REVISITNG THE DJIA FORECAST FROM JULY 16th, 2010

Remember this chart?

I first posted the chart on July 16th.  That time we had just pierced into the Ichimoku cloud and I had stated that this is the start of a pull back after which a serious summer would start.  

My  original outline for the move from then till sometime in September is still in the graph (red arrows).  I also put a fat yellow arrow where I expected the pull back to stop - and reverse.  The lowest point indicated was indeed met, - just a little earlier than I had indicated.  

The actual rally took the more difficult route, through the cloud instead of alongside it.  The first peak hit the level exactly as suggested in the previous blog.  It then corrected for a few days and then started to go higher, now exceeding the highs we had pointed to. 

While not entirely unexpected, the extended rally suggest that the pull back after 13th August could become more volatile than outlined.  It also suggests that the highs we see this week will be as high as it gets for this year. 

The final leg of the summer rally, anticipated for late August and into early September may well take the form of an Indian summer, nice but not so hot- and not so high as the August rally. 

The levels to watch for in the DJIA by August 13 are: 

• high - 10800

Would be a nice surprise if exceeded. Any advance above would ring in a sell signal as clear as bell.

• pull back to - 10400, a swing of less than 3% from the current levels

if not breached by August 24th, this could change my view about the Indian summer theme, i.e. it could become hotter after all. 

• pull back to below 10200

and the Indian summer will turn more frosty and volatility more unpredictable. A break through the Ichimoku cloud by August 24th and there will be no Indian summer at all. 


The period between August 21st and 24th is a key for a low and reversal time.  I will wait with more detailed ideas for the aftermath till we see what transpires in the meantime. 

How about the Hang Seng?

I would have like to tell you that it is the STI that excites me, but my preliminary target of 3038 has yet to tackled seriously, - and no! I don't think it will be exceeded this summer. 

The one factor that could change the outlook into the third quarter is Mainland China's SSE 180, but we can mostly hope that some of the enthusiasm spills over into Hang Seng and maybe, just maybe into the STI.  

This is what the Hang Seng looks like at present:

I am showing a bigger time frame than in the above chart, just to illustrate where the index has been, and will likely try to reach again, this summer. 

The index is well above the Ichimoku cloud, which is bullish. It has also signs of having started a new 50-week cycle as of July 18 low. A new cycle in a bear environment can rise very swiftly and exceed commonly accepted structural highs in the early phase. 


Since then the Hang Seng has rallied sharply adding about 15% in less than 15 days. From here a pullback should see the index come down to the 20900 level, a move that is exactly 38.2% down of the rise in the new cycle, and a frequent Fibonacci level for a pullback target. 


From this point we could see the index rise to 23000 level as soon as it convincingly pushes past the 22000 high that we currently face. If it does, it will very much support the Indian summer theme in the DJIA, - as hot as it gets. 


We shall soon see, what transpires.  Happy National Day, - to all you Singaporeans and friends.