CHART OF THE THE DAY(August 16, 2010)

STOCK MARKET OUTLOOK (For Aug 16, 2010): DOW COULD REVERSE ITS WEAKNESS WHICH CAN MEAN A TEST OF ITS WOLFE WAVE TARGET OF 11300 AFTER ALL. A REBOUND ON KLSE STOCKS IS IN THE CARDS. BUY.

On Friday’s close the KLCI was up by 10.82 points or 0.80% at 1360.15 on higher volume of 996 million shares traded. Advancers led decliners by 502 to 228 with 269 stocks unchanged.
1. The Dow fell by a whopping 265 points on Thursday but that did not shake Asian equity markets.
2. All Asian bourses were higher except for Hong Kong, Manila and Thailand.
3. This is a good instance of a decoupling of the Dow from Asian markets when it comes to the downside of the Dow and this augers well for the Asian markets.
4. Yesterday’s rebound on the KLCI was not unexpected as we had highlighted the possibility of the 1349 resistance turned support line holding the market up, and it sure did.
5. This unusually strong rebound on the KLCI of 10.82 points is indeed a breath of fresh air after experiencing the very often half hearted bounces from local stocks.
6. There was an up-gap yesterday on the KLCI and it seems quite apparent that a “morning doji star” has unfolded. This seen at a low price area where stochastic hooked up from the oversold zone is indeed foretelling of more rallies to come in the coming week.
7. Here are the stocks-to-watch for Monday: ZELAN, JERNEH*, LANDMARK, LIONIND, SCOMI, GENP, INCHKEN, SAPCRES, AXIATA*, DAYANG*, GENTING*.
8. New stocks to watch are: TWSCORP, JERNEH-WA.
9. In summary I am very pleased with the rebound yesterday and it is indeed a very important rebound because any further falls would mean a fall below its 1349 support. The strong volume clocked yesterday is also a strong indication of buying power.
10. As such we expect an uptrend from now.
11. Our view about the Dow is that it is still bullish and we see it hitting the Wolfe wave target of 11300. Here are the reasons: The Dow is AT the “clouds” at 10,420 suggesting it is still bullish, the Chikou span is above price, and last but not least the Dow is AT its 200-day SMA. But it is getting more bearish by the day and continuing weakness would put the Dow is jeopardy of a recovery. Be cautious.
12. We are still optimistic Dow can rebound to test 11400 (amended) and our KLCI hitting new 2.6 year highs of 1387 and 1408.
13. The ringgit strengthend to 3.1660 from 3.1825. We are now long ringgit/short USD.
14. CONCLUSION: The KLCI is still very much above the Ichimoku clouds and this means a buy signal on selective stocks. The DAX, Singapore index, Hang Seng index, Korea index are also above clouds while Dow is AT the clouds and Footsie, CAX, Australia are in the clouds. So it looks like the world’s markets are still bullish. If Wolfe wave target is right, then expect Dow to climb further to test 11300. But look
for stability yon the Dow and a rebound on Thursday because any further falls could change our view about the bullishness of the world’s markets!