I was wrong...but thinking of catching the inevitable big rebound.

The S'pore bourses' inability to respond to the Dow's huge 281 point rebound was the most frustrating aspect of the unpredictability of markets this past week. However, the belated rebound before the National Day holiday did allow me to reap some unexpected gains on call warrants of Wing Tai, OCBC and CityDev, to offset painful losses, so I was not so unhappy.
With Thursday's credit squeeze-induced plunge and Friday's near plunge, let's see what the charting crystal ball can tell us:















From the above chart, I observe that there is minor bullish divergence in the daily chart of the Dow Industrials and a doji formation, caused by the mid-morning turnaround in the index from a loss of 213 points to a slight gain, and ending with the small loss(that hopefully bodes well for the coming week).























I have boxed out the similarities in the February decline and the current one, with the current candlestick similar in position to the one five months ago that plugged a bottom in the correction.

However, the main difference is that the credit concerns now have wider implications and deadlier ramifications, whereas in February/March, the main catalyst was the unwinding of the Yen carry trade( where foreign funds which have borrowed vast amounts of the Japanese currency on low interest rates, buy it back to repay in a flood).

I would compare the current drop to the correction in '98(which also happened round about the mid-July timeframe coincidentally) that only bottomed out in October that year. That was a nostalgic time for me, as,with my partner, I was able to pick up OCBC at $3.50, CityDev at $2.49(we sold it for $7.70 in early November '98), Jardine Strategic at US$1.05(my partner STILL holds this share after buying me out at a price much lower than the current one) and in Malaysia, many others, including Time Engineering at 25.5sen(it peaked at RM6.40 in 2000).

Forgive me for waxing lyrical about those times, because it was an opportunity of a generation, and I was able to specu-vest full-time, without the need to put on a constricting tie, and be tied down to a restrictive, unrewarding job.

However, back then, a year of the Asian financial meltdown had already battered blue chips down by over 60% from all-time highs(and speculatives by over 90%) in some cases), so the downside risk was low, and my partner and I were able to buy with conviction.

Now, however, prices are correcting from all-time highs in many instances, and I plan to buy up to the hilt very soon, but only to sell for short-term gains of 20% to 50%.

Look at the chart of Fannie Mae, and you'll see what I mean:

















A 20% plunge from $70 to $56 in slightly over a month was followed swiftly by a 21% rebound to an intraday high of almost $69!

If a stodgy government-linked company's stock can trampoline in such a volatile fashion, all the more housing stocks( which I wouldn't advise even the most risk-courting investors to try catching) like Hovnanian(a rebound of 56%) and Beazer Homes(a spike up of 122% from lows):



























Even Germany's IKB, which had to be bailed out by Berlin, showed a 52% rebound in three days before Friday's descent(which incidentally did not bring the stock anywhere near those August lows):
















Bolstering my argument for a sharp rebound next week, several Dow components(especially financial issues which have born the brunt of furious selling) show signs of selling exhaustion:



















Citigroup(above) is showing signs that the strong support at $44-46 is holding up.

And JP Morgan's weekly chart shows that last week's plunge is a wee bit overdone:




















Even the 'bear' itself, Bear Stearns' stock, is showing the kind of chart that put a bottom to the '98 correction on the Dow:



















Looking further afield to the point-of-crisis stocks of BNP Paribas and Deutsche Bank( which earlier in the week halted redemptions on some funds), the candlestick charts indicate temporary double-bottom type formations:




















Additionally, many Dow components display the bullish crossover on the daily Stochastics, and some show similar, but impending, crossovers on the weekly Stochastics.


Finally, key tech issues seem to display unusual strength, one of which is Cisco.





In S'pore, interesting candidates for a rebound include Soup Restaurant, Fuzian ZY, Tiong woon an many others.


A caveat: For the medium-term, I still intend to unload all my shares by September.