Technical Analysis by K Ajith

US bourses complete bear rally,

Friday’s decline in US indices confirms that the corrective rally in the US has
ended. Our earlier take on the DOW was that the index was within C of an AB_
C corrective structure and that the index could head up towards 13500 before
falling towards at least 12500 or so. We had however assumed that the break
down would take place following the FOMC meeting on September 18. We stand
corrected on that front.

Friday’s decline came on the back of weak August non-farm payrolls which
showed a decline of 4000 jobs versus expectations of gain of 110,000 jobs. The
weak numbers led to a steep rise in both the 2yr and 5 yr US Treasury bonds,
with yields declining towards the lowest level in recent weeks. We had earlier
warned that the bond markets did not show the same degree of enthusiasm as
equity markets, with the latter rebounding significantly greater than a
corresponding fall in US bond markets. This to us, was another sign that the
recent move up was a corrective rally. Readers should now expect at least
another decline towards prior low of 12525 or towards the 12,000 level.

Singapore bourse

The wave pattern for the ST Index is less clear partly because of recent
inaccurate data points. Even so, we can safely assume that the rebound from
2962 has ended or is at the very final stage. At the very least, the index will
correct 62%of the advance from 2962-3505, which will provide a downside target
of 3170, which is near a prior gap level An equally likely scenario would be for
the index to drop back towards 2962. Our preferred view, nonetheless is that the
ST index is within a 4 wave decline.