Straits Times Index: Appearing toppish, now targeting 2,220No longer bullish. Elliot Wave Count on the Straits Times Index (FSSTI Index) highly suggests that Wave 5 has been completed when the index hit a high of 2,424 as it is matching Wave 1 with utmost precision ( Elliot Wave principle suggests that Waves 5 usually travel the 100% of Waves 1 ). Furthermore, with the 14-day RSI still remaining in overbought territory, we do not recommend investors to engage in long positions at present levels.
The long-awaited correction could occur very soon, as the current Wave A is expected to translate into losses for the STI. Nevertheless, there is also the possibility that the STI could first enter a consolidation period before staging a move lower, as markets do not always move in a straight line. Initial support is identified at the 2,220 – 2,234 level, as outlined by the 61.8% fibonacci retracement of Wave 5 and a series of daily lows. Further support is also seen at the 2,094 mark where the 100% fibonacci retracement of Wave 5 and the lower bollinger band converge.
Meanwhile, although we do not foresee resistance at the 2,424 – 2,433 level to give way, additional resistance is nonetheless available at the 2,605 – 2,622 zone. This level signifies the 161.8% fibonacci extension of Wave 1 and a certain technical gap.
Shanghai Composite Index: Approaching inflexion point, trend to turn bearishBullish trend was inline with expectations. Price action of the Shanghai Composite Index (SHCOMP Index) was bullish as we had forecasted but overshot our target of 2,743. However, the current breakout move arising from the Symmetrical Triangle formation seems to have hit exhaustion while Wave Count suggests that Wave A may be kicking in very soon. We thus are no longer bullish on the index.
Reaching inflexion point. As Waves 5 usually travel the entire price length of Waves 1, the index may have already seen the completion of Wave 5 when it hit a high of 2,791 which is very close to its target at 2,808 ( Wave 1 = Wave 5 = 2100 – 1664 + 2372 ). Coupled with the 14-day RSI trading very close to overbought levels, we do not expect the index to break through this resistance mark. Nevertheless, should it occur otherwise, its next level of resistance is seen at around the 3,071 mark as represented by the 161.8% fibonacci extension of Wave 1 – the next most likely target for Waves 5.
Pullback to occur, initial price target at around 2,650. The impending downtrend in the form of Wave A should encounter its first support at the 2,635 – 2,668 area where a technical gap resides. Should this level fail to hold, additional support is identified at the 2,536 – 2,539 range as represented by the 61.8% fibonacci retracement of Wave 5 and the lower bollinger band.
Dow Jones Industrial Average: Resistance just around the corner, bullishness to subsideCurrent Wave 3 may end soon. We have broken down our Wave Count for the Dow Jones Industrial Average (INDU Index) into sub-waves and we now reckon that the index is presently riding on a Wave 3. With the 100% extension move of Waves 1 being one of the price targets for Waves 3, it is highly probable that the Dow may have limited upside left in the short term, given that resistance is just around the corner.
Should Wave 3 travel the 100% move of Wave 1, initial resistance is identified at 8,899 ( 7931 – 6469 + 7437 ). Given that the MACD chart is looking flat, however, we do not expect this level to be broken. Nevertheless, should events happen otherwise, the next resistance should beseen at the around the 9,794 – 9,803 area. This level represents the 161.8% fibonacci extension of Wave 1 and a certain daily high.
Should the index fail to take out the 8,899 mark as we have anticipated, price action could then turn bearish resultantly. Support, located at the 8,156 – 8,246 range as identified by the 50- day moving average, the lower bollinger band and a series of daily lows, would be expected to cap any downside pressures.
S&P 500 Index: An impending turnaroundAs with the Dow, the S&P 500 (SPX Index) has also been broken down into sub-waves. While its Wave Count may be similar to that of its counterpart, note that the S&P could have already over-extended its run as its current Wave 3 has traveled slightly more than the 100% of Wave 1. Coupled with the flattening 14-day ADX which signals that the present trend is no longer gaining strength, it is thus possible that the S&P may turn down anytime soon.
Resistance just ahead. Initial resistance is situated at the 951 mark, courtesy of the end of Wave 3 and the upper bollinger band. Should price action appreciate above this level, further resistance is then available at the 1,044 – 1,047 region as represented by the 161.8% fibonacci extension of Wave 1 and a certain daily high. On the other hand, should the index turn bearish from present levels as we had forecast, support at the 878 – 881 area as outlined by a series of daily lows should serve to prevent any further declines.
Hang Seng Index: Not looking bullish
Not looking positive. The Hang Seng Index (HSI Index) has seemingly completed 5 waves up while the impending 3 waves down is expected to drag the index down to lower levels. With the present Wave A still in its infancy stage, we recommend investors to cash out before any additional downside unfolds. The MACD chart that is currently flattening out also signals that the HSI is no longer bullish.
Initial price target at 17,340. The present Wave A is expected to pull the HSI to the 17,340 – 17,347 support zone at the very least. Should this level be broken below, Wave A should then extend itself to the 16,334 mark to complete the full retracement of Wave 5. Meanwhile, we do not expect resistance at the 18,961 – 18,967 region as represented by the upper bollinger band and the end of Wave 5 to give way.
