With US$100 per barrel staring at us and manufacturing contraction in the US helped by credit crunch and subprime loan woes..... how can market not go down? Each time it tested the downside, the rebound is equally fierce drawing cautiousness even for shortists. However it was noted that every rebound achieved a lower high. This phenomenon is also observed on most of the charts in the market. While major support looks well defended on 2 occassions but base on classical analysis, descending triangles are every where. To neutralise this triangle, we need to break the downtrend resistance line or trades out of the triangle.
I went short HSI when 27k gave way today and my view is 26k to be tested. I found no incentive for the market to head higher and surely panic and fear is in the air as the market took a sudden dive yesterday and it continued today. Since we are down for almost 3 months, i revisited the theory behind how a market bottom differentiates from a market top. Market top is known to be volatile with heavy volume... this is where the smart money ditch their shares as bullish sentiment took over sanity. Market bottom, is slow and price gains are small and controlled. Also volume is light as most will be in denial that the market has recovered. Last 2 weeks, market was exposed to lots of bad news yet Dow holds steady and gained during the last week amidst foreign investor funds buying into banks....not to mention dressing... now that we are officially into Jan 2008, undressing on the cards?
It's Friday tomorrow and i doubt many will want to risk carrying over the weekend hence any gains may be capped by profit taking. Jan 16th is CPI again and then we have Fed meeting on 30th Jan
Technical analysis seems to reflect the problems the US economy may be facing. While we see some decent gains in Dow recently, i thought it was given back rather cheaply. Nevertheless, opinions are often wrong and market is always right.
DISCLAIMER: This is not an inducement to buy or sell. You should do your own analysis on top of my postings.
