Wednesday, June 06, 2007

Watch out tmr, STI support at 3525

Market opened high but closed down negative for 2nd consecutive day, with heavier volume than previous days (for both of the 2 down days).

I think i'm beginning to see market distribution for STI already. When STI is going up and up, volume should expand in a bull market. Suddenly one day, STI would open high but close neutral or slightly negative with equal or heavier volume than previous day. This distribution phase might carry on for 2 to 3 days, always opening high but closing lower or neutral.

That is the sign of market peaking. It's easier to see with candlestick. You'll see 2 or 3 black candles after a series of white candles. The best thing to do is to sell upon the end of the 1st or the start of the 2nd day. That might be the chance to get out before any serious damage is done. Alternatively, that might be a good day to buy put warrants.

I've observed this for a couple of times already and it's quite reliable. I'll do more testing.

First of all, let's look at Dow.

Support level for Dow is at 13,440 (another 40 more pts to drop, as of now!!). If it breaks below it, it means that ema20 days support level is broken...that is very very bad. The next support will be around 13,170. A big big drop indeed. I don't mean that it'll drop in one day (possible, but unlikely). More likely to drop over a couple of days. All the other indicators support a downtrend. Brace yourself for the spill over effects.

We broke out of rising bear wedge on the downside around end of may, but we bounce right back into it. I believe the formation is still valid because STI hits the top trendline and bounce back into the formation (4th June). STI is sitting right on the support level at 3560. If we break that level (highly likely given the uncooperative Dow), we should find support at 3525. That level is near ema20 days.

STI better hold at 3525, if not, we could see it drop to 3450.

I can't monitor actively on Thurs and Fri. Oh well, might as well :) Dow currently -106 pts, europe market is all red.