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Friday, October 2, 2009

Short term upset - The Trader

Last night, the Dow Jones dropped 203 points amidst negative economic data. New initial job claims came in at 551k, disappointing economists estimates of 535k. In addition, the US Institute for Supply Management said its index of manufacturing activity in September slipped to 52.6 from 52.9 in August, disappointing expectations of a positive m-o-m improvement. Violation of short term dynamic support The Dow Jones violated a very important short term dynamic support last night which is the 30-day short term MAV line. We have always thought that the 30 day MAV line is a very crucial dynamic support of the Dow. An obvious break of the
support line will most certainly trigger more bearish sessions to come.

Strategy : Short term bearish
With the 30-day MAV line violated, we opine that there will be more bearish sell-downs in the days to come. Thus, we are forced by the bears to alter our short termviews to negative, though our mid term and long term positive views remain unchanged. As of now, we are technically short term negative on the closely correlated (>90% correlation) FBM-KLCI while maintaining our mid term and long term positive view. We expect the FBM-KLCI to face a correction ahead to below the 1,200 level. We are now advising caution for traders.

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