Saturday, January 31, 2009

Apart from a gap up on January 3rd, which closed sharply down with a low near the previous days’ narrow range, the USD/CNY moved very little last week. Neither S1 or R1 were challenged by price movement.

Bollinger Bands is on the chart again to demonstrate how the bands continue to narrow. This often precedes a significant break out in one direction or the other.

The indicator in the lowest window of the chart is called Bollinger Band width, and measures the degree of separation between the bands. When the bands narrow, the Bollinger Bands width indicator drops. It’s now near the level around which strong moves have typically occurred in the past.

An upward move is not out of the question but bias is to the downside.


Daily USD/CNY chart as at 29 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – dropping from its’ overbought level.
Bollinger Bands – constricting.
Bollinger Bands width – very low
EMA20 – flat, just below the market
R1 – resistance at 6.8500
S1 – support at 6.8045

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

On January 24th, I noted in this column that this currency pair (Euro/USD) appeared to be due for an upward correction. The following day was bearish, dropping about 107 pips, but unable to exceed the Jan. 20th low of 1.2764. That set the stage for what, to date, was only a one day rally. The rally was a massive 377 pip move, halting precisely at the confluence of a significant Fibonacci ration and the down sloping Moving Average.

As I write, the market is moving near it’s first level of support, a range between 1.3080- 1.3000. A close below 1.3000 would then bring 1.2860-1.2840 within range. There is a relatively strong probability that this will happen before the high at 1.3240 is broken to the upside. If support in the 1.3000 area is strong enough, the Euro could surge to the next level of 1.3100.


Daily EURO/USD chart as at 29 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – this short term stochastic is turning down from its’ overbought level.
MACD – is in negative territory, but turning up slightly.
20EMA – short term moving average, flat around 1.3240.
200MA – down sloping
R1 – nearby resistance around 1.3240
R2 – 1.3400
S1 – 1.3000
S2 – 1.2843

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Friday, January 30, 2009

In the past one month, the KLCI was up for two weeks and down for two weeks at the trading range between 866 and 937 points. In my previous article, I have expecged a pullback on the KLCI when it was 915 points. Resistance is at 940 points and the KLCI went as high as 936.63 in the first week of January before declining to close at 883.16 today. The KLCI is up 16 points on month. Negative financial and economic news locally and abroad has forced the government to take drastic actions such as lowering borrowing rates, planning for a second economic stimulus package and restricting intake of foreign workers. Investors are still split over their decisions.


Daily KLCI chart as at 30 January 2009 using NextVIEW Advisor. Click on chart for larger view.

The short term trend is up as the 30-day moving average is increasing. However, the KLCI is now slightly below this average. The long term trend is still down as the 90-day moving average is still declining. The KLCI movement for the past three months has formed a wedge chart pattern which indicates a correction in the long term down trend. The KLCI may still inch upwards as there is still strength left in the current short term up trend but because of strong resistance, the KLCI may not be able to rally and may just continue to stay sideways. Support and resistance levels remain at 800 and 940 points respectively.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Thursday, January 29, 2009

Markets in Asia moved generally higher today. Some markets have been closed especially on Monday because of the Chinese New Year. The Chinese are ushering into the year of the OX or bull. The bull is a hardworking animal in the Chinese astrology. Therefore, it does not symbolize a "bull" in the financial markets. Rather, it prompts believers to work harder. This may be true as economies are slowing down and those who do not work hard may get axed.

Korea, Singapore and Malaysia indices, which were closed for two days ended on a bullish note today with 64.58 points (5.91%), 80.85 points (4.80%) and 6.94 points (0.8%) gain respectively. Japan's Nikkei and Thailand SET index which were opened since Monday has gained 361 points (4.6%) and 14.8 points (3.4%) from last Friday. Hong Kong, China and Taiwan stock exchanges are still closed. Australia's All Ordinaries which closed on Monday, up 135 points or 4.1% since last Friday.

European markets end higher as finance stocks surge. London's FTSE closed 100.8 points (2.4%). France's CAC40 index closed 122 points higher (4.1%). U.S. stocks rose on Wednesday, capping the S&P 500's longest winning streak since November, as financial stocks soared on optimism the Obama administration was making progress on a plan to relieve banks of money-losing assets (Reuters). The US DOW was bullish with 200 points higher or 2.5%.

Are investors really gaining confidence on the rescue plans set up by their goverments? Or is it just a technical rebound or a would be dead cat bounce? Market Strategist Mr. Benny Lee thinks that the rebound was due because of its oversold nature and should advance about 10% from the recent lows in the respective countries indices. However Mr. added that "the rebound may just be temporary as the down trend pressure is still strong and market is expected to be in a volatile mode balanced by investors confidence on the government financial stimulus and the deepening global recession".

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N.I.N.E.

Saturday, January 24, 2009

The rise in the value of Gold halted sharply at 866.50, precisely at the convergence of three significant Fibonacci ratios.

The up-move that began on January 15th appears to be part of a larger correction which should resolve itself to the downside. A close below 836. will virtually confirm that the current uptrend is over and that a test of the January 15th low of 821.50 is underway.

If that occurs, a subsequent drop to around 770 will likely occur.

Risk is to the upside. A close above the down sloping trend line will target the January 9th high of 890.50


Daily Gold chart as at 22 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – up
CCI – a momentum and volatility indicator, is above it’s 50 level, a bullish sign.
Price Pattern – the recent pattern appears to be a bearish flag, but this is not confirmed until 836 is exceeded to the downside.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Friday, January 23, 2009

The market has shown virtually no net gain or loss during the past week (to time of writing).

No significant resistance or support levels have been touched by price action.

The rise of the MACD does not necessarily imply bullish movement in the market. It commonly returns to it’s “O” level when the market is trading in a tight range.

The Bollinger Bands may carry more significance than some of the other indicators, in this case. As the bands converge, drawing closer together, there is less volatility in the market. Eventually volatility will return and the bands may expand rapidly, as the did on Dec. 1/08.

A move to resistance around R1 may occur first, most likely to be followed by a move to test S1, and possibly lower.


Daily USD/CNY chart as at 22 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

The main resistance and support levels have remained unchanged from last week.
R1 – 6.8500
S1-6.8029
R2 – 6.7700

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

The Euro has continued to lose value against the US dollar. Important technical levels of support have been broken on the way down.

Key support on the daily chart, at 1.3030, was broken, however a lower level of support on the weekly chart has not yet been touched by recent price action. That is the area around 1.2721 – 1.2700.

The probabilities for this week are not yet entirely clear. Even though the market is due for a larger move up, there is still the possibility of a further move down to test weekly support at the November 20th low of 1.2422.

If the market drops to 1.2721-1.2700, we should see a relatively strong upward move that will break the down sloping trend line on the chart. That could mark the beginning of a multi-day trend which will probably eventually rise to test the December 16 high of 1.4719.

The ideal downside target, near-term, is 1.2700, but any bullish move that breaks through the resistance at the trend line and can close above 1.3388 may have sufficient momentum to trigger a longer term bullish move.


Daily EUR/USD chart as at 22 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

Stochastic – oversold
NextView RSI – in negative territory, below it’s long term moving average.
200 MA – sloping down, reinforcing the fact of the down trend.
20EMA – short term moving average, strongly down.
Trend lines – The market has moved down wards in a clear trend channel, the upper line providing potential resistance and the lower line providing potential support.
Fibonacci – Important support at 1.2700 is reinforced by a significant Fibonnaci level.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

GONG XI FA CAI

We wish every reader of N.I.N.E a Happy and Properous New Year!


Thursday, January 22, 2009

OIL INDECISION

The difference between consolidation and indecision is important. A consolidation pattern shows the end of a downtrend and the potential to develop the conditions necessary for a new uptrend. This is a pattern with a high probability of developing a new uptrend.

A pattern of indecision shows the market is uncertain about the future. This is a low probability pattern. The market could jump quickly upwards, or it could quickly fall. There is a 50% probability of a move in either direction because the market is evenly balanced.

The pattern of price movement of the NYMEX (New York Mercantile Exchange) Crude Oil weekly chart in recent weeks shows a pattern of indecision. The chart has developed a symmetrical triangle. The pattern is created when two equally correct, but contradictory, trend lines can be plotted on the chart. The uptrend line in this pattern on the weekly chart starts from the low near $32. The trend line shows buyers are moving into the market. The up sloping trend line shows some buyers are becoming more optimistic.

Other traders have a different opinion. They are worried prices are going to continue to weaken. They are sellers in the market. This selling pressure is defined by the down trend line. This line starts from the high near $56. The two trend lines define two equally correct, but exactly opposite opinions of the market. The symmetrical triangle captures indecision. The balance of probability favoring bulls or bears is evenly balanced. The market can develop a fast breakout in either direction.

The symmetrical triangle is used to calculate the target level for the breakouts. The base of the triangle pattern is measured and this value is projected up and down from the apex of the triangle pattern. The upside projection has a target is between $67 and $70. This is near to a long term resistance support area.

The pattern projection downside target is near $18. This is below the long term historical support level located near $24. This level is clearly seen on a monthly oil chart. A fall to around $24 support will develop if the American economy moves into a severe recession. A fall below this level suggests America is moving into a Depression.

The oil price is developing a better relationship between true demand and supply. This has created the price fall from $145 to around $50. The continued fall in demand created by the problems in the American economy have the potential to reduce demand further. This situation can see the oil price around $24. The chart pattern of indecision will reach the apex of the triangle in 2009, March. Traders will watch carefully for the direction of the price breakout from the chart pattern.



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

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Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.

Wednesday, January 21, 2009

There is an electric shock in Tenaga's financial performance. The shock was expected for those who are following this counter closely. State-owned Tenaga Nasional Berhad (Tenaga) is the sole electricity utility provider for Malaysia and has recently posted the highest quarterly loss in six years and their executives are expecting a weaker performance for this year, especially if the Ringgit weakens. Tenaga Chief Executive Che Khalib Mohamad Noh told reporters it will be tough to meet analysts'' forecast of a net profit of RM2.12 billion for the fiscal year ending Aug. 31. The main reason were slower growth in electricity demand, higher coal prices and weaker ringgit.

The company reported a loss of RM944.1 million from a net profit of RM1.51 billion a year earlier for the fiscal first quarter ended Nov. 30 although quarterly revenue increased 27.2%. The biggest loss was its foreign exchange loss which amounted to RM1.4billion. Higher fuel costs and payments to independent power producers cause its operating expenses to rise 48.9% on year to MYR7.06 billion

I believe that the investors are already expecting this in 12 January when price went as high as RM6.85 and closed at RM6.50. On the chart, this is a bearish reversal pattern. Price continued to fall since then and is now at RM5.95. Although news were reported after the market closes yesterday, the market did not overact to the bad news. From RM6.50 to RM5.95, the news is already discounted in the price fall. Price fell 8.5% in 6 days.

Now the question is whether the price of Tenaga going to continue to fall or shall it rebound. Before analyze the price chart of Tenaga, let's take a look at analysts' price forecasts after the loss announcement. Among the bearish forecasts are Morgan Stanley (RM5.69) and Maybank (RM5.45). Bullish forecasts from Goldman Sachs (RM8.20), Affin Investment (RM6.90), MIMB (RM6.80) and OSK (RM9.15). Bullish forecast average is RM7.76 and bearish average is RM5.57.

Price of Tenaga was RM9.00 on November 30 and the price today is RM5.95. This means that the share price has declined 33% on year. If we are comparing with price in the beginning of the year 2007 when the price averaged about RM12.00, price has fallen 50%. The company market capitalization wiped out about RM26billion since early 2007.

The price trend has been down since July 2007 and this can be defined by the down trend line. Price is relatively oversold and is currently just above the support level of RM5.80. The increasing Relative Strength Index (RSI) indicator indicates bullish strength despite the sideway price action. The bullish momentum and the overold level may trigger a technical rebound.

The price movement today was supported well and a "Doji" pattern is formed on the chart. A Doji is a Japanese Candlestick chart pattern which indicates uncertainty. When price were certain in the past few days (downward) and uncertain now, it may trigger a reversal.


Daily Tenaga chart as at 20 Janaury 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

Therfore I expect the price to rebound at current level to a target price of RM7.00 (which is the down trend line level), as long as the price stays above RM5.80 or as long as the RSI indicator is able to hold above 35. Current RSI reading is 40.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.


Tuesday, January 20, 2009

Since the double bottom formed on the SET Index Chart in a month ago, the market went on to trade sideways although initially there was a bullish momentum in the market. When new Prime Minister Abhisit Vejjajiva took over office on just before Christmas, after a year-long protest that sees the fall of two prime ministers believed to be closely associated formed prime minister Mr. Thaksin Shinawatra who is currently in exile, the market was bullish. The SET Index rose from 440 points on 23rd December 2008 to a high of 488.12 points on the 6th of January 2009. The high was a pivot resistance high formed in November 2008.

The benchmark index has corrected since and now it is back to the level before the new PM took office at 433.19 points. Investors were still not convinced although the primary focus of the new PM is to revive the economy with was battered by the protests that led to lower inflow of tourist. Tourism is a major component in Thailand's GDP. Exports which made up two thirds of Thailand's GDP have declined because of lower demand worldwide. Bangkok Bank estimates Thai GDP growth for the year 2009 to be 2%. For the past four years Thailand have been enjoying a moderate growth in GDP of slightly more than 4%.

Technically, The SETI is in a sideway consolidation period between the support and resistance range between 380 and 480. The SETI is currently in the middle of this sideway range. The bullish momentum still exists in the SET Index in the longer term. The RSI level still holds upwards. The SETI which broke the down trend line resistance level still stays above it. However, the bulls are being hold by the bears strongly at the resistance level.


Daily SETI chart as at 20 Janaury 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

The SETI is expected to remain in this trading sange in the near term. The future direction of the SETI depends on whether it is going to break the support or resistance level. If the SETI breaks and stay above the resistance level of 480, there is a high chance that the SETI can rally to 600 points. However, if the SETI breaks below the support line of 380, the down trend may resume to test the next support level at 320 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.
Hong Kong stock market has been trading in a down trend correction since October 2008 and I have mentioned this in my last article in December 2008. The correction has formed a down trend wedge pattern in the Hang Seng Index (HSI) with a defined support and resistance and I have mentioned the HSI is expected to test the resistance level and there is a high chance that the down trend may continue, if it breaks the wedge support level.

On the 15th of January, the HSI broke below the support level at 13,800 points and has been staying below this level until today. The HSI has been falling for the past 6 days is currently at 13,339.99 points. Although the HSI is higher than the previous day's close, it closes lower than the opening today which shows that the sentiment is still bearish.

The momentum in the long term is strong downwards. The short term bullish momentum has started to become bearish in the past few weeks. Relative Strength Index (RSI) on both weekly and daily charts is forming swings lows. Therefore there is a high chance of the down trend would resume IF the HSI is unable to climb back above the wedge support level which is currently at 14,000 points. The downside technical target for the wedge pattern is at 8,800 points.


Daily HSI chart as at 19 Janaury 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.

Monday, January 19, 2009

Japan's economy has been getting weaker since year 2007 and this has led to a very bearish market sentiment that led to a strong bear trend that started in July 2007 when the Nikkei was trading around 18,000 points. In my last analysis on Japan's stock market in 8th October 2008 when the Nikkei225 was at 10,155 points, I have expected the market to fall further and the Nikkei may find some safety net at 8,800 points. However, the benchmark index went under this net and only found support at 7,000 points in late October 2008. It rebounded since and traded sideways in a range between 7,500 and 9,500 points.

Today, the Nikkei 225 is at 8,256.85 points. The index is still below the declining long term 90-days moving average and this means that the market is still in a down trend. In December 2008, the Nikkei went above the short to mid term 60 to 90 day moving averages but went below it again few days back. The market is in a long term down trend consolidation.


Weekly Nikkei225 chart as at 19 January 2009 using NextVIEW Advisor. Click on chart for larger view.

The consolidation is currently dominated by the bears in the long term although it is being supported in the short term. The weekly RSI indicator are forming lower swings. A break below the crucial support level may send the Nikkei to a technical target of 5,500 points. I'd expect the Nikkei to trade sideways in the said trading range at least until the next quarter.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.

The US Dow Jones Industrial Average closed 68.73 points higher on Friday at 8,281.22 points after a rebound on Thursday. Prior to that, the market experienced 6 days of falling prices. Before the US market opens, the rest of the markets have also rebounded from a series of down days.

Japan's Nikkei closed 206.81 (2.6%) higher at 8,230.15 points, Hong Kong's Hang Seng Index inches up 12.55 points at 13,255.51, Singapore's Straits Times Index closed 1.5% higher at 1,730.45 points, Australia's All ordinaries closed at 3,494.90, 18.1 points higher. London's FTSE closed 0.63% higher at 4,147.06 points. France's CAC40 index climbed 0.70% higher at 3,016.75 points. Kuala Lumpur's Composite Index however fell 1 point to close at 896.47.



US Wall street is looking forward this week to big fourth quarter earnings from corporates like Google, United Airways, General electric, Microsoft, Johnson&Johnson and hundreds of others. However, the week is shortened with markets closed today for Martin Luther King Jr. Day. On Tuesday attention will be focused to Washington with the inauguration of President-elect Barack Obama.

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N.I.N.E.

Saturday, January 17, 2009

The “Flag” that was less than ideal, as noted in last week’s analysis, never did become ideal, and eventually dropped to the downside very close to key support at 1.3079.

The market is showing some early signs of being over sold on short term indicators. Longer term indicators are showing the probability of more down side momentum.

It is very likely in the next couple of days that there will be an upward bounce from the general area around 1.3079. A nearby target for a bullish bounce is 1.3600, and then 1.3721.

If key support at 1.3079 is penetrated, and especially if 1.3030 is broken to the downside, any upward gains should be minimal, although a rise as high as 1.3950 would not be out of the question.

Support at 1.3079 remains the level to carefully monitor.


Daily EUR/USD chart as at 15 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
R1 – nearby resistance at 1.3500.
R2 – 1.3700
R3 – 1.3960
S1 – key support between 1.3079- 1.3030
S2 – 1.2730 (not shown on today’s chart.

Stochastic – oversold
MACD – strongly down

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.
Last week this currency pair had a one day spike down to support near S1 on the chart, but quickly rebounded upwards.

The price pattern implies that a rise to or near resistance at 6.8500 is still possible, but that would be merely corrective action, as the long term trend is still down.

The market moved primarily sideways during the past week. This may continue for awhile until some significant news or event can jolt the market in one direction or the other.


Daily USD/CNY chart as at 15 January 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

MACD – in negative territory and moving sideways
Ichimoku Kinko Hyo – the “cloud”, the vertical lines in the chart, are supposed to indicate resistance or support for the market. The fact that the currency value is in the middle certainly indicates indecision or weakness, or both.

R1 – 6.8500
S1- 6.8029 – no change from last week’s support level.
S2 – 6.7700

****

Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Friday, January 16, 2009

As expected, and as forecast in last week’s column, gold moved sideways for a couple of days and then dropped down strongly, breaking through support at last week’s S1 (now noted on the chart as R1).

Now that support has been broken, there is very little technical support on the chart until around 770. There may be a brief upwards bounce from minor support at S1 but that should be capped by resistance at 816.



TECHNICALS
Stochastic – oversold
Bollinger Bands – relatively oversold
R1 – resistance at 816
S1 – minor support at 800.
S2 – zone of support from 782- 770.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.
The saucer pattern in the Shanghai Index has failed but the market continues to develop trading breakout behaviour. The market behaviour has confirmed the development of a sideways trading pattern. This is a long term consolidation pattern. The bottom of the pattern is defined by a narrow trading band between 1685 and 1750. This is described as a support area or support region. Currently the upper edge of this support area is providing good support.

The upper edge of this sideways pattern is defined by a second narrow trading band between 2000 and 2100. This is a resistance area or resistance region. These boundaries provide the upper and lower levels on index trading activity as the market continues in the sideways consolidation pattern.

The behaviour feature of this market condition is the development of short term rallies which move quickly upwards to test the resistance area. These rallies are followed by rapid price falls that test the support area. These fast rallies and rapid retreats create difficult trading conditions.
The sideways consolidation pattern is a necessary stage in development before a new long term up trend can develop.

A successful breakout above the resistance area from 2000 to 2100 will find the next resistance level near 2300. There is a high probability the market will fall before the Spring Festival holiday. There is also a strong probability the market will rise after the Spring Festival holiday. A good rally after Spring Festival will move above resistance between 2000 and 2100. A strong rally will test the resistance level near 2300.

The market also continue to show the pattern of fan trend lines. The position of fan trend line 1, 2, 3 and 4 have been confirmed. The recent index retreat has confirmed the position of fan trend line 5. The 5 fan trend lines start from the high point on 2008, January 15. The recent rally high point on 2008 December 22 confirms the position for fan trend line 5. In the recent past fan trend line 5 was a resistance trend line. The recent move above the value of fan trend line 5 is a continuation of the fan trend line pattern of behaviour. Now trend line 5 acts as a support trend line.



The pattern of fan trend lines will continue to develop with fan trend line 6, and possibly a fan trend line 7. The position of fan trend line 6 cannot be confirmed there is a stronger breakout above the level of fan trend line 5.

There is a high probability the market will continue with rally and retreat behaviour inside a long term trend consolidation pattern.

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

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Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.

Thursday, January 15, 2009

The US equity market has been bearish in the past 1 week of trading because of negative financial and economic data. The current Israel-Palestinian war has also contributed to the already weakening market sentiment. The Dow Jones Industrial Average 248.42 points or 2.94% to 8,200.14. The DJI was very bearish in the morning as it plunged 300 points to the low of 8,144 in the early session from the opening price of 8,446.

In my previous article just 2 days ago, I mentioned that a technical rebound is expected because of a strong momentum, but it looks like the bears are still preventing the bulls from marching on. Looks like the DJI may test the support level at 8,100 points. If the DJI breaks below 8,100 level, then the bears start to take control again and the DJI may start to decline further. Next Support level is at 7,500 points.


5-min DJI chart on the 14th of January 2009 using NextVIEW Advisor. Click on chart for larger view.

In Europe, London's FTSE fell 218 points (4.9%) to 4180.64 and France CAC40 Index dropped 145 points (4.5%) to 3052. Expect markets in the Asian region to decline further today.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.

Wednesday, January 14, 2009

The Vietnam Stock Index (VNI) from the Ho Chi Minh Stock Exchange (HOSE) has been in a down trend since early January 2008. The index was trading around 900 points. The long term down trend is defined by the 90 day-day moving average and this average has been declining since early 2008. A down trend correction took place in July to September 2008 and the trend continues down. The VNI is currently at 307.13 points after rebounding from a low of 284 points.

The VNI remains in a down trend but a bullish convergence on the Relative Strength Indicator (RSI) and a declining voume shows that the down trend is weak. The RSI indicator continues to increase. This also suggests that the support low of 284 is well supported.

The VNI has been declining for the past 4 days and this is expected because the VNI was at the resistance level of the short term up trend channel and the Stochastic indicates that the VNI is overbought at 322 points.

In the longer term, the VNI is expected to climb higher with a short term target of 340 points and a more optimistic technical target of 380 points. However, expect the current correction to head towards the up trend channel support level at 300 points in the next few days.


Daily VNI Chart chart as at 13 January 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.
As we enter 2009, it is no longer imperative the level of GDP growth Malaysia registered in the year that just passed – either 5.5%, 5.0% or even 4.5%. What is more important is the level of economic growth one foresees this year.

Malaysia – Annual GDP Growth (Estimate and Forecast based on official figures)

The official forecast is for a growth of 3.5%. Although we do not disagree that the level of economic activity in 4Q08 – a figure which we will know only by the end of February – may suggest the extent of slowdown going forward, changes in the local and global economic landscape especially in the first six months may affect the projection in both ways.


Malaysia – Quarterly GDP Growth (y-o-y)

As we mentioned last month, many governments have already announced their stimulus packages to manage the impact of the slowdown with the intention to avoid a recession this year, Malaysia included. The question is whether it is only the government that should increase spending.

With Malaysia aiming to be a developed nation by year 2020 with aggressive expansion in the manufacturing sector, the significance of public sector spending is now at low levels. If one analyses contribution of the components of the “three-sector closed economy”, public consumption in Malaysia is relatively insignificant.

By definition, a “three-sector closed economy” comprises public consumption, private consumption and gross fixed capital formation (or investments). By adding net exports (exports less imports), it then becomes a “four-sector open economy”.

Between 2001 and 2007, public consumption or in other words, government spending, constituted only between 14% and 16% of spending of the three sectors. The more significant one has been private sector consumption, representing 55% - 59% of the three sectors, while investments comprised 27% to 31%. (available figures on investments are not divided into that of public and private sectors.)


Malaysia – From the 3-sector “closed economy” perspective (2008 based on Jan-Sept figures)

This observation means that for every 1% reduction in private sector spending, it can only be mitigated by a hefty 4% increase in government consumption to ensure total private and public sector consumptions remain unchanged, assuming status quo on other sectors. But for every 1% reduction in investments, it can be moderated by a 2% increase in public consumption.

For this reason, we see the decision to reduce employees’ contribution to the Employees Provident Fund (EPF) by three percentage points to 8% for two years starting this month as an acceptable policy measure to maintain private sector consumption.

Yes, it may affect employees’ savings for retirement but such a measure is only for two years. If this option is not exercised, more damages may await everyone if the economy succumbs to a prolonged slowdown or recession.



Malaysia – Loans growth, monthly (y-o-y)

This however does not mean that the RM7b stimulus package announced recently is sufficient. While the government’s move, intentionally or otherwise, to reduce public consumption to 13.8% of the three-sector closed economy in the first nine months of 2008 is a good move, the “savings” should now be used to increase its contribution.

In 2000 when the global economies experienced a technical recession, public spending in Malaysia only constituted 12.8% of the three sectors. But this was raised to 14.4% in 2001 with a reduction in contribution from investments but status quo on private spending.

The investments component may also be affected this year in view of the bleak economic outlook that may affect new private direct investments, not to mention possible close down of some existing operations. In addition, loans growth may also be peaking as financial institutions may impose stricter guidelines on new approvals and drawdowns.

We hope the same policy measures to be repeated, i.e. raising public sector contribution to the three-sector closed economy to 14.5% - 15.5% levels this year. This measure is necessary not only to maintain the level of economic activities in the three-sector closed economy but also to overcome any shortfall in net exports, which represented 14.6% of Malaysia’s four-sector open economy last year.

Especially so when the world output is expected to moderate significantly to only 2.2% this year from an estimated 3.7% last year as predicted by the International Monetary Fund (IMF) in its latest projections. It expects the US, Euro area and Japan going into recession this year with forecasted GDP contraction of 0.7%, 0.5% and 0.2% respectively.



Which means that Malaysia’s future exports is at stake as these countries represent 35% of its total exports, which dropped 2.6% year-on-year in October 2008. This has not included Malaysia’s other trading partners that may also reduce imports as they are also affected from the global slowdown.

Malaysia – Percentage of Net Exports (2008 based on Jan-Sept figures)

And finally, a reduction in imports in semi-finished products in line with the anticipation for a drop in exports in finished products will also impact manufacturing companies especially those in free trade zones. Any retrenchment exercise arising from this, which we are beginning to hear and read, will then affect private consumption.

So, while consumers will be able to spend more (in aggregate) but wisely following the reduction in EPF contributions, the government will also need to step up its stimulus packages in an effective and efficient manner to weather the current storm.

Stimulus packages can be in various forms, such as important infrastructure projects especially those that were delayed earlier due to high materials costs at that time, agriculture projects that can make us self sufficient on our basic food needs in 5-10 years, developing disbursement of a new fund for selected small and medium scale industries, as well as education grant for retraining retrenched employees.

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Article Contributed By Ameer Ali Mohamed. Ameer is Director, Financial Research of NextVIEW. He has a total of 20 years experience as a corporate journalist, investment analyst and fund manager, including as research head of two stockbroking firms and CEO/CIO of a funds management company.

Republished with permission.
This article was published in the Just Say It column in Shares Investment (Malaysia edition) January 2009. You can get the latest copy of Shares Investment (Malaysia edition) at leading bookstores in Malaysia.

Tuesday, January 13, 2009

In my previous analysis on the 27th December 2008, I wrote that there is strength in the Singapore Straits Times Index (STI) with an upper resistance at 1,900 points. The STI went as high as 1,959.95 points on the 7th of January 2009 before descending to 1,776.25 points on the 13th of January. The STI is now on the short term up trend line support level.

The STI is expected to rebound from this trend line support level and test the 1,900 points resistance level again. With the strong bullish momentum indication from the RSI, there is a high chance that the STI may be able to go beyond the resistance level and perhaps test the longer term 90 day-moving average is currently at 1,977.

However, if the STI breaks below the 1,700 points support level, then we may expect the STI continue its down trend. The support level is the support level of a correction pattern (triangle) in the long term down trend.


Daily FTSTI chart as at 12.40 PM (+8.00GMT), 13 January 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.
It has been another month of uncertainty as the year ends and the KLCI traded in a tight trading range with a bullish bias as expected. The KLCI traded between 835 and 888 points, lower than the previous month’s trading range. KLCI closed at 876.75 points before the new year, and this level is very near to the monthly closes for the past two months. The KLCI came out of this trading range in the new year as the KLCI continues rally upwards and closed at 923.57 points on the 12th of January.

The KLCI is tested the long term 90-day moving average on the 7th of January at 936 points but unable to go above it. I wrote in my previous article that the KLCI may test 940 points. However, it is above the short and mid term 30 and 60 day moving average, which has started to move flat. This means that the KLCI is in a long term down trend correction. The convergence between the KLCI and the RSI indicator indicates that there is strong bullish momentum in the short term up trend.


Daily KLCI chart as at 12.24 PM (+8GMT), 13 January 2009 using NextVIEW Advisor. Click on chart for larger view.

With the strong momentum, the KLCI might be able to test the 940 points resistance level. In the mean time, expect a pull back to 870 points because KLCI is in a overbought level.

Short term target 960
Long term target 550

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.