We had been bearish on the equity markets for some time and had repeatedly recommended selling into rallies. We had also stated that equity markets would decline even if the Paulson bailout get voted through by the US Senate. Last Friday’s initial rally of more than 250 points on the Dow Jones Industrial Average (DJIA) on expectation of the move and the subsequent 157-point decline underscores this point.
However, we think, there will be large countertrend swings near this period and recommend readers to close out shorts and position for a rebound. DBS, for example, could find support near S$15.60-15.70 while Keppel Corp appears grossly oversold and could stabilise near S$6.60-6.70. At S$1.36-1.40, Cosco Corporation likewise appears attractive.
For FSSTI, we maintain our downside objective of 2,200 and based on last Friday’s close of 2,297, this represents downside potential of 97 points. Do note that we are not calling for a bottom or an end to the bear market, but an important inflexion point. On wave count, we think a major wave 3 of C low could form near that level, before 200-250-point consolidation unfolds.
For the DJIA, an alternative wave count suggests support at 10,000-10,050 as opposed to an earlier and still preferred wave count with support near the 9,500-9,600 range.
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