The Dow, US Economy & KLCI

Dow Jones moved up strongly today to recapture the 11,000 points level. While this is a positive move coming on several days of downward pressure, it is based three factors.
1) The most important seems to be the market's perception that the Fed may stop raising interest rates. According to CNN: The Fed expects economic growth to slow this year and next, which "should help to limit inflation pressures over time," Bernanke said in testimony to the Senate Banking Committee. This is of course good news for interest rates & lower inflation is good for the economy too but if US growth slows down too much then world growth too may slow down too much.
2) The second factor is that US companies are reporting good earnings in the double digits. So a slowing economy is not slowing down corporate profit growth. Hmmm, so far so good.
3) Oil prices have fallen from the $78+ to just about $72. OPEC has stated that high prices will be bad for the world economy & that a slow global economy is bad for oil producers as demand will slow. So keep pumping it up boys. Nothing new here, but markets like this. Also US oil reserves have gone up despite it being the summer driving season when oil demand is highest. Maybe those blokes in the US are actually driving less? No they are driving more, just about 3% more, but nevermindlah, thats not too bad, could have been worse.

Anyway how will this affect Bursa? For one Asian markets will definitely rise. The triple whammy of lower inflation, stop in interest rate rises & lower oil will help. So Bursa should rise too. Now if this triple whammy maintains for the long term then we will see a rally on the markets incl. Bursa. That may provide the Inverted Head & Shoulders I spoke of in an earlier posting & a rally to 976. http://talkingstock.blogspot.com/2006/07/kl-futures-ci-ci-head-shoulders.html

However, first the CI must return above the uptrend channel & breakout above 922 & maintain above that. Then it must take out the very strong 930 level. Only then will we see the rally to 980. Chances of this happening? I am not into crystal ball gazing, so I will let the charts do the talking & if the above targets are met then its "Game On". If not then back to a mild correction again.