This target level was also at the same level as the long term uptrend line starting on 2006, September. This trend line has not shown strong support.

The head and shoulder pattern shows the market up trend has ended. The pattern does not tell us how the bear market down trend will end. The historical support and resistance levels show where the market may consolidate and develop a rebound.

The previous resistance level in 2004 until 2006 was located near 10700. This previous resistance level may act as a support level for the DOW. In a bear market the previous resistance levels do not provide strong support. The historical support levels created during the market rise are more reliable. The historical support level is near 10,000.

From 2004 to 2006 the DOW traded in a sideways pattern. The top of the trading band was near 10700. The bottom of the trading band was near 10,000. There is now a higher probability that climax selling will cause the DOW to fall quickly towards 10,000. Support near 10700 is not strong.

Climax selling is important because it indicates the end of the downtrend. The climax selling is seen when price falls rapidly and there is very large selling volume. Then the market also recovers quickly, although buying volume is small. This situation does not develop a shaped recovery. This climax selling is a leading indicator that signals the development of a consolidation phase in the market. This phase may last for many months, or a year. The market trade\s in a sideways band.

There will be many individual American companies which will collapse in the next several months. Lehman Brothers fell more than 70% since 2008 February before declaring bankruptcy. The AIG chart has been falling for many months losing 80% of the price value. The recent bad news was also not a surprise to traders who use chart analysis. Many American stock charts show similar behaviour so we know there is more bad news developing.



The good feature of the DOW Jones index chart is the strong support between 10,000 and 10700. This is the area where consolidation will develop and the eventual development of a new uptrend.

To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE

Falling into Recession

The Malaysian and Singaporean governments are preparing for recession. In Malaysia yesterday, the prime minister advised government linked companies must prepare for a possible global recession. The Finance ministry in Singapore said that the republic may slide into a recession as slowing global economic growth.

A recession is typically two consecutive quarters of economic contraction. Below are the quarterly performance of these two countries stock market, based on the benchmark indices.


COMPOSITE.KL and STI.SI performance chart since March 2008 using NextVIEW Advisor

Both Malaysia's Kuala Lumpur Composite Index (COMPOSITE.KL) and Singapore's Straits Times Index is down 17.6% since March 2008, 2 quarters ago.

Wednesday, September 24, 2008

The Straits Times Index (STI) fell to a 26 month low of 2307 last week when global markets went into a state of frenzied selling. The heightened volatility also caused the VIX indicator to spike to a high of 42 - a level not seen since Oct 2002.

A reprieve may be in sight for the near term
. With the STI now rebounding nearly 300 points from the low of 2307 in just under 3 days, the current momentum might carry the bear rally to 2672 and then above 2700 in the next few weeks. The 2672 level also coincides with the 38.2% Fibonnaci retracement of the sell down from 3267-2307.

At this juncture, we believe this leg of the market rebound is Wave-A of the small cycle. From here, we expect to see a Wave B consolidation before STI resumes its uptrend or Wave-C towards 2672 or higher.


Daily STI chart as at 22 September 2008, charted by Ken Tai.

Japanese Candlesticks suggest that the STI should hold its ground at 2307 based on its ‘hammer’ formation. Notwithstanding, investors should not take this view as carte blanche to take on excessive portfolio risks; there is still downside risk to 2100 before we can safely reverse our view that the market crises is over. Long SGX, Chartered Semi-Conductor and Olam.

Commentary and article contributed by Mr. Ken Tai. He is an Analyst of a large stock-broking firm in Singapore.

Tuesday, September 23, 2008

Price of commodities rebounded strongly in the past few days as investors seek to come back to commodities amid weakening US Dollar and the unease about the U.S. government's US$700 billion bailout plan which was criticize by many analysts and well-known investors.

Price of commodities which fell sharply since early July has been very oversold and the technical rebound is now happening and price should correct upwards to the next resistance level.

Yesterday price of light, sweet crude oil in the NYMEX futures contract (which expired yesterday) made its biggest one day jump of US$25 at US$130 a barrel before settling down to close at US$120.92, up US$16. The exchange halted electronic crude oil trading after prices breached the $10 daily trading limit but was resumed seconds after the limit was raised. The price of gold shot up more than $44 to settle at $909 an ounce. Crude Palm Oil futures in Bursa up RM74 per tonne to close at RM2,259.

The correction: Price of light crude oil is expected to correct to test US$130 again. Its 100 day average is at US124. Price of gold may find resistance at US$950. Price of crude palm oil is expected to correct upwards to the next resistance at RM2,800.

Equity markets declined, lead by a fall of 372.75 pointsor 3.3% in the Dow Jones Industrial Average. Other markets are expected to decline further after substantial gains in the past few days as there is still room for commodities prices to increase.

Commentary and Analysis by Benny Lee
The Shanghai Index chart has four features which suggest developing good news. The chart suggests the market decline may soon end. These are the four features.

The first feature is the strength of the second fan line. The fan pattern shows a long term trend reversal. It takes many months to develop. The decline in recent weeks has used the second fan line as a support level. This is important because it shows the market does not have panic selling. If there was panic selling then the market will fall below the support level shown by the second fan line. In many world markets the market has fallen below important support lines and trend lines.

The second feature is the head and shoulder pattern. The first downside target for this pattern is near 2000. The second downside target for this pattern is near 1750. These head and shoulder patterns have been very reliable in many international markets. When the market achieves these downside targets then the market moves into a consolidation pattern. This shows the bear market is weakening. Traders watch for good support to develop near 1750 to 2000.

The third feature is the high probability of a consolidation pattern developing between 1750 and 2000. This consolidation signals the end of the bear market and the development of strength for a new bull market. This consolidation period is when many investors return to the market and start to buy.

The consolidation pattern can include a sideways consolidation pattern where the market moves between horizontal support and resistance levels. Another consolidation pattern is a longer term saucer pattern. This usually takes several months to develop. A third type of consolidation pattern is a “W” pattern. This starts with a very strong rally from support. Then the rally fails, and falls back to the support level. This is quickly followed by another rally and this is the beginning of a longer term uptrend.

The fourth feature is the potential to develop good rallies in the index as it moves towards support between 1750 and 2000. This is a common feature in this consolidation period. These rallies provide good trading opportunities.

These four features will develop fully in the next several weeks. The signal for the start of the consolidation period may include a bear market selling climax. This is a sudden market collapse with exceptionally strong selling volume. This panic selling behaviour pattern signals the end of the main section of the bear market. Traders use extreme caution in the current market condition.

To read more articles and commentaries from Daryl Guppy, click HERE



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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE

Monday, September 22, 2008

Euro Dollar against US Dollar (EUR/USD)

My expectations for this currency pair are very much influenced by my interpretation of market structure. In Elliott Wave terms, the move down that began on July 15th/08, with the most recent low on Sept. 11/08, looks very much like an “A” wave.

If that is so, “A” waves must be followed by “B” waves. “B” waves are often erratic and complex. It is highly unlikely that the high of July 15 will come into play as a target in this market any time soon.

If the Sept. 11th low holds and if the immediate resistance (R1 on the chart) is broken to the upside, the maximum upside target for this week will likely be in the resistance zone between 1.4950 and 1.5050.

At time of writing, resistance at R1 is holding, but will likely be broken soon, after which the R2 zone will come into view as a near-term price target.


Daily EUR/USD price chart as at 18 September 2008 using NextVIEW Advisor

TECHNICALS

NextView RSI – rising but not yet in positive territory.
Bollinger Bands – these bands are, for the moment, constricting. This implies sideways movement is probable.

R1 – currently at the rising trend line around 1.4400.
R2 – between 1.4950 – 1.5050. When R1 is broken to the upside, this resistance zone will become a price target for Euro bulls.
S1 – a fairly strong support level, which if broken to the downside will target the 1.3600 area, an unlikely scenario at this time.


US Dollar against Chinese Yuan (USD/CNY)

I’m a little surprised that this pair hasn’t moved a little faster to the down side. I’ve been anticipating such a move for two or three weeks already.

This market has already been in a sideways trading range for two months, and the trading range has tightened even more recently.

A break above R1 will target R2 or slightly higher.
A break below S1 will initially target 6.7794, 6.7400, and then lower.


Daily USD/CNY price chart as at 18 September 2008 using NextVIEW Advisor

TECHNICALS

MACD – this indicator is in negative territory, but even more importantly is relflecting the sideways price action of the market.

Commentary and analysis by Don Schellenberg
It is no surprise that gold has been rising for the last few days, not merely because of current world economic conditions, or economic uncertainty in the U.S. – but because gold had corrected down to a powerful support level that we discussed a few weeks ago in this column.

What next? There is little doubt that the next major target is to the upside around 1,032, with additional potential to $1,215., and higher.

For the coming week, gold should continue to rise in value, but it won’t be a straight line to the top. Two significant levels of resistance have already been broken by the strong upsurge that occurred on Wednesday, Sept. 17th, a one day move of over $92. The market is falling slightly as I write, to test the previous main resistance around $843.

This level of $843. could be broken to the downside but there is now significant support between 832 – 800. Look for at least a day or so of correction before the market moves up to the next level around $918.


Daily Gold price chart as at 18 September 2008 using NextVIEW Advisor

TECHNICALS

NextView RSI and MACD – positive divergence last week on both of these indicators implied that an upmove in the market could be expected.

200 Moving Average – currently providing resistance in the same area as the 50% level of the correction that occurred from March 17th to Sept. 11th/08 (from the high of 1032.50 down to 736.).

R1 – resistance at the 50% level.
R2 – 918.
S1 – a support zone from 843 – 792.
S2 – key support at 736.

Commentary and analysis by Don Schellenberg

Friday, September 19, 2008

The Dow Jones Industrial Average (DJI) made a strong rebound last night gaining 410 points or 3.86% following Bush administration plan to fix the financial crisis, which was doubt by some as the worst since the great depression in te 1930s. the rebound in the DJI sent positive vibes in markets in Asia. The S&P500 index was up 50.12 points or 4.33%. Below are the performances of market indices in the Asia region as at 12.30 p.m. (+0800GMT) in order of performance.

Shanghai: SSE Composite 2,075.09 +179.25 (9.5%)
Hong Kong: Hang Seng Index 18,779.03 +1,146.57 (6.5%)
Jakarta: IDX 1,878.72 +91.05 ( 5.1%)
Singapore: ST Index 2,521.35 +102.14 (4.2%)
Korea: KOSPI 1,457.40 +64.97 (4.6%)
Australia: All Ord 4,834.30 +180.20 (3.9%)
Japan: Nikkei 225 11,885.84 +393.32 (3.4%)
Thailand: SET index 619.15 +18.77 (3.1%)
Malaysia: KL Composite Index 1,011.49 +19.83 (2%)


Thursday, September 18, 2008

The political drama in the past one month has sent the Thailand markets into a frenzy and now the fear of further credit crunch, the investors in Thailand were selling off. The benchmark SETI is in its lowest in more than 4 years. Today as at 12.50 pm, the SETI fell 31.2 points or 5.16% to close at 573.89 points.

A new prime minister was elected and will be officially installed soon. Deputy President of ruling party PPP Mr. Somchai Wongsawat who is only an MP for seven months and also the brother-in-law of ousted former Prime Minister Thaksin Shinawatra is set to be the Thailand's 26th Prime Minister. He vows to make peace with opposition party PAD, which held street protests that demanded former Prime Minister Samak Sundaravej to resign.

Recently Thailand's central bank, the Bank of Thailand announces that Thailand is insulated from Lehman collapse. AIA in Thailand gave assurance to their policy holders that they are still fundamentally strong in Thailand.


Monthly SETI chart as at 12.50pm, 18 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

Technically, the Thailand SETI currently at the support level and evidence is needed to confirm whether there are any support, which is not seen at this moment. The chart also suggests that the current support level may not hold and it may lead the SETI to the next support level between 480 and 500 points.

Commentary and Analysis by Benny Lee


The US market is the current catalyst for the sharp fall in the financial markets all around the world. News of giants collapsing spread fear to investors all around the world. They and many other experts like myself believe that the credit crisis is not over and soon the Asian markets may go through this crisis. The Dow Jones Industrial Average (DJI) extends its losses yesterday by falling another 449 points or 4%. to close at 10,609.66 points.


Monthly DJI chart as at 17 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

The DJI is currently near the support level of between 10,400 to 10,600 points. The levels are based on Fibonacci projection and retracement levels. Another support range is found between 9,600 to 9,700 points, should the DJI break below the current support level. We may expect some support and a rebound on the DJI at the current level.

Commentary and Analysis by Benny Lee
Like the Hong Kong Market, the Japan benchmark Nikkei 225 index (Nikkei) fell to a lowest of more than 2 years. The Nikkei fell 416 points or 3.5% to close at 11333 points as at 12.13 pm today. Generally investors in Asia fear the credit crunch domino effect that may take place in Asia soon following the lead from the US.

Nikkei have retraced more than 61.8% from the bullrun that starts in the year 2003. This is a very bearish situation for the Nikkei, based on Fibonacci studies. The next support level is seen based on the congestion in the year 2004, which is at 10,500 points.


Monthly Nikkei chart as at 12.12pm, 18 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

Commentary and Analysis by Benny Lee
If you have followed my analysis on the Kuala Lumpur Composite Index (KLCI), I have adjusted my bearish forecast for the KLCI from 1,100 points to 850 - 950 points. The 850 points forecast is based on the long term head and shoulders pattern target. and the 900-950 points level is based on a cluster of Fibonacci levels.

The political scene in Malaysia is as hot as the financial markets as it takes off into the next level, with Malaysia's premier and his deputy swapping the ministerial portfolio. More drama unfolded yesterday. Leaders intend to contest for top party posts, including "caught in the act" Chua Soi Lek, The Son-in-Law Khairy Jamaludin, Chew Mei Fun. Yesterday also witnessed the pullout from one of Ruling Party Barisan Nasional component party SAPP from Sabah.

Anwar Ibrahim to announce list of MPs who will be crossing over today? I do not find any news in the local media except for Straits Times Singapore.

Another blogger arrested under sedition act (ISA) after the earlier arrests of influential blogger Raja Petra Kamaruddin from Malaysia-today, Opposition MP Theresa Kok and a Chinese daily news reporter who was later released. All are arrested because of a suspected threat to national security. The PM has already announced that Anuar Ibrahim is a threat to national security and economic stability. It's just a matter of time before he is arrested. I wonder if I am going to be arrested because I pose a threat to the financial markets/economy by giving a bearish view. ISA allows detention without trial. De-facto law minister resigned after the ISA arrests.

The KLCI fell another 36 points (3.6%) today as at 11.27am to close at 966.96 points. We may expect to see some support when it goes into the 900 to 950 points zone. Is the market bottom going to be at this level and will there be a rebound?


Monthly KLCI chart as at 11.27am 18 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

Although I am expecting market to bottom out at this level, we will have to look at further developments on the chart to confirm the bottom. Keep reading my analysis on this blog as I will update when there are any development.

Analysis and Commentary by Benny Lee
The Hong Kong Hang Seng Index (HSI) took another beating today amid heavy losses on the Dow Jones Industrial Average (-449 points or 4%) and the Shanghai Stock Exchange Composite Index (-112.6 points or 5.8% as at 11.53 am. The HSI drop sharply lower. As at 11.53 am, the HSI is at 16,293.40 points, down 1,343.80 points or 7.6%, making it the lowest in more than 2 years.


Monthly HSI chart as at 11.53am, 18 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

Investors were worried and seen dumping stocks on fear of credit woes in the US which might hit their shores soon, despite given assurance from some insurance brokers and banks. The support level for HSI is at 15,000 points, an ABC correction target, which is from the high in October 2007.

Commentary and Analysis by Benny Lee
The Straits Times Index (STI) fell again for another 92.24 points or 3.8% as at 11.33am today following the heavy deline on the US Dow Jones Industrial Average and the rest of the financial markets. The STI is currently at 2,327.05 points.


Monthly STI chart as at 11.33am, 18 September 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

The STI has a downside target of 2,100 points based on an ABC correction since the high in October 2007. A 61.8% Fibonacci retracement is at about 2,200 points. Therefore, the STI may only find support between 2,100 and 2,200 points. It is heading that direction but when it gets there, we need to find any evidence of support whether the market is bottoming out.

Many anxious insurance policy holders and investors thronged AIG in hot sunny Singapore to seek clarification and many vowing to terminate their policies. The same thing happened at AIA.


Commentary and Analysis by Benny Lee

Wednesday, September 17, 2008

Just last week I wrote about getting prepared for another ride down (with an exclamation mark) when immediate support levels in the market were broken. This happens after the market failed rally after the US Fed bailed out mortage giants Fannie Mae and Freddie Mac.

The latest credit crunch casualty was one of the top financial house, Lehman Brothers which the government unable to provide any assistance and this sent stock markets around the world taking a deep plunge. The Latest news was that the US Fed has rescued insurance giant American international Group (AIG) with a US$85 billion loan and Barclays buys Lehman Brothers' banking unit.

I believe this is is just the beginning of a domino effect. News are being reported that investors are thronging insurance companies to find out more about their companies financial standings. A massive cash-out from investors will cause the dominos to crumble faster.

Markets are making new lows and major support levels were broken. Where are the support levels now?

Malaysia Kuala Lumpur Composite Index (KLCI): Support level of 1,030 points broken. Next support 930 to 950 levels. A longer term support is at 800 points (from the head and shoulders pattern). I will post more details on the KLCI later. Update 18/09/08: Click here for more details.

Singapore Straits Times Index (STI): Support of 2,540 points broken. Next support level is at 2,100 to 2,200 points. I will post more details on the STI later. Update 18/09/08: Click here for more details.

Hong Kong Hang Seng Index (HSI): Support of 19,000 points broken. Next support level is at 15,200. I will post more details on the HSI later. Update 18/09/08: Click here for more details.

Japan Nikkei 225 (Nikkei) Index: Support of 12,400 points broken. Even the major support level of 11,700 points was broken yesterday. Next support level is at 15,200. I will post more details on the Nikkei later. Update 18/09/08: Click here for more details.

US Dow Jones Industrial Average (DJI): The 10,800 support level was tested again and rebounded. With the negative news and weak Asian market performance, the DJI, being the major catalyst of plunging markets, is expected to decline further. Next support level is at 10,000 points. I will post more details on the DJI later. Update 18/09/08: Click here for more details.

Update 18/09/08: Click here also for Thailand market update and details.

Commentary and analysis by Benny Lee

Tuesday, September 16, 2008

Crude Oil Support

Two weeks ago we suggested the oil price was at a balance point. There were fears that the consolidation pattern support band near $110 to $113 on the NYMEX (New York Mercantile Exchange) Crude Oil weekly chart would develop a new uptrend. The failure of this consolidation band is bearish for the oil price. The next support level is near $100.

The consolidation band between $110 and $113 is a technical consolidation band. It is created by calculating the potential resistance target when price moved above $100. Price reached this level in 2007 March and then retreated. This was the normal pattern of the oil trend in 2007. The price did develop a small consolidation between $110 and $113 before moving strongly towards the next technical chart target near $125. The weekly oil chart confirms the support band between $110 and $113 is weak.

The top of the very strong consolidation area is located near $100. The bottom of this very strong consolidation band is located near $87. This is the next support target area. The $100 level is an important psychological level. However a fall to this level indicates a significant change in the up trend and confirms the development of a new strong downtrend.

The fall below $110 shows developing trend weakness. This is confirmed with the Guppy Multiple Moving Average relationships. The long term GMMA is turning down and beginning to compress. This indicates developing downtrend pressure. This is an important development in the last 2 weeks. Confirmation of the strength of this downtrend pressure is shown when the oil price closes below the lower value of the long term GMMA near $105.

The confirmation of a substantial downtrend starts with a fall below $105. This increases the probability the price will fall to support near $100. The fall to $100 would signal the end of the strong uptrend in oil that started in 2007, January. This is important for oil, but it is also important for the behaviour of the American dollar. The behaviour of the oil price has a direct influence on the strength, or weakness, of the US dollar.

There is now a higher probability the long term downtrend pressure will continue with a move towards $100. In the next several weeks, traders will watch for consolidation developments near $100.

Although price has a high probability of pausing near $100 there is also a strong probability that price can fall below $100. When price reaches $100 it shows the downtrend pressure is very strong. A fall below $100 has a support level near $87.00. There is a high probability in the long term that oil will consolidate between $87 and $100.

To read more articles and commentaries from Daryl Guppy, click HERE



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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE

Friday, September 12, 2008

Moving Average Part 2

Here is a continuation (part 2) on the moving average indicator . Click HERE for Part 1.

2. The underlying trend - Support and Resistance

Think of the average as an underlying force that pulls back its objects. Say, a group of bulls walking in a same direction. One or two bulls may stray away from the group, but eventually this strayed bull(s) has a high chance of making its way back to the group.

The group of bulls here is the underlying force and the move into a direction (e.g. up/down or sideways) and they move into a direction (trend). Price can move away from the moving averages, the same manner a bull or a few bulls may stray away from the group. So, when price goes far away from the average, it tends to pull back to the average.

In an up trend, price is normally above the average and when it goes far above the average, it tends to pull back and the average acts as a support level. If this support level is broken then the direction of the up trend may change. (In part 1, I have mentioned that the trend is only changed when the direction of the moving average has changed.

In a down trend, price is normally below the average and when it goes far below the average, it tends to pull back to the average which acts as a resistance level. If this resistance level is broken then the direction of the down trend may change.

In a sideway market, there is no direction, therefore the price cuts easily above or below the moving average. In this case, the moving average does not provide any support or resistance.

Time Frame:

In part 1, I mentioned about the different time frames to determine the different trends (short, medium, long term trends). So it is up to you to determine which underlying force you are trying to identify. Imagine the long term trend is a group of 1000 bulls, while the short term trend is a group of 100 bulls.

Applying the Moving Average on the chart

The best way to apply a moving average is to find a parameter (the period used to calculate the moving average) where the moving average acts as support and resistance as much as possible.


Singapore STI chart with 10-day simple moving average using NextVIEW Advisor. Not a proper moving average to use.


Singapore STI chart with 24-day simple moving average using NextVIEW Advisor. A proper moving average to use.

The application of moving average is made simple using NextVIEW Advisor Professional because you can change the parameter on the fly. The moving average line changes as you change the parameters.

Thursday, September 11, 2008

Markets around the region have started to make newer lows despite the rebound on Monday. The cat jumped, the bear caught the cat, slaughter it and threw it down. The cat did not bounce back. The cat was from Asia, infact there were many cats slaughtered. Below are the performance of markets in the region today:

1. Singapore Straits Times Index - 2,541.15 points. DOWN 81.26 points or 3.1%. Almost a 2 years low. Near support level, more analysis here.

2. Kuala Lumpur Composite Index - 1,041.07 points. DOWN 21.63 points or 2.04%. A 21 months low. Near support level, more analysis here

3. Hong Kong Hang Seng Index - 19,388.72 points. DOWN 611.06 points or 3.05%. A 17 months low. More analysis here.

4. Japan Nikkei225 Index - 12,102.50 points. DOWN 244.13 points or 1.98%.

5. Shanghai Stock Exchange Composite Index - 2,078.98 points. DOWN 71.78 points or 3.34%. A 22 months low. Almost 3 times lower than its highest high in just October last year.

6. As at 9.15 pm (Malaysian time) London FTSE is at 5,283,90 points, down 82.60 points or 1.53 % and is still declining on my screen.

THE US market is expected to plunge today when it opens, following the rest of the markets. My analysis here.

Support levels were broken, prepare for another ride down!

Commentary and Analysis by Benny Lee

Wednesday, September 10, 2008

Malaysia's Pearl of the Orient, Penang which is a major tourist destination has been in the limelight recently, for the wrong reasons. A Penang leader in UMNO (The main party component in the Barisan Nasional front which currently governs the country) was alleged to have uttered racists remarks that caused an uproar among the members parties of the coalition who demanded the PM to take action against him immediately for refusing to withdraw and apologize for the statement he made during the Permatang Pauh by-election which was eventually won by opposition leader Anwar Ibrahim.

Now former Prime Minister Tun Mahathir has re-joined UMNO after resigning the party 3 months ago because of concerns with the current situation. Other pundits say he may work with his former nemesis Tengku Razaleigh Hamzah and Muhyiddin Yassin to rin for top posts in UMNO.

Regional markets rally on Monday except for the benchmark Kuala Lumpur Composite Index. In fact the market literally came to a standstill while other markets rallied 4 to 5%. On Tuesday, the KLCI closed lower, following a correction in the regional markets. Regional markets are expected to decline further today as the Dow Jones Industrial Index declined 280 points yesterday, wiping out Monday's gains.

Malaysian market is expected to remain firm with a downward bias as investors are staying in the sidelines to wait one of the most important event that is going or not going to happen that will affect the whole nation, that is can former DPM Anwar Ibrahim form a new government which he is so confident till today amid allegation of sodomy. He will be brought to court today to hear the charges.

Tuesday, September 9, 2008

The price of crude palm oil futures (FCPO) fell RM115 or 4.6% today to close at RM2354 per barrel. Price of FCPO has been in a down trend since mid of July this year after about a four month correction. The highest close in history was set this year at RM4330 per barrel on the 3rd of March. With today's closing price of RM2354, it simply means that the price has fallen 45.3% since the historical high and it took only about 6 months.

The price today is also equivalent to the price in August last year. So, it took about 11 months for for price to up and months to go down. One of the characteristics of the markets (any markets, whether it is equity or derivatives) is that price falls faster than it goes up. As a trader you can actually make money faster by going short (short sell in he futures market) but most investors do not actually know how to do it.

The price is currently at a support level (it was once tested on the 19th of August). So, can this support level hold the price of FCPO and cause it to turn around and rally upwards?

Technically, price is in a very strong down trend. it was oversold in early August and the price did rally upwards but a small one with resistance at RM2753. The failure to at least rally to its short term average (RM2,900) shows that the strength of bears is strong.

Based on retracement and expansion studies using Fibonacci ratios, the next support level RM1940 to RM2000.

Fundamentally, demand of Crude Palm Oil and other edible oils is expected to decline because of slowing economy and rising inflation. Inflation has started to ease a little with the decline in price of crude oil, but that does not really improve the slowing economy much. Price is not expected to increase at least until winter in December.


Daily FCPO chart as at 9 September 2008, using NextVIEW Advisor

Therefore, there is a high chance of price falling lower, at least to test the next support level of RM2000. However, if price is able to maintain above current support level (RM2351) and start to overcome its resistance of RM2750, then we have a confirmed bottom (double bottom chart pattern confirmation) and price shall rally further.

Bursa Malaysia's US Dollar-denominated crude palm oil futures contract, known as FUPO, marked its entrance today (5th September 2008) into the Malaysian derivatives market. As a cash-settled contract, FUPO is aimed to attract more foreign traders and investors who wish to trade in the US dollar currency.

Dato' Yusli Mohd Yusoff, CEO of Bursa Malaysia Berhad, said, "This first multi-currency product from Bursa Malaysia offers a lot in terms of trading opportunities to a new segment of the market. We expect that, like any other new product in the market, it will take time before the numbers increase but we are confident of the prospect of this unique product which meets the international demand for currency risk management tools." Source: Bursa Malaysia

Commentary and Analysis by Benny Lee


The US market rebounded aggressively on Friday because of investors confidence on the bailout by the US Fed on Fannie Mae and Freddie Mac, which star investor Jim Rogers describes as a decision "more communist than China right now... read more at Roger on CNBC.

Here is an excerpt from an interview with Jim Rogers from CNBC;

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions," Rogers said.

Investor extraordinaire Warren Buffet however, said otherwise. He said that the Fed "Did exactly the right thing".

From CNBC,

In stepping in to bail out and recapitalize collapsing home mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Hank Paulson "did exactly the right thing," said billionaire investor Warren Buffett.

"I wouldn't change anything in the plan myself," Buffett said in an interview on CNBC. He said he expects this step will go a long way in calming the market and resolving the ambiguity surrounding the two companies.

Read more here.


Monday, September 8, 2008

The Dow Jones Industrial Averarage (DJI) made a strong rebound on Friday after testing 11,037.85 points, the DJI climbed back about nearly 200 points to close at 11220.96 points. The government takeover (more like a bailout) of the twin mortgage giants Fannie Mae and Freddie Mac created relief to investors. My previous forecast still holds for the DJI with current support level at 10,800 points and resistance level at 11,700 points.

The rebound in the US market has triggered the Asian markets to rebound strongly as well this morning.

The Singapore STI index opened with a wide gap of 92.58 points (3.6%) and as at 10.24 am, the STI is maintained at 2669.42 points. The STI failedto be support at 2,700 points and nearly tested the next support level which is based on Fibonacci clusters level of 2,540 points last Friday, where the STI went to a low of 2,554.04 points. While my previous analysis remains the same, the resistance level has been revised to 2,800 points because of the declining trend.

Like Singapore, the Hong Kong market has also rebounded aggressively with a gap of 907 points on the Hang Seng Index (HSI). The HSI opened today at 20,840.69 points, 4.5% higher from last Friday's close of 19,933.28 points. As at 10.34am, the HSI closed lower at 20,728.85 points. My previous forecast still hold for the HSI, with support level at 19,000 points and resistance level at 21,000 points, with major resistance at 23,600 points.

The Malaysian market however, did not over-reacted on the spike on the rest of the markets in the region. The Composite index opened at 1,075.22, just 4.68 points (0.4%) higher than the close last Friday. It is now a little higher at 1,077.21 points as at 10.43 am.

Investors are being extra cautious currently because of the current political situation, which speculation on whether ousted former Deputy Prime Minister Anwar Ibrahim is going to take his alliance to topple the current government and form a new one. Mainstream media shows that it will not come true, while it is otherwise in the blogosphere. Like the investors who are grabbing their popcorn and a drink, let's wait, watch and see...

My previous forecast is still valid for the KLCI, with immediate support level at 1,060 points and stronger support level at 1,030 points, while resistance at 1,160 points.

Here are the performances of other markets as at 10.52 am:

Japan: Nikkei UP 438 points (3.6%)
South Korea: KOSPI is UP at 62 points (4.4%)
Taiwan: TWI UP 333 points (5.2%)
Shanghai: SSE DOWN 14 points (0.8%)
Thailand: SETI UP 8.5 points (1.3%)
Australia: All Ordinaries UP 175.80 points (3.5%)

Overall, the markets are currently just going through a technical rebound because of the steep fall in most markets especially on Friday. Trend for the markets are still down.

Commentary and Analysis by Benny Lee

Mr. Benny Lee is conducting a workshop this week which offers a 6 months trading program for serious investors, click here fore more details.


Saturday, September 6, 2008

When I was a beginning trader, I naively believed that a 100-share trade was no different from a 10,000 share one, since both could be executed with the same entries, exits, and money management. What I failed to appreciate is that the risk of any trade or investment affects our ability to evaluate it calmly, rationally, and objectively.

A head of a brokerage firm, which offered free simulated trading to new traders, once told me that 80% of the traders made money in the (very realistic) simulations, but only 20% were successful once they traded real money. The difference, he observed, was the emotional impact of having actual money on the line.

In this same vein, a reader asks the Doc:

When I was younger and fitter I played soccer. My skills were okay, but I tended to panic when I possessed the ball and heard the opposition hurtling towards me.

Unfortunately I've carried this kink in my think over into my share trading.

I love trading. I've been learning and applying in earnest for the past year and have managed to overcome several barriers. However, three times I have panicked during a broad market sell off and sold out as I watched my paper profits disappear.

The latest example was yesterday. I'd struck a purple patch recently and the paper profits were looking very healthy. However, my positions began retracing without hitting my stops and those paper profits disappeared like sand slipping through my fingers.

When the market dropped yesterday, I found this too much to handle and I sold out at just above break even!

I know I won't be a good trader until I learn a few strategies to conquer this these panic attacks.

I have a few observations and suggestions for our earnest and motivated trader. But first, let me ask you—the reader—to review what he wrote and identify what you think is the most important thing he said. One way of doing that is to figure out what you would first ask him if you were counseling him directly. Would you inquire about:

• The soccer experience
• His emotional reaction to sell-offs
• Yesterday’s market incident
• His desire to be a good trader
• Or something else?

My first question to our trader would be “something else”. I would say to him, “That’s interesting; you say you’ve managed to overcome several barriers. Could you tell me about those barriers and how you overcame them?”

Why would I ask this? Simple: Whatever he did to overcome his earlier barriers may hold the kernel of a solution for his current dilemma. Those solutions reflect the genuine and unique strengths of each individual. Instead of focusing on the problem and unwittingly reinforcing the notion that he is the problem—Note how easily he jumps from the issue of handling sell-offs to the larger, personalized problem of “I know I won’t be a good trader”—it makes sense to apply his known strengths to the challenge at hand. This reinforces the important message that even very good traders face huge hurdles to success.

This approach is known as solution-focused brief therapy, and it is particularly effective as a change strategy for those of us facing normal life dilemmas. Let’s say you come to me with a trading issue and I find out that you recently worked out a marital problem. You and your spouse learned to be better listeners by not taking disagreements personally and, instead, using them to identify each other’s needs and desires. Right away, we might then take a look at how you’ve been able to listen to your spouse and how you became able to not take differences personally. Perhaps this same strategy could work when it comes to listening to the market and not allowing your self-esteem to ride the market’s ups and downs!

The working assumption of the solution-focused therapist is that somewhere, at some time, each of us has successfully dealt with situations that are similar to the present dilemma. Depressed people aren’t always depressed, so how about finding out what they’re doing when they’re feeling better about themselves? Couples with problems don’t always argue; what are they doing right when they’re getting along? And our trader is not always panicking in the market, even when markets don’t always move his way. It would be worth identifying what he’s doing during those times: the kernels of solutions are often hidden in exceptions to problem patterns.

As it happens, I faced a dilemma much like our trader’s early in my trading career. I became panicky whenever I increased my size, as even normal movements against my position felt too risky. I overcame that problem when I examined how I handled risk in other areas of my life. For example, whenever I tackled a new project as a psychologist, such as writing a journal article, I always made sure that there was a guaranteed home for the article before I had finished it. I did this by consulting with editors ahead of the writing. My logic was that, by securing my publication, I could free myself to focus on the process of writing.

Similarly with trading, I learned to take guaranteed profits when positions went my way. Once a trade moved in my favor by the amount I was willing to risk on the trade, I immediately created a trailing stop on the position that guaranteed a profit. As a result, a winning trade could never become a loser. As the position moved in my favor, the stop moved with it, locking in an increasing profit. The security of knowing, “This trade will be a winner, no matter what” provided the reassurance I needed to counteract fears of risk. In my work with high frequency traders, I’ve used the same rationale to create trailing stops on daily profit/loss, so that, once the trader is up by a certain amount of money during the day, the stop point for the trading session is moved to a level of assured profitability.

My solution may not be yours; the beauty of solution-focused counseling is that it allows each person to craft solutions based on their experience—not the abstract advice of a guru. If you can identify the occasions when you’re already a good trader, the chances are good that an analysis of those occasions will start you on the road toward solving the next market challenge.

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.