Monday, August 23, 2010

Signs of Uncertainties Ahead

The recent spate of stellar earning reports, coupled with the faltering US economy (worsening job situation), has resulted in investors having a very mix idea of the market direction. Fears of a double-dip recession seems to be at a high and may have a negative effect of the upcoming week.

I'm looking at some of the major indices for some preparation for next week:

Dow Jones Industrial
Looking at the chart, we seem to be at the crossroads now. Our current level is just touching the border of a middle support level. Should the negatives continue, I would be looking at Dow reaching a level of approximately 10,000. Upside though is approximately 10,700. The next couple of days will be crucial.

S&P 500
The S&P looks to be very near the main support line. I am expecting to see strong support coming in at the 1055 level. But should this support be broken, the market is going to look very bleak. Again, we should know the answer by the first half of the week.

As a summary, should the support levels hold, I'm not expecting a huge drop in the US market. Probably at most 1 day of big plunge before the market start picking up again. HOWEVER, do take note of the mentioned support levels, once broken, we could be in for a bad ride.

Hang Seng
Let's start with the Hang Seng index for the Asian markets. The Hang Seng seems to be trading within the recent channel. Upside resistance level should be about 21,650 and downside support should be somewhere 20,750. However, should 20,750 support be broken, again it looks like there could be a significant plunge. Limited upside potential.

Shanghai Stock Exchange
Oh how I hated the past few months of China market. China seems to have lost her steam, and in addition to all the tightening from the Government, the market seems to have come to a standstill. Good news is, I think the Chinese Government has succeed in taming the market and I don't foresee any further tightening policies coming up. Bad news is, the Shanghai Stock Exchange is trading just below the middle resistance level. We'll need some strong momentum to broke this level. If not, I see the market turning south to a level of about 2,580.

Overall, I think majority of the world market seems to be trading at either resistance or support level. It's very hard to see a clearer direction it's heading. As such, I would recommend conservative investors to sit out this period and wait for the fog to clear. For the more ambitious traders, the next few days will be crucial. I foresee either some good bargains coming up, or some cut losses to be made.

Good luck.

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