GOLD Price Support

The gold price shown on the New York Mercantile Exchange Gold chart has unusual behavior. The price behavior is dominated by strong trends which are interrupted by strong support and resistance levels. There are four important support and resistance levels. The lowest of these is located near $790.00. This is not a well defined support level so it is more effective to consider this as a support area.

The next support level is near $885.00. This is well defined and has been tested and retested.
The next support resistance level is near $925.00. This was a strong resistance level in 2008, September and October.

The highest resistance level is near $1000.00 This is an important psychological level. When the American market collapsed in 2008 January this was the peak area for the gold price. The retest of the $1000.00 level again in recent weeks indicates there are significant problems with the American economy.

Support and resistance analysis suggests the retreat in the gold price will find good support between $885.00 and $925.00. There is a high probability of a rebound from this area and a retest of resistance near $1,000. A successful breakout above $1000,00 has a first target near $1,075 and a second target near $1,115. The long term breakout target is near $1,210.

The recent retreat from near $1,000.00 found a support level provided by the uptrend line which started in 2008, November. The retreat has broken the up trend line and normally this is a signal for a new downtrend to develop. A new short term downtrend line starts with the high point on 2009, February 20,. It touches the high point on 2009, March 13. The value of this trend line is now near $911.00.

Three features show a continuation of an uptrend rebound. They are:

• A close above the value of the short term downtrend line near $911.00.
• A move above the longer term uptrend line. Current value is near $915.00.
• A move above the resistance level near $925.00

The first target for a successful breakout above $925.00 is resistance at $1,000.00. A fall below support near $885.00 is bearish. The next strong support level is $790.00. The short term downtrend line crosses the $885.00 support level near the beginning of April. Traders will watch carefully for evidence of a bullish rebound or a continuation of the downtrend. Gold has a confused chart behavior so traders watch for price to move above or below the significant price levels before they take action.

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.

Malaysia KLCI: Rebound to Continue

Market volume was slightly higher this week. Selling pressure has eased and optimistic investors were hunting for bargain stocks on fundamentally strong companies. The KLCI still remains in a down trend. The short to long term averages are currently at 880 points. The averages have been flat this week. The KLCI has created lower short term swings after a coming out of a 3 months correction and the bears claimed victory.

The weak rally has not really affected the bearish momentum. Although indicators like RSI and Momentum have risen, it is still not above the mid-point levels of these indicators. The mid-point level for these indicators is equilibrium between the bears and the bulls. The RSI indicator is at 39.3 and the Momentum is at 97.2. The mid-point for RSI and Momentum is 50 and 100 respectively. The ADX indicator is still increasing showing that the bearish pressure is still strong. The different between the PDI and MDI has started to become narrower now.

Market volatility remains firm this week after expanding two weeks ago. The KLCI has finally rebounded of the bottom band, but still below the middle band. The Stochastic Oscillator has started to increase this week and went above its 3 days moving average. This signals a short term price reversal up. The current rebound looks insignificant on the weekly chart. The weekly MACD histogram is still declining. The histogram measures weekly momentum.


Daily KLCI chart as at 19 March 2009 using NextVIEW Advisor. Click on chart for larger view.

With the positive short term technical readings, I would expect the rally on the KLCI to continue and test the 880 points resistance level next week. Fundamentally, the equity markets are expected to respond positively from the latest economic developments. The short term forecast at 800 points is still valid if the KLCI stays below 800 points. Therefore, my short term forecast of the KLCI is sideways with a trading range between 800 and 880 points. The long term forecast is still bearish as long as the KLCI stays below 940 points. The long term forecast remains at 550 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.

Crude Palm Oil price bullish but waiting for a break out

My last commentary for the Crude Palm Oil Futures (FCPO) was two months ago on 13 January when price of FCPO was at RM1,988 . I'd expect the price of FCPO to climb to RM2,400 to RM2,500 of the FCPO can stay above RM1,800. However, in the next two months, the price traded in a sideway range between RM1,740 and RM2,000. The price if FCPO is currently at RM1,902.

The up trend is very well intact because price is above both short and long term 30 and 90 day moving averages. The longer term 90 day average is at RM1,726. However, the strong momentum last month has started to weaken. The ADX indicator has started to decline and the RSI indicator swings stay flat. Average trading volume for FCPO remains the same as last month.

The price action for the past three months has formed a chart pattern called “ascending triangle”. The triangle pattern indicates that price is in a correction. The correction has an upward bias because of rising support levels (The term “ascending” refers to rising support levels). When the close price breaks above RM 2,000, it confirms the continuation of the up trend, with a price objective of RM2,260, same as the target price I set last month.

The momentum would start to get strong if price breaks and close above RM2,000 and this could push price of FCPO to RM2,260. If price can’t break above this level, expect price to trade between RM1,730 and RM2,000 this month.


Daily FCPO chart as at 16 March 2009 using NextVIEW Advisor. Click on chart for larger view.

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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.

US Dow Jones have to pass through 8,000 to overcome bears

The US market has rallied more than 13 percent after a technical rebound when the Dow Jones Industrial Average (DJI) went to as low 6469 two weeks ago. Yesterday, the DJI rose 178.73 points or 2.5 percent to close at 7395.70 points. Improve housing data led to some investors confidence, causing stocks of homebuilders and banks to climb.

Do not be fooled by thinking that the US market may be out of the down trend. It first need to pass through the 8,000 points resistance level to get out of the bear trend. The down trend of the DJI is defined by a 70 day moving average (see chart) and it is currently at 8,000 points, which was also the previous support level. The momentum of the down trend can only be overcome by a rally above this level. If not, it may just be another pull back of a strong down trend.


Daily DJI chart as at 17 March 2009 using NextVIEW Advisor. Click on chart for larger view.

Yesterday, other indices were positive as well. The broader S&P 500 index went up 3.2 percent to 778.12 and the Nasdaq composite index rose 4.1 percent to 1,462.11. Price of crude oil nears $50.

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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.

VALUE INVESTING – BE CRITICAL WHEN USING BREAK-UP VALUE APPROACH

In times of economic uncertainty, value investing is one of the favourite valuation approaches investors use as it is purportedly one of the safest methodologies. However, investors must be wary and critical before using such an approach because in equity investments, there are no valuation methods without any risks.

With many developed economies already in a recession and Malaysia experiencing practically a pause in growth in 4Q08 y-o-y, investors are likely to be enticed into using this approach for their equity investment decisions.

One of the most popular methods in value investing is to invest in stocks that trade below the liquidation or break-up value. A more aggressive investor would evaluate the prevailing price of the securities against its net assets value (NAV). A conservative investor would assess the current price of a stock against the value of its net tangible assets (NTA).

While NAV refers to the shareholders’ funds item on the balance sheet, NTA removes all intangible asset items including goodwill, deferred tax assets and other intangible assets. The rationale is simply that intangible assets may have lower or no value at all when the assets or businesses of a company (or group of companies) are broken up and sold separately. Further, goodwill such as brand value may have a lower intrinsic value than the reported value on the balance sheet during times when business activities slow down.

While the uncertainty on the value of intangible assets can be addressed by using Price/NTA per share instead of Price/NAV per share, there are also some other delicate issues to consider when using such a valuation method. Whether these issues have been addressed or not remains to be seen.

This relates to the other components of assets, both current and long-term, on the balance sheet. In addition, it also relates to the company’s earnings for the current and future financial years that will affect the shareholders funds.

As far as the writer is concerned, there are three major asset items that may affect the accuracy of using such an approach: receivables, inventories and investments.

Receivables

Receivables are current assets derived from the company selling its goods and/or services on credit terms: it can be listed under trade or other receivables. Under current economic conditions, the ability of a company to convert all the receivables within an acceptable period of time into cash may be questionable. Some of its customers or debtors may no longer be in a position to pay their outstanding debts to the company due to cashflow problems.

One way to overcome this would be to ascertain if the receivables of a company have been rising in relation to either cost of goods sold or revenue over time. For trade receivables, it is important to analyse the receivables turnover, which tells us whether or not the average number of days that credit terms are being settled by trade debtors has risen.

Inventories

Inventories are also classified under current asset items and can be divided into two – raw materials and/or semi-finished products that will be processed into finished products; and finished products that are pending sales. Both have become risky under the current economic uncertainty.

For one, a company may have produced goods based on the previous sales momentum, but the economic slowdown or recession may dampen current and future sales. This may affect the number of months needed to clear the inventories. In addition, slower sales and rising inventory may also impact the use of raw materials and semi-finished products as the company slows its rate of production.

For inventories – finished and semi-finished products and raw materials – that are relatively perishable, write-downs may become necessary when they are not saleable anymore. The same also applies to finished products that become obsolete within a short period of time.

There may be instances when finished products must be sold at prices lower than the production cost to get rid of them before they become obsolete. This can also mitigate unnecessary rising costs for storing the rising quantities of unsold finished products.

Investments and Earnings

Investments, a long-term asset item, may also need to be reviewed under the current economic conditions. Under present accounting standards, the lower of cost or value principle is already conservative. However, an investor must make certain that the reported value of investments on the balance sheet is not lower than the prevailing value, more so if the value may have dropped below the cost as at the reported date and may have dropped further as at the current date.

Current year earnings potential may also affect Price/NTA or Price/NAV of a company. If the company were to report losses during its current financial year, both ratios above will definitely become higher than previously because retained earnings, an item under shareholders funds, will be adjusted downwards. This may explain the abundance of companies already making losses with low Price/NTA or Price/NAV.

It is not the intention of this article to criticise the liquidation or break-up value approach in equity investment decision making. We wish to stress here that investors who apply the Price/NTA or Price/NAV per share approach must also include other related analyses such as analyzing relevant financial ratios and expectation of current and future earnings before making a value investing decision.

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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) March 2009. You can get the latest copy of Shares Investment (Malaysia edition) at leading bookstores in Malaysia.

Price of Gold strong resistance at or before US$936

In my last article, I suggested that support would surface around 880, as I expected the down move that occurred. The market itself has declared I found support, short term, at 891. instead of 880.

Most likely the upward bounce from this level will run into strong resistance at or before 936, after which a further decline should be anticipated.

From one point of view the larger chart pattern appears to be an unconfirmed classic ‘Head and Shoulders’ formation. It will only be confirmed and tradable as a Head and Shoulders pattern if and when the price of gold drops convincingly below the rising trend line. For that, we must wait and see. (not all lines applicable to a head and shoulders are drawn).



TECHNICALS

Stochastic – oversold
MACD – moving into bearish territory
MACD Histogram – diverging with price, suggesting upward pressure is present in the market.
R1 - immediate resistance between 936-945.
R2 – resistance zone between 980 – 1006.
S1 – support between 891.50 – 874.
S2 – distant support at 800.

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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.

KL composite Index downward rally expected to continue

The KLCI closed at 838.39 points, 3.55 percent lower than the previous corresponding week. The trading range was 27.7 points, between 836.51 and 864.20. The previous corresponding week trading range was only 8 points. The volatility is caused by the selling pressure. The volatility started to expand when the KLCI broke the support level of the correction 2 weeks ago.

The down trend on the KLCI continues with more selling pressure in the short term. The short to long term 30 and 90 day moving averages are currently near the same level and heading downwards. Momentum indicators are still showing very strong bearish strength. The RSI indicator continues to dive and is now at the five months low, although price is just at three months low. The ADX indicator is also indicating that there is no slowing down in bearish pressure. The PDI and MDI in the ADX indicator are still diverging.

I have mentioned earlier that the market volatility has increased and this is supported by the expanding Bollinger bands. The KLCI continues to stay at the bottom band. A rebound was expected but did materialize last week because of heavy selling pressure. The Stochastic Oscillator is at the oversold range but no signs of price reversal.

Daily KLCI chart as at 12 March 2009 using NextVIEW Advisor. Click on chart for larger view.

The KLCI is currently at three months low and is likely going to test the 5 months low at 800 points but a technical rebound is expected early this week because of the market being technically oversold. Furthermore, the US equity market has started to rally upwards in the past few days with banking stocks leading the market. The Dow Jones Industrial Average closed above 7,000 points level after staying below it for about two weeks. This provided some confidence in the market, not only locally but globally.

The KLCI is expected to face strong resistance especially at 880 points level. Generally, I think that the market is going sideways next week. The long term forecast is still at 550 points as long as the KLCI stays below 940 points. Do not be too excited with the positive developments in the US because bears are still in control of the market and they would for opportunities to sell whenever the market rally upwards. I’d expect the rally to be short. For the US market, the Dow Jones Industrial average s expected to rally the to the next resistance level (previously a support level) at 7,400 points.

KLCI Short term target (3 months): 800 points
KLCI Long term target (9 months): 550 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.

Come and visit Benny Lee at ATIC Kuala Lumpur on the 14th and 15th of March 2009

FOREX: Euro Dollar has strengthened against the US Dollar

At the time of writing, the Euro dollar has strengthened against the US dollar, and may have potential to strengthen more in the near term. However, just today the market rose to a level of relatively strong resistance.

No important previous highs have been exceeded so far in the Euro’s rise, which makes somewhat vulnerable to areas of resistance. The resistance is appearing at 1.2780, very near to the R3 level mentioned in last week’s column.

A combination of forces at 1.287- is what the market is reacting to. Firstly, there is a one month old declining trend line precisely at that level as well as at least five Fibonacci ratios virtually piled on top of each other.

While the bearish reaction at 1.2870 was predictable it’s not yet clear how far the bears can push the market down.

A drop below 1.2700 would likely cause a decline that would test the low at 1.2455. On the other hand, a close above 1.2900 would likely send the market up to between 1.3000-1.3100.



TECHNICALS

MACD – rising strongly
Stochastic – rising strongly
EMA20 – rising slight, and below the current price

R1 – immediate resistance at 1.2870
R2 – zone of resistance between 1.3000-1.3100
S1 – immediate zone of support between 1.2715 – 1.2630
S2 – distant support at 1.2455

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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.

Come and visit Don Schellenberg at ATIC Kuala Lumpur on the 14th and 15th of March 2009

Oil Price Consolidation

The NYMEX (New York Mercantile Exchange) Crude Oil chart shows a consolidation pattern following the substantial fall in prices in 2008. The consolidation pattern is a sideways trading band that is defined by long term support and resistance levels. This type of consolidation pattern is also developing in many commodities. The consolidation pattern does not automatically lead to the development of a new uptrend.

The lower level of the trading band is near $32.00. This level has been tested several times in recent weeks. This level is also a strong historical level.

Currently trading has been limited to a price range between $32.00 and $50.00. The $50.00 level does not have any historical significance so there is only temporary resistance near this level. The Guppy Multiple Moving Average (GMMA) relationships on the daily chart show the long term group of averages are beginning to compress and turn upwards. This is a leading indicator of a developing bullish trend change.

A strong resistance level is located near $56.00 and this defines the upper edge of the trading band. This was a very strong support level between 2005 and 2007. In a bear market it is the previous support levels that become very powerful. They act as new resistance levels when the downtrend changes to an uptrend. The fall below $56.00 in 2008 November, established $56.00 as a strong resistance level.

The width of the trading band is $24.00. This value is used to project upside targets for any breakout above $56.00. These targets are located near $80.00. This is a low probability target because there is a very strong resistance level located between $68.00 and $70.00. This level provided resistance and support from 2005 to 2007. This is also equal to the lower edge of the long term GMMA applied to a weekly chart.

The width of the band is also used to project down side targets. These are located near $10.00. The consolidation behaviour suggests there is a lower probability to a move towards $10.00. Consolidation indicates the strength of the downtrend momentum has become weak. Price may dip temporarily towards $26.00 which is a very strong historical support level.

The GMMA relationships show a bullish bias for activity inside the trading band. This suggests there is a high probability trading will continue to move in a rally and retreat pattern between $32.00 and $58.00. This is a move of nearly 80% and offers good trading opportunities. The behaviour in coming weeks will include stronger and higher rallies which tests the resistance level. The price retreats will be less and have a low probability of reaching support at $32.00. The price retreats will develop rebounds from higher price levels and this shows the bullishness of the 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.

Come and visit Daryl Guppy at ATIC Kuala Lumpur on the 14th and 15th of March 2009

KLCI set new direction - downwards

The KLCI has broken the support level of a “wedge” chart pattern at 880 points. The three months old wedge pattern indicates correction. This simply means that the correction in the major down trend in the past three months has ended and the outcome is that the bears have beaten the bulls. The momentum of the trend has also turned bearish, but not strong. The short term 30-day moving average has started to turn bearish since late February and is now in the same trend as the long term 90 day average. The Relative Strength Index (RSI) indicator has started to create new lows and the weekly MACD has been down for three consecutive weeks.

Market volatility has also changed with stronger bear strength. The Bollinger Bands, which monitors market volatility, has just expanded on the downside. When market volatility expands, price is expected to move into a direction and in this case, downwards. Market volume has started to increase marginally higher in the last two weeks as compared to the previous weeks. This means that there is some selling pressure.


Daily KLCI chart as at 6 March 2009 using NextVIEW Advisor. Click on chart for larger view.

Warren Buffet once said “Be greedy when others are fearful and fearful when others are greedy”. Mr. Buffet has started buying months ago when there was panic selling. However, price continues to fall. I believe that the fear is not over and there should be another round of fear coming. In a statement recently, he mentioned that the US economy fell off a cliff. Buffet who is still optimistic with the future outlook has not regret buying into the market and encouraging investors to also do so in October. The Dow Jones industrial average has fallen from 8,852.22 to close at 6,626.94 on Friday. Buffett stands by his overall advice that owning stocks over time will profit people greater than so-called safe investments. Well Mr. Buffet, we do not have deep pockets like you do.

Now that the KLCI has broken the 880 points support level, it has set a new direction in the short term. It looks like the 940 target for the first quarter is fell short by 3.37 points as the KLCI went to a high of 936.63 on the 7th of January. The wedge pattern has a price objective at 740 points. Therefore the short term target is 740 points. The long term target remains at 500 to 550 points. The price map below shows the direction forecast short term (in blue) and the longer term (in red). Both forecasts are valid as long as the KLCI remains below 940 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.

Come and visit Benny Lee at ATIC Kuala Lumpur on the 14th and 15th of March 2009

Pric of Gold has good chance od breaking below $880

The price of gold moved through last week’s first level of support at 930, not before spiking up to nearly 988, and then retreating rapidly down again.

As I write, the market is reacting slightly to the 50% level of the price wave that began on January 15th at 801.50 and ended on February 20th at 1007.70. At the moment the upwad reaction to the 50% level seems weak, so I expect that at most, within a few days the market will reach 880.

Support at 880. should cause a more dramatic rise in price. Old support is in this area, as well at the rising trend line and a confluence of several Fibonacci ratios. Short term the market is oversold. Will the support around 880. be enough to send gold spiraling to a new high. Probably not. There is a very good chance that support at 880. will be broken within the next several days or weeks, in which case the 700. level could come into play once again.


Daily Gold chart as at 5 March 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
Stochastic – over sold
NextView RSI – in negative territory, rising slightly
EMA 20 – at the R1 resistance level and flattening out.
R1 – 930.
R2 – a resistance zone between 986. – 1007.
S1 – 880.

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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.

Come and visit Don Schellenberg at ATIC Kuala Lumpur on the 14th and 15th of March 2009

FOREX: USD/CNY Analysis

Once again there has been very little movement in value of the USD against the RMB.

There was a minor test of last week’s R1 level, which failed. For the moment the market appears to be quite comfortable in it’s fairly narrow trading range between the R1 and S1 levels identified on the chart.

There has been a slight upward pressure on the market which has not yet dissipated. A new break above R1 could potentially target R2. If that does not happen, expect more of the status quo.


Daily EUR/USD chart as at 5 March 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

NextVeiw RSI – flat
Stochastic – overbought level, and turning down slightly
EMA20 – flat
Bollinger Bands – flat and defining current levels of support and resistance
R1 – nearby resistance at 6.8340
R2 – 6.8500
S1 – support at 6.8130
S2 – 6.7925 (not shown on the chart)

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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.

Come and visit Don Schellenberg at ATIC Kuala Lumpur on the 14th and 15th of March 2009

Forex: EUR/USD Analysis

In last week’s commentary I proposed two scenarios of market movement. The first one was preferred and that is that the market was in a correction against the down trend and that the market should continue downward and break below the February low of 1.2512. The market indeed did that and in fact reached a low of 1.2455 on March 4th.

I suppose a question arises – “Why have two scenarios?” My philosophy is that every trader and investor should have at least two views of potential market movement. One of those should be a ‘preferred’ view, based on the weight of evidence that the market provides on the chart. But since there are no absolute certainties in the market, the best we can have is ‘high probability’.

The alternative view only comes into play when the market itself provides the evidence that the preferred scenario is no longer viable and must be dismissed.

Traders can only be successful when they have a strong enough view to put money at risk in a trade, but are flexible enough to exit a trade and adapt to new circumstances, when the market proves that the preferred view is wrong.


Daily EUR/USD chart as at 5 March 2009 using NextVIEW Advisor. Click on chart for larger view.
TECHNICALS

R1 – nearby resistance at 1.2262. Last week’s first level of support is this week’s first level of resistance. Evidence is mounting that this level will soon be exceeded to the upside.

R2 – The second level of resistance is around 1.2780
R3 – 1.2880
R4 – 1.3000 – any strong close above this level will indicate that a new rally is underway, if not a major reversal.

S1 – a zone of support between 1.2510 – 1.2500. A close below this zone of support would mean a resumption of the down trend, next targeting 1.2400.
S2 – 1.2400 (not shown on chart).
MACD – flat
Stochastic – rising from it’s over sold level.
EMA 20 – sloping down
NextView RSI – flat in negative territory.
Pattern – the current price pattern which has been developing over several weeks may still imply a near term down trend, as long as R2 in not exceeded to the upside.

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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.

Come and visit Don Schellenberg at ATIC Kuala Lumpur on the 14th and 15th of March 2009

China: Support Test on Shanghai Index

The Shanghai Index continues to retreat strongly after the very rapid breakout above resistance near 2300. There was a high probability this retreat would develop. There was also a high probability the new up trend line would not provide strong support. This up trend line starts with the low of January 13. It was tested several times around February 20. Recently trend lines have not been reliable so this was a low probability support area. This also suggests that trend line analysis will continue to be unreliable in many stocks.

This strong retreat from 2402 has confirmed the position and importance of fan trend line 6. The fan trend line pattern is a long term market reversal pattern and usually has between 5 and 6 fan trend lines. Each fan trend line acts first as a resistance level and then as a support level.

Fan trend line 6 will now act as a resistance level. An index rebound from support and a move above fan trend line 6 will confirm the beginning of a new long term uptrend. Fan trend line 6 is the final fan trend line in this pattern and confirms the market is developing a new long term uptrend.

The developing pattern of support established the foundation for the up trend continuation. The most significant support area is the old resistance level between 2000 and 2100. This is now a very important long term support area. Strong support in this area has the potential to develop a strong rebound and successful test of fan trend line 6. The rebound from this area could develop very strongly and move quickly above the resistance level created by fan trend line 6. These are not Gann fan lines.

The Guppy Multiple Moving Average (GMMA) relationships show good long term support for the trend. The short term GMMA has compressed and turned down. The long term GMMA continues to move upwards and is showing little evidence of compression. This suggests investors are buyers in this market. They see the index retreat as a buying opportunity. Investors are developing confidence in the market.

The short term GMMA could dip into the long term GMMA as the index tests the 2000-2100 support level. The GMMA relationships show developing trend strength. A successful test of the long term GMMA will confirm the trend breakout and continuation. The GMMA relationship shows there is a low probability the market could fall below support at 2000.

Failure to move above 2300 before the beginning of March shows the trend continuation will be slower and more difficult because the index must rise above resistance from fan trend line 6 and also resistance at 2300.



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.

Come and visit Daryl Guppy at ATIC Kuala Lumpur on the 14th and 15th of March 2009

Even world's greatest investor is not spared from the US financial meltdown

World's greatest investor and one of the richest men in the world Warren Buffet said that he did some dumb things in 2008 investment that saw his share price lose almost half its value in one and a half years. In his annual letter to Berkshire Hathaway shareholders, Warren Buffett says he did some "dumb things in investments". Buffett also predicts the economy will "be in shambles throughout 2009.



Those who have invested in his company after 2004 and hold till today incue loss in capital. Those who invest in early 2008 loses up to half of their capital!

From CNBC:

The mistake of commission: buying a large amount of ConocoPhillips stock just as energy prices were near their peak. Buffett writes, "I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year." He still thinks oil will eventually go well above its current $40-$50 range, "but so far I have been dead wrong." Even if energy prices do rise, "The terrible timing* of my purchase has cost Berkshire several billion dollars."

Buffett also reveals that he spent $244 million for shares of two Irish banks that "appeared cheap" to him. At the end of the year, they were written down to their market price of $27 million, for a loss of 89 percent, and they've continued to drop.

The letter also reveals a 9.6 percent decline in Berkshire's book value per-share last year, making 2008 the company's worst year since Buffett took over in 1965. Book value fell by $11.5 billion during the year. There has been only one annual decline before this one. In 2001, book value fell 6.2 percent. "By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game."

Read more here from CNBC

They are not spared from laying-off staffs too.

Berkshire reduced staffing last year in half of its nearly 80 operating units, and said more job cuts were coming in an economy unlikely to recover before 2010.

* Maybe he should consider technical analysis?.....

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N.I.N.E.

Stock Market Indices Analysis and Updates

US Dow Jones Industrial Average (6,763.29): I have recently comment that the US is heading towards 6,000 points. Click here to read the analysis. In the longer term, it may even go as low as 5,000 points.

Kuala Lumpur Composite Index (868.74) I have made many comments on this market where I live in. It has a long term target of 500 to 550 points. For now, my guess is that the KLCI may test 800. Click here for the analysis.

Singapore FT Straits Times Index (1,528.51): In my previous article on 2 February, I have mentioned that the STI is heading towards 1,600 points. Now that it is already there, I need to analyze further. The STI may start to test the 1,470 points low. The FTSTI has resumed its down trend as the short term 30 day average which was up in the past 2 months has started to decline. The short to long term averages are declining now. The momentum indicators like RSI have declined below the 50 level. The benchmark index is set to test the 1473.77 points low which is a five and a half years low. It may also even test the 10 years low at 1,200 points if there are no changes in the current economic and financial crisis.



Hong Kong Hang Seng Index (12,033.88): My last article was on 20 January 2009 and mentioned that the HSI has a technical target of 8,800 points. The short term 30-day moving average has also declined since and signaled a continuation in the long term down trend. Despite an increasing bullish momentum as indicated by the RSI indicator, is still can’t past through the 50% mark. With weak bullish support and weakening fundamental data, the HSI is expected to continue to fall further to the next support level at 10,600 points.

Japan Nikkei 225 (7,229.72): My last analysis for this market was on 19 January 2009. I have mentioned that a break below the crucial support level may send the Nikkei to a technical target of 5,500 points. Technical indicators have started to show bearish momentum from neutral. The crucial support level is 7,000 points, which is where the index is heading now. A break below this level means that the index has made a new 26-year low.

Thailand SET Index (413.09): My last analysis was on 20 January 2009. I mentioned that the SETI is expected to move sdeways and if the SETI breaks below the support line of 380, the down trend may resume to test the next support level at 320 points. The SETI managed to hold between the trading range mentioned in my last article but a strong momentum downwards has just started after heavy sell down in the US and Europe market.

Vietnam NV Index (241.46): The VNI is currently at 4 years low. My last article was on January 14 where I mentioned that the VNI is in a weak down trend. The support at 284 points wasn't able to hold the selling pressure and price continues to dip. Next Support level is at 220 points and if still this support level can't hold we are looking at the support level at 130, which is is the lowest since October 2000.

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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.

Come and visit Benny Lee at ATIC Kuala Lumpur on the 14th and 15th of March 2009

U.S. Dow Jones Falling Down, Falling Down, Falling Down;

Singing in the tune of "London Bridge is Falling Down"

U.S. Dow Jones Falling Down, Falling Down, Falling Down,
U.S. Dow Jones Falling Down, everyone is worry,

Build it up with stee moo lus, stee moo lus, stee moo lus,
Build it up with stee moo lus, Obama says "hurry",

Stee moo lus will crash and burn, crash and burn, crash and burn,
Stee moo lus will crash and burn, there goes my money,

U.S. Dow Jones Falling Down, Falling Down, Falling Down,
U.S. Dow Jones Falling Down, so does economy.

US Dow Jones Industrial average plunged almost 300 points or 4.24% to close at 6,763.29 points, lead by steep falls in banking shares. AIG posted a record US$61.7 loss and the goverment is likely going to pump in more money, which raised concerns about the extent of damage to the financial system.

Dow to fall to 6,000? read article here from Benny Lee on the 24th of February and here from Daryl Guppy on the 26th of February.

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N.I.N.E.

Malaysia KLCI - Path Still Not Decided

Bearish resistance has prevented the KLCI to go above 900 points last week. Despite the strong promise made by US President Barack Obama to revive the financial industry and economy, the markets reacted negatively as the economy is going to a record deficit spending. The US benchmark Dow Jones Industrial Average (DJI) fell to its lowest since May 1997 bringing the stock market back to 12 years ago. The DJI is currently at 7,270 points and I am expecting it to find the next support level at 6,000 points in the intermediate term. The KLCI continues to stay below 900 points at 890.67, trading between 883.81 and 898.74 points last week.

The Malaysian market is still pretty much in a correction. Technically, the KLCI is still in a “wedge” chart pattern that looks like a triangle. The market I still hesitating to move into a direction. It has already been more than three months. The short to long term averages have started to converge and the KLCI is trading within these averages, confirming the sideway market. However, the long term trend is still down because the 90-day Moving Average (90SMA) is still declining. The market is at a crucial point of time. Momentum is still neutral as indicated by the Relative Strength Index (RSI) which has been hovering around its 50% level.

The market volatility continues to contract further. The Bollinger Band width is not expanding yet. The market is being pressured from both sides. The tightening of the Bollinger Bands and the Wedge pattern which is nearing the apex confirms this. We are still waiting for a breakout. A breakout above resistance level of the wedge pattern would indicate that selling pressure has eased and price is expected to rally. However, a break below the support level of the wedge pattern would indicate that the buying support is over and price is expected to continue the down trend.


Daily KLCI chart as at 27 February 2009 using NextVIEW Advisor. Click on chart for larger view.

The market is still divided over the direction of the market. One third is convinced that the economic stimulus packages can turn the financial market and economy around and the other one third is not convinced. The last one third just has no idea. The path is still not decided. There is also no evidence yet on which direction the market is expected to head at least until it breaks the support or resistance level of the corrective wedge pattern. The wedge support and resistance level is at 880 and 910 points respectively.

We will wait for further developments in the market to determine the direction the market is heading. A break below 880 points would see the KLCI making its way to test the 800 points support level created in October last year. If it breaks the 910 resistance level, I would expect the KLCI to find strong resistance at 940 points. Therefore the potential upside is less than the downside. Since the major trend is still down, the bias is at the downside. The long term target still remains at 550 points as long as the KLCI stays below 940 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.

Price Of Gold Support level at US$930

A week ago, gold had risen to a resistance zone near the July 15/08 high of 989.60. As suggested, downward pressure and profit taking have indeed driven the market down to its’ current value of 953.30.

Important support is nearby the current price – around 930. It’s probable that gold will reach this level before making a new high above 1,008. The next few days will likely produce sideways activity in the market.


Daily Gold chart as at 26 February 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

R1 – nearby resistance between 983. – 992.
R2 – 1,008.
S1 – a nearby support zone between 930 – 918, with 918. being the most important.
EMA 20 – supporting the market.
SMA 200 – around 860. The longer the market remains below 1,008., the more the market will be attracted to the region of the 200SMA.
Ichimoku Kinko Hyo – This is included because of its’ uniqueness. It shows support in the general area of the 200 day moving average.

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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.