Friday, October 23, 2009

After making a new high since June last year at 1,270.44 points, the FBMKLCI pulled back to close at 1260.02 points on Thursday with a relatively lower volume. The benchmark index still managed to close positively from last week with a modest gain of 13.16 points or 1%. There were profit taking activities in the past two days but the pressure was not high to cause the market to decline substantially. The KLCI traded between 1,247.18 and 1270.44 points in the past five days. There were not much news or financial data released last week and all eyes and ears are focused towards the national budget on Friday.

The average daily trading volume was 1130 million shares but volume declined sharply in the past two days with a daily average of 887 million shares. Investors were staying out to wait and see the outcome of the national budget which is expected to be broad-based. Prices of commodities keep soaring as the US dollar plunges further. This worries investors because high commodities prices may dampen economic growth. Regional market performances are mixed and are starting to feel stronger resistance.

The US Dollar is still weakening against major currencies. The Euro dollar is now EUR$1.50 to a US dollar. It has increased 3.4% in less than a month. However, it has strengthened against the Malaysian Ringgit last week. The weak US dollar has pressured commodities prices to climb higher. Gold continues to stay at US$1,060 an ounce while crude oil has gone above US$80 a barrel. Prices of rubber futures in TOCOM and crude palm oil futures in Bursa Malaysia have also risen to JPY225.00 a kg and RM2,210 per metric ton respectively.

The market continues to stay in an uptrend. The FBMKLCI is still being supported strongly by the short and long term uptrend. The rally in October is stronger than the rally in August. The momentum indicators are showing stronger bullish momentum in this rally. The RSI and Momentum indicators pivot highs are higher than the previous pivot highs. The MACD indicator continues to stay above its moving average. There is still little room for the market to move higher because the resistance level is at the range between 1,280 and 1,300 points.

The market volatility remains the same as last week with the Average True Range (ATR) indicator indicating an 8.5 points daily range. The index is still hovering at the top band of the expanding Bollinger Bands which also measures volatility in the intermediate term. This also means that the distribution of price in the past one week is on the high side. This confirms the momentum indicators which indicated strong bullish strength.


Daily FBMKLCI chart as at 22 October 2009 using NextVIEW Advisor


The market has almost fully recovered from the 2008 bear trend and there is still no major correction since the rebound in March this year. It took nearly more than three years (2004 – 2007) for the FBMKLCI to climb from 800 points to 1,260 points and less than a year for it climb the same this year. We have been waiting for at least a major correction to happen but the market is just bulldozing through resistance levels. Analysts, fundamentalists and chartists alike, including yours truly have been revising the resistance levels higher a few times this year. Can the resistance be broken again this time?

Chances of the index testing this level are high but there is low chance that it will stay above it and rally further without a proper correction. The resistance level I talked about since last month is 1,280 to 1,300 points. The market is not expected to immediately turn bearish either, because the leading indicator, the Ichimoku Cloud is still widening and market is supported well. The market may struggle to move higher this week. The immediate support level is 1,220 and if this level is broken, then the market may move lower for correction with the next support level at 1,160 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.

Thursday, October 22, 2009

Who follows and who leads in markets? The answer is surprisingly different to the answer most people assume is correct. Intermarket technical analysis is a useful strategy tool for asset allocation. It’s also a useful tool for working out what may happen in the future. It’s too easy to look at markets in isolation, or to use outdated assumptions about market relationships. This is lazy thinking and in a changing market environment it can cost a fortune.

We publish hundreds of charts each year in our financial newsletter publications and in columns for international and Chinese financial media. The chart below is the probably the single most important chart you will see in 2009. You will need to put aside lazy thinking and assumptions to fully understand it.

This is not a technical chart. It’s a combination of 3 indexes, each displayed as a single line. Unlike many comparative charts the indexes have not been rescaled to a single starting point so we can see relative performance in percentage terms. This is not significant.

The charts have been time adjusted so it is easier to compare the behavioural characteristics of the three markets. We use the Dow Index and the Australian ASX S&P 200 XJO index as representative of markets outside the US. The DOW and XJO charts have been time shifted to the left so the absolute market lows of March 2009, match the time of the absolute market low in the Shanghai Index in October 2008. This type of time shifted display clearly shows which market is a leader and which markets are followers.

This chart display confirms that 2009 has seen the most profound change in market dynamics in more than half a century. Put simply, China leads and the DOW follows.

The blue line shows the performance of the DOW index.
The black line shows the performance of the Australian ASX S&P 200 XJO index.
The red line show the performance of the Shanghai Index.

The DOW is now at 10,000 but how important is this in terms of global market behaviour? The DOW is following the behavioural leadership of the China market. The 10,000 equivalent for the Shanghai Index is 3,000. The Shanghai market reached this level and briefly powered above it before developing a trend correction. The Shanghai Index remains in trend correction mode and is using price and time corrections. The price trend correction is the sudden index fall of between 15% to 20% from 3480 to 2750. The time correction for the trend is the extended sideways movement over the past 10 weeks. The important relationship is not the comparative percentage returns, but the comparative behaviour.

We need to watch carefully because there is a high probability our markets and the US market will follow this China market leadership behaviour with a lag of several months. This suggests a trend price correction in the order of 10% to 15% followed by a period of sideways trading as the market applies a further trend correction using time.

Analysing and understanding China market behaviour is absolutely critical to any market strategy. China leads, the DOW follows the behaviour and other markets tag along further behind. Watching China gives investors a glimpse of the potential future. It is absolutely essential to developing any long term portfolio investment or planning.

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, October 19, 2009

The Nikkei has two important features. They are best seen on the weekly chart. The first is the series of trading bands. These provide support and resistance levels. This pattern of behavior is similar to the patterns seen with many other regional indexes, but the Nikkei is less developed. The upper edge of the current trading band is near 10400. The market consolidated in this area and is now retreating from this resistance level. The lower edge of this trading band is near 9000 and this is the new downside target. Traders will look for support consolidation in this area.

The second feature is the uptrend line starting from the March low. The position of this line was confirmed when the market developed a successful breakout above the long term downtrend line. The drop below the new uptrend line is bearish. This uptrend line intersects the trading resistance band level. The failure of the market to push above this level and to remain above the uptrend support line sends a stronger bearish message. There is a low probability of a rally rebound developing prior to a retest of support near 9000. There is also a low probability the market will easily move above the resistance level near 10400.



The trading band extended from near 7500 to 9000. The trading band is used as a projection method and sets an upside target near 10400. This is a nominal target because it does not coincide with any previous support or resistance level. However it has proved to be a more significant resistance level than the historical 10,000 resistance level.

Regional markets have moved in double trade band projections. Using this method the next resistance level is near 11800. This is near to the strong historical support resistance level at 12,000. The rapid market fall from near 12,000 suggests there is little resistance to a rapid rise in the market. Once the market is above to move above 10400 here is a high probability the market will move quickly and smoothly to 11800 to 12000.

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.

Saturday, October 17, 2009

When I was studying in graduate school in the 1960s there was a big debate among economists: Which version of macroeconomics best described the world, Keynesian or Monetarist? The Keynesians claimed that fluctuations in aggregate demand determined output, monetary policy was not very important, and fiscal policy is what is needed to pull the economy out of a slump.

Monetarists, on the other hand, believed that erratic monetary policy was the most important source of fluctuations and that, by stabilizing the money supply, the central bank could limit the severity of recessions and prevent a depression such as the U.S. experienced in the 1930s.

Economists, unlike scientists, cannot run a series of controlled experiments to pick a winner. We had to wait 70 years for another financial panic of the magnitude that hit our economy in the 1930s to shed light on the question.



Keynesians Start Well

Keynesians assert that business cycles are caused by changes in aggregate spending behavior. When businesses and consumers are optimistic, they increase their spending and the economy flourishes. When they are pessimistic, spending falls and the economy slips into recession.

This latest crisis was indeed preceded by a period of optimism, particularly in the housing sector. When housing prices soared, many homeowners felt wealthier and increased their consumption. Some believed that they were destined to be able to use their houses like ATM machines, cashing out their home equity as real estate prices rose.

But when the increased supply of housing overwhelmed demand, the euphoria broke and home prices fell. This led to the largest decline in consumption since the end of the Second World War. The cause of the recession was quite Keynesian in nature.

Monetarists, on the other hand, came up short on the cause. The supply of money and credit continued to advance before the financial crisis. In fact, in the year leading up to the start of the recession in December 2007, the money supply increased at a faster pace than in either of the two preceding years. Although some claimed that the cause of the housing bubble was the Fed keeping interest rates too low too long, it is the money supply, not interest rates, that Monetarists watch.

Monetarism finishes Strong

But on the subject of the policies to get us out of the crisis, the Monetarists shine much brighter. Milton Friedman's monumental work, "A Monetary History of the United States", argued that whatever caused the Great Depression of the 1930s, the downturn was made much worse by the Fed's failure to aid the credit markets. In the early 1930s, as the economy worsened, millions of depositors tried to withdraw their funds from the banks (there was no deposit insurance at that time). Although Congress created the Federal Reserve so that it could provide emergency reserves, the Fed did nothing, and billions of dollars of deposits were lost. The money supply fell sharply, and virtually all financial activity ground to a halt.

The fall in the money supply instigated a huge deflation that hit not only in the stock market and real estate but also commodities. The consumer price index dropped 24 percent between December 1929 and December 1932. The collapse in the price level worsened the burden of debtors and added to the already sharply rising level of defaults. Friedman claimed that if the Fed had prevented the collapse of the banking system and stabilized the money supply, deflation would have been avoided and the Great Depression would never have happened.

But Keynesians objected. Keynes claimed that the forces of deflation would have overwhelmed the central bank, leaving it powerless. Once interest rates hit zero, monetary policy no longer could stimulate the economy since negative interest rates are impossible. Keynes called this situation "The Liquidity Trap" and claimed that, under these circumstances, only fiscal policy -- tax cuts and massive increases in government spending -- could prevent a recession.

A Test of the Theories

Although the Keynesians got it right on the cause of the crisis, it increasingly looks like Milton Friedman and the Monetarists got the solution right. Ben Bernanke, who studied Friedman's "Monetary History", made sure that the Federal Reserve did not repeat the fatal mistakes of the 1930s. He not only reaffirmed the Fed's support for bank deposits but expanded its coverage to money market mutual funds and all business accounts, no matter what the size. Virtually no depositor or money fund investor lost money in this crisis.

The Fed was indeed hampered by the Keynesian Liquidity Trap when the central bank set the Fed Funds near zero at the end of last year. But Bernanke initiated policies to mitigate this constraint. First the Fed lent banks far more reserves than they required, an action called Quantitative Easing. This assured the banks would have sufficient funds to meet any withdrawals. Secondly, the Fed established lending facilities to reduce the soaring interest rate on privately issued debt instruments.

During the Great Depression interest rates on private debt increased sharply because dramatically higher risk premiums were demanded by lenders. Indeed, last year, the libor rate, which is the rate at which banks lend to each other and upon which trillions of dollars of private loans are based, soared after the Lehman bankruptcy. But when then Fed sharply increased lending to security dealers, banks, and non-bank financial institutions, these premiums shrank dramatically.

When the public saw that their deposits and money funds secured, the panic eased, the stock market rose, and consumer confidence improved. The latest data indicate that it is almost certain that the recession ended sometime this summer.

It is true that the Keynesians will claim that the Obama fiscal package of tax cuts and spending is also responsible for the economic recovery. I will concede these policies did stimulate spending somewhat. The Obama package totaled $775 billion spread over two years, but the Fed has lent over $1 trillion in the first six months of the crisis, and stood ready to lend even more if necessary. Fortunately, the Fed is now scaling back its lending as many financial institutions are paying back their loans and reducing their excess reserves.

The Winner?

Both the Keynesians and the monetarists are right. The Keynesian emphasis on unexpected fluctuations in spending did the best at explaining how we got into the crisis. But the Monetarists' claim that preserving the banking system is critical to prevent a recession from becoming a depression is also right.

I am in no way absolving policymakers, particularly the Fed, who failed to see the crisis coming and protect the financial system. But we should be thankful that economic theory provided us a framework that prevented the last recession from turning into something much worse. The biggest winners are not the Keynesians nor the monetarists, but all of us counting on an economic recovery.

by Jeremy Siegel, Ph.D.


N.I.N.E finds this article interesting. The article is extracted from Yahoo! Finance.

Friday, October 16, 2009

The Malaysian equity market extended its rally last week with the benchmark FBMKLCI climbing 16.77 points or 1.36% from last week to settle at 1,246.86 points Thursday. The index has increased 3.26% in a month. The market found resistance on Thursday when the FBMKLCI fell 10 points from the intraday high of 1,256.59 to close at the current level. Market is supported well by FBMCKLI component stocks ahead of the tabling of the national budget end of this week, improving economic indicators and also strengthening of the Malaysian Ringgit.

Market participation has increased significantly last week especially in the last few days of the week. Average daily trading volume has increased 1,063 million shares from 750 million shares the previous week. The surge in market participation was due to positive economic reports and rise in regional markets. The Dow Jones Industrial Average has increased 2.8% in a week. Japan Nikkei 225 index and London’s FTSE increased 4.1% and 1.3% respectively.

Malaysia Institute of Economic Research (MIER) has upgraded forecast on Malaysia economic performance for this and next year following improving macroeconomic indicators, better consumer sentiment (CSI) and business confidence (BCI) indices as well as improving sectoral indices. Malaysia GDP (gross domestic product) for this year is revised to a contraction of 3.3% from a contraction of 4.2% earlier. While for 2010, Malaysia GDP is expected to grow by 3.7%, higher than the 2.8% forecast earlier. Furthermore, the International Monetary Fund (IMF) earlier this month anticipated the global economy to expand by 3.1% in 2010 from a 1.1% contraction in 2009

The US Dollar is still weakening against major currencies and caused US-dollar dominated commodities to continue to increase. Crude oil in the futures market has surged to US$78 a barrel from US$70 a week ago. Price of gold went as high as US$1,070 an ounce before settling at US$1,050. Japanese Yen-dominated rubber prices in TOCOM remained the same as the following week at JPY$215 a kg. Locally, the price of crude palm oil also increased from RM2,030 per metric ton to RM2,110 although the Malaysian ringgit is strengthening. This is because demand for palm oil in Europe, China and India remains strong. The price of this commodity went as high as RM2,196 last week.

The equity market continued to be supported even in the short term. The FBMKLCI continues to stay above the short to long term 30 to 90 day moving averages. The market was last supported by the short term 30-day moving average about a month ago. The uptrend is supported by a good bullish momentum. The RSI, Momentum and MACD indicators are still increasing since the rally a month ago. In the longer term, these indicators are also indicating a good bullish momentum as these indicators are making new pivot highs. Therefore, there is a high chance that this upward rally is going to continue.

Market volatility remained firm with the FBMKLI traded in an 8.4 points range on a daily basis, based on the Average True Range (ATR) indicator. The volatility was almost the same as the previous week’s daily average range. The distribution of price however is on the upside as FBMKLCI continues to stay at the top band of the expanding Bollinger Bands. This confirms the bullish momentum. The mid band of the Bollinger bands, acts as the average or equilibrium between the bulls and the bears is currently at 1,222 points.

The market made new highs as expected and the immediate support level is revised to 1,200 points when the 1,230 immediate resistance level is broken. The immediate resistance level is now at 1,260 points and a stronger resistance level is between 1,280 and 1,300 points. With the current momentum, there is a high chance FBMCKLI climbing to this stronger resistance range. However, if the market fails to make new highs and the FBMKLI falls below the 1,200 points support level, then the market may move further into correction to the next support level at 1,150 points.

The leading Ichimoku Cloud indicator started to expand a little bit after contracting for about two weeks. This shows that the market still has good support and can be supported well in the near future with the current momentum. Therefore, the equity market may continue to move upwards at least in the next one month or being maintained above the short term support level.


Daily FBMKLCI chart as at 15 October 2009 using NextVIEW Advisor

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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.

Wednesday, October 14, 2009

Commodities Bull

Prices of major commodities have found its footing in the past few months and the recent price actions and the weakening US dollar set to push prices of commodities to new highs. There are tell-tale signs that global economy is improving (at least that's what the analysts say) and demand for commodities is expected to increase to fuel the economy. Most commodities prices have broken out of the correction zone and I am expecting the bulls to pull the commodities market to fresh highs.

Crude Oil:
The price of Crude oil on NYMEX has just jumped above US74 a barrel, breaking out of the US$65 - US$64 correction range. It has a very high chance to rally into the regions of US$82 - US$85 region in the short term. It may even go to US$91 a barrel in the intermediate term of 6 months.

Gold
COMEX gold performance was extremely bullish as the price continues to make new historical highs. The price of Gold has came out of the correction period in early September and now has a price target of US$1,120 an ounce in the short term based on the triangle chart pattern price objective and US$1,300 in the intermediate term of 6 months.

Rubber
Price of Rubber has rallied quite strongly in the past few weeks and this bullish momentum is set to continue with a short term price target of JPY$230 a kg and an intermediate price objective of JPY$260.

Crude Palm Oil
Price of Crude Palm Oil has also showed strong support in the past two months and the increasing demand for this commodity has cause the price to start climbing. The bulls have just started to pull this market. Price is expected to hit RM2,400 in the short term and even climb to RM2,800 in the intermediate term of 6 months. See more detail analysis here.

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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, October 13, 2009

In my article last month, I mentioned that the price of Crude Palm Oil Futures (FCPO) in Bursa Malaysia which was at RM 2,145 per metric ton at that time may only find support between RM2,000 and RM2,050. The price of FCPO fell to a low of RM2,013 on October 6 and rebounded to close at RM2,085 on October 9. With this close, the price of FCPO fell RM94 or 4% from a month ago. I also mentioned that once price goes to this support level, it may start to rebound and rally at least to RM2,300 in the intermediate term. Now that price is near this technical support area, there is a good chance for buying because risk is low.

The price of FCPO is still in a correction zone of a major uptrend, clearly defined by a triangle chart pattern since May this year. Price is currently below the short to long term 30 to 90 day moving averages. The averages are currently converging and this indicates that the correction may be over soon. The averages are between RM2,150 and RM2,230. Average daily trading volume has slightly reduced to 9,200 contracts last month from 10,400 contracts in the previous corresponding month. Selling pressure in the previous month has eased off.

The support level of the triangle pattern may be broken in mid of September at RM2,130 but the stronger support level, like I mentioned in my previous article is between RM2,000 and RM 2,050. Therefore, it is not considered as a broken support level and the correction is still intact. Currently, the support level remains at RM2,000 and the triangle pattern resistance level is RM2,300. Price is expected to reverse its uptrend if it breaks below the support level or continue its uptrend if it breaks above the resistance level.

Momentum indicators are slightly bullish now with RSI and Momentum indicators inching away above the middle level. The strongest sign of a bullish momentum is the MACD indicator which has just started to cross above its trigger line or its 9-day moving average. The only indicator that still indicates down trend is the ADX indicator. However, the ADX is the most lagging indicator.

The weekly chart shows a bullish reversal Japanese Candlestick pattern called the “Piercing Line”. The last time the chart showed a similar bullish reversal pattern on the weekly chart was on the week of July 17 and price rallied from RM2,120 to RM2,440 in four weeks. With the current pattern, price is highly expected to rebound out of the correction zone and rally upwards.

Price is expected to at least rally the next resistance at RM2,300 and even go higher to test the next resistance level at RM2,400. If the price of FCPO is ablt to overcome these resistance levels, the price of FCPO may even rally to RM2,800, but probably not this year. The forecast is valid only if the price of FCPO stays above RM2,000 and if this support level is breached, price of FCPO may fall further to RM1,900.


Daily FCPO chart as at 10 September 2009 using NextVIEW Advisor

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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.

Friday, October 9, 2009

Markets all over the world rebounded last week after moving into a correction for the past two weeks. The Malaysian market, benchmarked by the FBMKLCI rebounded exactly after testing the Bollinger Bands’ middle band which is a 20-day moving average. The FBMKLCI increased 21.74 points or 1.8% from last week to settle at 1,230.09 points Thursday. Thursday marks the biggest increase in a day for last week’s trading period with a 1% increase. The market is currently testing the immediate resistance level and market participants are optimistic about the equity market outlook.

However, trading volume only increased slightly. The average daily trading volume last week was 750 million shares and the previous week’s average was 662 million. Therefore, not many investors are optimistic and the majority is still staying in the sidelines. The market was spooked by a trading error from a foreign broker on KL Kepong shares which may cost the broker half a million ringgit losses. The market was bullish despite lacking positive leads locally so I guess that no news is good news.

The US Dollar continues to slide against major currencies last week, continuing its down trend. This again has pressured prices of commodities to increase. Price of Gold in COMEX continues to make historical highs and is currently at US$1,050 an ounce, increasing 5% in a week. Crude Oil in NYMEX continues to stay around US$70 a barrel. Rubber futures in TOCOM rose about 6% in a week to JPY$214.80 a kg. However, Crude Palm Oil futures in Bursa Malaysia declined from RM2,115 per metric ton in the previous week to RM2,030.

The benchmark index is well supported by the short term trend. The FBMKLCI continues to stay above the short to long term 30 to 90-day moving averages despite several pullbacks from the uptrend that started in April. A major correction is yet to be seen in this 6 months bullish trend. Momentum indicators are about to turn bullish again after mixed signals last week. The RSI and Momentum indicators are starting to move away from the middle level and the MACD indicator is about to cross above its trigger line or 9-day moving average. ADX indicator has just started to increase again, showing good strength in momentum last week.

The Bollinger Bands started to expand again with the FBMKLCI penetrating the top bands after testing the middle band two weeks ago. The same situation (the expansion) happened exactly a month ago and the FBMKLCI made new highs for the year. Therefore, we may expect the same to happen again and this time the projection is 1,280 points before it finds the next resistance. The average daily trading range is the same as the previous week. The Average True Range indicator which measures the average trading range for past one week is 8 points and is relatively low historically.

The immediate support and resistance are still 1,196 points and 1,230 points respectively. The FBMKLCI is currently testing the resistance level for the second time in a month. The market is set to test newer highs because of the strong bullish reversal and breakout. The next resistance level is between 1,280 and 1,300 points. However, if the market fails to make new highs and the FBMKLI falls below the 1,196 points support level, then the next support level it is going to test is at 1,150 points.

Looking ahead, the leading Ichimoku Cloud indicator continues to contract last week and this indicates that the support for the uptrend is getting thinner. Being a leading technical indicator, a major trend reversal is not expected until the cloud bands cross. Therefore, there is still a chance for the market maintain its uptrend at least for another month.


Daily FBMKLCI chart as at 8 October 2009 using NextVIEW Advisor

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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, October 8, 2009

The demise of the dollar
By Robert Fisk, The Independent

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
Eight weeks ago we said the key figure for the Taiwan index is 7400. This is the long term historical support level and it will act as a resistance level. The market did move above this level but it is now developing a consolidation pattern. The lower long term resistance near 6700 has been overcome and this area will provide support if the market retreats strongly from the lower edge of the consolidation area near 7300. The upside target for a sustained breakout above 7400 is near 8100.



On the daily chart the long term GMMA is well separated and shows good investor support for the developing trend. It has shown relatively little compression as the index retreat developed in early July and again in early August. There is some strong trading activity but it uses the long term GMMA as a support level.

The strength of the trend is shown by the good separation in the long term GMMA. Trend strength has been confirmed as the upper edge of the long term GMMA moves above 7300. A lower edge move above 7100 is confirmation of trend stability and sustainability.

The rapid rise of the trend has stabilised and traders can look for regular rally and retreat behaviour within the context of the longer term uptrend. This is a strong market, but a rapid retreat to support near 7100 is possible.

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.

Wednesday, October 7, 2009

The shipping industry in Singapore may have taken a backlash from the current global economic crisis but this is the industry to watch when the economy recovers and see growth. One of the bigger shipping companies in Singapore, NOL’s share price performance is lagging as compared to other shipping companies and the overall market performance. Nevertheless, its share price has doubled since the low in March. The price trend has moved up steadily with new highs and modest corrections along the way. Its share price has climbed as high as $1.90 before making a correction to the current level at $1.67.

The company net income fell sharply in year 2008 at US$83 million from US$523 in year 2007. Its share price in beginning of year 2008 was around $3.00 (adjusted) and fell to $0.78 in March this year. The share’s highest price was $5.55 on 16 July 2007. Therefore, there is a lot of room for this share price to move upwards as compared to other shares which have recovered more than 50% from the 2007-2008 bear trend. NOL have only recovered about 20%.

The reason why this stock is highlighted is because the price has come near a crucial level. This level acted as important support and resistance in the past four months. In June, this level acts as a resistance and once it was broken in July, it became support in August. This crucial level is $1.60. Since price is near this level, a technical rebound is expected.

Trend is still strong upwards as the short to long term 30 to 90-day moving averages are increasing. The price is in a correction now because it fell below the 30 and 60-day moving averages. However, the price is still above the longer term 90-day average. There is a concern about the current uptrend because the price broke below the uptrend line that existed since March. Technically, when a trend line is broken, the trend is over and a trend reversal is expected. The crucial support level is going to determine whether the uptrend is going to be supported.

The momentum indicators are indicating bearish momentum and this was because of the current correction which is quite substantial. The longer term momentum however is still bullish as the price trend is in convergence with the pivot highs of the momentum indicators that include RSI and MACD. The indicators are still above the middle level on the weekly chart.

There is a high chance that price may rebound at this crucial support level at $1.60. If it breaks below $1.60, the uptrend has failed and may change direction. If the price stays above $1.60 then it may rebound to $1.80 to move back into the uptrend and may even climb to the resistance level at $2.00. Therefore, a low risk buying opportunity exists between $1.60 and $1.65 with a stop loss below $1.60. To overcome price volatility, stop loss should not be lower than the Average True Range (ATR) which currently reads $0.06.


Daily NOL price as at 2 October 2009 using NextVIEW Advisor

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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, October 6, 2009

The Sensex is best seen on a weekly chart with upper resistance levels are easily seen. The most important feature is the uptrend line. The break below this line changed the function of the line. This is now acting as a resistance level for the rising trend. We expect to see the index rise to this line and then retreat from it. Support is provided by the value of the lower edge of the long term GMMA. This is best seen on the daily chart.



The primary resistance level for the current rally is at 17,500. A retreat from this level may develop a sideways consolidation pattern with support round 15,500. The key danger in this trending behaviour is the volatility retreat such as that seen in August.



The daily chart shows good support from the long term GMMA near 16200. The lower edge of the long term GMMA is near 15500. This is a steady and well supported trend. Traders can apply Darvas box trading techniques to buy as new highs and breakouts from new highs are created. The value of the long term trend line is well above the current index activity and this leaves room for fast rallies.

The key feature to watch in any market retreat is the reaction of the long term GMMA. If there is developing indications of compression it suggests trend weakness. Traders need to be alert for a significant test of support. Increased compression in the long term GMMA will confirm a major tests of trend strength.

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, October 5, 2009

Continuing economic developments in this vibrant country has lifted the Vietnam equity market to a new 17-month high. The VN index of HOSE rose as high as 594.32 points before settling at 580.90 points. The 595 points level is a 38.2% Fibonacci level from the 2-year bear trend that started from the highest level in the index in March 2007 to the low in February 2009. The benchmark index rose 34.2 points or 6.2% since last month and has so far risen 146% from the low in February 2009.

The market trend is still strong upwards with the short to long term moving averages increasing. Click here for more and look for Market Insight
The Thai Equity market has been very bullish and is one of the best performing markets again this month. Investors were on broad-based buying spree. The benchmark SETI index even broke and stayed above the 700 points resistance level to close at 717.07 points after hitting a 14-month high at 731.58 points. The index so far has increased 63.82 points or 9.7% since a month ago. The SETI is current hovering around the 61.8% Fibonacci retracement from the bear trend that started from the high in November 2007 to the low in December 2008.


Daily SETI price as at 30 September 2009 using NextVIEW Advisor

The momentum of the trend is generally strong with a little weakness in the short term because of the pullback from the 14-month peak. Most momentum indicators are above the mid level and this means that the bulls are still dominating. The index may test the 700 points support level and a good short term trading opportunity is available here as the market is set to make newer highs with resistance at 795 points because of the strong bullish momentum. If the index is unable to hold above 700 points, then the market is set to extend the correction to the next support level at 650 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.

Rubber futures prices soared to 11-month in mid of September at JPY$218.4 per kg after breaking the JPY$214 resistance level in a second attempt but the rally failed to extend further. Price of rubber futures (RSS3) in TOCOM then pulled back 7% to close at JPY$199 on September 30 lower than the closing price a month ago. Rubber price fell JPY$12.7 or 6.8% month-to-month.

The short term 30-day moving average has started to decline since a week ago but the longer term 60- and 90-day moving average is still increasing. Price of rubber is above these two long term averages but below the short term average. The price action indicates an uptrend correction. The divergence between price and momentum indicators like RSI and MACD shows that the bears are still in control and therefore provide strong resistance for price to move higher.

Support level remains strong at JPY$190 and is this price level is broken, price may fall further to the next support level at JPY$176. If price can still maintain above this support level, there is a high chance that the price may rally to test the JPY$220 high again.


Daily TOCOM rubber futures price as at 30 September 2009 using NextVIEW Advisor

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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 FCPO was not able to stay above the uptrend line last month as price continues to decline. The FCPO price fell RM169 per metric ton or 7.1% to RM2,186 in a month. FCPO and soyoil was going against the other commodities trend as the dollar weakens. The price of FCPO found support at RM2,070. The price has been trading in a range between RM2,070 and RM2,240 in the month of September. Exports were slowing down as inventories were increasing in importing countries amid lower consumption.

For more, click here and look for Market Insight

Friday, October 2, 2009

FBMKLCI: Weaker Momentum

The Malaysian equity market moved into a minor correction after making a 15-month high in the previous week. The FBMKLCI shed 9.71 points or 0.8% in a week to settle at 1,208.35 points Thursday. The local market was rather defensive and did not rally like the rest of the regional markets. Investors and traders were not so confident about the market making new highs and started to take profits. The FBMCKLI traded in a tight trading range between 1,200 and 1221 points last week with a daily average volume of 662 million shares. The average trading volume was 18% lower than the previous week of 813 million shares. Market players are staying in the sidelines.

The FBMKLCI is still in an uptrend. The benchmark index is still above the short term 30-day moving average. The short to long term 30 to 90-day moving averages are still increasing, indicating that the trend is still intact. There is a divergence between the momentum indicators and the FBMKLCI in the longer term. This means that the uptrend since the low in March this year is weak. However, the readings from these indicators are mixed. RSI and Momentum indicators are indicating that the bulls are still in control with reading slightly above the middle level but MACD and ADX indicators signals weaker momentum.

The Bollinger Bands which was expanding in the past three weeks has started to contract as the index moves away from the top band to the middle band, which is the 20-day moving average. This indicator shows that the upward momentum has started to weaken. Market volatility remains the same as the previous week. The Average True Range (ATR) indicator shows that the FBMKLCI average trading range is 8 points.

The immediate support and resistance levels are at 1,196 points and 1,230 respectively. The FBMKLCI is currently in this range and as long as the FBMKLCI stays within this range, the market is expected to trade without any direction and trading volume would decline further. The leading Ichimoku Cloud indicator has started to tighten last week and this means that support is getting thinner. However, we may not expect a major reversal in the next one month.

The indicators are showing that the market is currently at a standstill and this does not bode well with the uptrend. If the market continues to trade sideways, interests may dwindle and market may start to fall when investors and traders start to distribute. The uptrend can only be continued if the FBMKLCI breaks and stay above the 1,230 points with a target of 1,300 points. However, if the 1,195 points support level is broken, more downside can be expected and the next support level is at 1,160 points.


Daily FBMKLCI chart as at 1 October 2009 using NextVIEW Advisor


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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.

25 September 2009. Light Sweet Crude Oil price on the New York Mercantile Exchange (NYMEX) was unable to move higher after it hit a high of US$75 a barrel on the 25th of August this year. Exactly a month later, the price fell US$9.00 or 12% to US$66.0. The short term price trend is now bearish but the longer term trend is still bullish. The 30 and 60 day moving averages have started to decline and the price broke the uptrend line (S1) that was intact since March until a few days ago. However, the longer term 90-day moving average is still increasing.

Continue to read this and other articles/commentaries in the Market Insight newsletter.

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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.

Gold Price Analysis

In general terms, gold has been testing its all-time high that was achieved on March 17, 2008, at a price of 1,033.90. So far, in 2009, there have been two attempts (some would say three), to reach or exceed that lofty high. Both of those attempts have failed.

Gold is still in an uptrend but showing signs of weakness. Trend indicators on the weekly chart are weak. ADX has risen slightly in the last month, but is below 15. Strong trends usually register 20-25 and higher.

he MACD is in positive territory but is diverging from price – indicating weakening momentum. Stochastics is dropping from its’ overbought level.

The chart pattern, especially from an Elliott Wave perspective, implies that an irregular flat correction has been underway since February 23, 2009, to the present time and is not yet complete. To be complete the market should swing down below 950 and possibly below 900.

Here’s the stickler. If my view of the pattern is correct, there should be one more attempt to move to the upside before the larger correction just mentioned occurs.

Mathematically calculated targets that seem reasonable for an upside move, in the near-term, range from 1,030. – 1,0460.

If the market drops below 970. before the potential rise just described, it will likely mean the high is capped until the irregular flat pattern has reached its downside objectives.


Weekly Gold futures chart from COMEX as at 29 September using NextVIEW Advisor.

In London, the five large market-makers who agree two "gold fixes" each day both to clear outstanding orders and act as a benchmark price – set the AM Gold Fix at $997 an ounce. "Net long" position (of bullish bets minus bearish bets) rose to a new all-time record equal to 795 tons in the Gold Futures and options market. The trust-fund traded as SDPR Gold on the New York stock market increase the volume of bullion held to back its shares by 0.7% to 1,094 tons. London's major Gold ETF provider, ETF Securities Ltd, said it's increased its bullion holdings to a record 261 tons.

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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.

Thursday, October 1, 2009

A month ago I wrote in this column that “the market has a good chance of dropping to around 90 or even lower. On September 17th the market created a short term bottom at 88.22.

Although the market is currently rising, at 89.96, the rise is expected to be very short-lived. Another drop is expected soon, to test the December 17, 2008 low of 87.11.

Click here to continue reading (Market Insight):

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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.

Euro/US Dollar Analysis

On September 22/09, this currency pair finally stretched up to a visible level of resistance (R1 on the chart). This level is confirmed by at least two important Fibonacci ratios – one obtained by the Fibonacci retracement tool, and one by the projection tool.

These facts, of themselves, won’t prevent a further rise in Euro’s value. But there are signs that a significant downward correction will be due soon.

1) Since early June/09, the gradual up-move for EURUSD has largely been without correction and there have only been brief periods of trend.

2) Momentum and trend indicators began to turn down when the market reached the resistance level (R1) that has been on my watchlist for months.


Daily Eur/Usd chart as at 29 Sep 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
Stochastics – oversold
MACD - below its “0” line, and strongly down.
ADX – around its 24 level, reflecting the strength of the down trend.
SMA200 – rising at 1.5585
EMA20- down, at 1.6200
R1 – nearby resistance at 1.6467
R2 – 1.67522
S1 – 1.5769
S2 – zone of support from 1.5500-1.5400.

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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.