Tuesday, March 17, 2009

A False Recovery For Dow Jones Industrial Average ?

These few days I was watching the share prices movement of AIG and Citigroup day and night. Monitoring how the Dow Jones Industrial Average doing? To my surprised, I didn't believe what has really happen to Citigroup share price and AIG Group share price. Both of them are doing very well.

Citigroup from about USD 1.00 per share has reach about USD 2.50 per share and for AIG Group from about USD 0.35 has reach about USD 0.90 per share. More than 100 % gains. When their share prices at low, I feel very tempting to buy few of these share and I went to ask few of my friend and mention to them, will now be a good time to buy these two share?

The answer they gave it to me, the AIG will go bankrupt and will be take over by the U.S government and they have nothing left. They own the government so much money and the U.S governments are controlling AIG now. The Citigroup will reach USD 0.50 per share and they will face so many non-performing loans (NPL) in the future. Not only they mention that the share prices will crash some more but they also mention that if you try to buy any of the U.S share right now, you might not even have a chance to recover.

But today I have learn a very good lesson. A lesson that I always used as my guide and tools when I trade in Malaysia share market. Whenever there are so many of them feel very negative and have no positive thinking towards the shares or the share market, it would be the right time to buy. As I use to say, there will be no Niagara Falls everyday.

Whenever the share prices drop or tumble so much, they will for sure rebound before they post another losses in future. Maybe because this is a U.S market, a market that look quiet virgin for me as I never touch any of the foreign share. May this be a lesson for me in order for me to enhance and sharpen my skills further.

By the way, the world share prices are performing very well. With most the world financial equity market showing stronger sign of recovery. I was impress with these kind of performance. Here are some of the comments from one of the research house about the DJIA. I received this article last week on 12th March from Mr. Jesper Lee - Cimb. Let us share about the Dow Jones outlook and possibility.

A False Recovery

DJIA hits 6,600 downside target. The DJIA reached our wave 5 target of 6,600 pts last week when it went as low as 6,469 pts. Although the index bounced back on Tuesday, it does not mean that it has bottomed. The rebound in the past two days is the minor wave (iv) which is expected to peak between 7,210-7,438 pts, the 38.2%-50% Fibonacci retracement of wave (iii).

Major downtrend to end? The DJIA’s weekly chart shows that it is close to ending the 5-wave downtrend from the Oct 07 peak. Only a break above the 7,500 resistance channel would confirm that wave 5 down leg has ended. Once this bottom has taken place, we expect a strong wave “B” rebound for 5-8 months which could see the DJIA challenging the 9,000-10,000 levels before the destructive wave “C kicks in.

Rebound target of 745 for S&P 500. For the S&P 500, the wave (iv) rebound target is between 745-770 pts, the 38.2%-50% FR of minor wave (iii). Since wave (ii) was “flat”, we expect wave (iv) to be “zig-zag” formation. End of wave (iv) is to be followed by the final wave (v) down leg which could take the S&P500 to 630-650pts and the DJIA towards the 6,000 level. A break above 7,500 pts for the DJIA, however, would negate this wave count and would probably indicate that the wave 5 down leg was completed last Friday. We believe this scenario is unlikely.

Nasdaq below Nov 08 low. The Nasdaq Index finally broke below its Nov 08 low of 1,295 pts on Monday when it plumbed an intra-day low of 1,265 pts. This was followed by the strong minor wave (iv) rebound which could push the index back towards the 1,392-1,435 levels before the wave (v) down leg kicks in. Assuming wave 5 equals 0.618x of the length of wave 1, the wave 5 target is 1,230 pts.


Dedalus said...

Hi Jackie,
Love to read your analysis....keep up the good work. You mentioned about buying U.S. stocks like Citigroup or AIG. How do we do that in Malaysia ? I'm really interested.....

Jackie Lee said...

From your broking house in Malaysia. Some of the broking house already have the facility to purchase any listed foriegn share.

Like shares listed in Singapore, Hong Kong, Indonesia, South Korea, Australia, UK and USA.

Anyway thanks for your comments. Enjoy reading.

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