Stock Market Analysis Nov 8, 2012

Major factors affecting the market:

SN	Factor	Nature	Situation/Effect
1.	European Economy	macro	Situation is still not looking good. Whether it is contained is unknown. Struggling to contain it.
2.	US Economy	macro	Economic data showed growth is mild.
3.	Company results	micro	Among the US companies, results are generally good. But these are lagging data.
4.	China Growth Concerns	macro	Expectation is China will stimulate economy after hand over of power.
5.	US fiscal cliff	macro	A big concern but no clear solution or direction in sight.
6.	Consumer sentiment	macro	Generally weak in US. Job data has remained the same.

The recent market reactions to the Obama re-election:

1. US market sold down for the first 2 days after election
2. Obama is not going to worry about market. He will be focusing on real economy
3. Market ignore good company results

Market sell down is to show color to Obama.Market sell down slow down next day. Selling pressure if off.
European is still concern.
Obama will be less concern about market. More about long term benefits.
China will shift to consumer based from export base economy reducing reliance on US and Europe.

Interpretation:
Short term market will face correction pressure. Over long term, the market will recover stronger with shift towards Asia. Focus on companies deriving income from Asian and South American markets. For long term investments, wait for correct to buy in.

Market Trend March 06, 2012

Has not be blogging since I was involved in a major project. Partly due to change of computer, the setting up was not quite ready.

It appears to me that the bulls are running a little bit tired. Some form of corrections should be in the cards. Maybe, it will not be major since there are still liquidity and Fed is always ready to intervene by injecting more money. Now that Greece issue is no longer a major concern, the market will be focusing on other issues. So far, economic data has been decent and it appears the economy is getting better though not that good. US presidential election coming, Fed is always ready to "help" the incumbent. That's how they protect their job?

Market Analysis: 2011 Rally(?)

Earlier this year, there has been much talks about 2011 year end rally. I believe there are some investors who bought into this idea. From the last 2 weeks, the out look has changed a lot. It seems clear that some of the guru's  prediction of 2012 market collapse is becoming more realistic! Are we heading for a double dip market? Is the recession unavoidable?
From the technical analysis, here is an interesting article that I like to share:

http://www.etfguide.com/research/705/8/The-Chart-That-Trumps-Analysts-Call-for-a-Year-End-Rally/

This is a very classic, standard technical analysis using support lines and patterns. If technical analysis is reliable, we should see the market moving towards the 2009 lows or even more within the next few months.

As an investor, it is better to be cautious. Be alert to the market movements and make sure we have our cut-loss rules in place.

Market Trend Analysis - Double Dip A Reality?

In 2008, the housing bubble in US triggered a worldwide financial melt down. The toxic financial derivatives has cause financial institutions all over the world to lose trillions of dollars in total. Many companies went bust and some large companies went into trouble.

In 2011, what is facing us is the sovereign default. With toxic "Assets" (if they are really assets) being taken into US Fed, the US banks are now operating as normal. However, that has not generated much changes to the fundamentals. US and Europe still operates under the same mechanism. Borrow money, spend to generate demand and growth. There is no change in fundamental of operations. There is no intention to change. Again this would certainly generate another bubble. The borrow and spend first and then pay later (if there is some spare cash) strategy is going to go on. Of course everybody is hoping this would go on forever. Even if it does not, it would be the next generation's problem.

Looking at the situation in Eurozone, I am tempted to think that we must wait for at least one country to default in order to see some fundamental shift in the methods of tackling the problem. It would really take some major events to make people realise that spending future money is not sustainable in the long term. The UK is smart not to join the Eurozone. Now the Germans must be regretting. Imagine trying to convince a hard working, thrifty person to lend money to a lazy person who refuse to work but wanted to live a more luxurious life! You must be treating the hardworking person like an idiot in order to come up with that idea.

Bailing out cannot go on forever. It is not sustainable. The Greeks must have a concrete plan to bring themselves out of the debt loop. This is like drug addiction. Only drastic, fundamental changes to the economic structure can bring them away from such addiction. And for that to happen, some pain has to be inflicted or else they would never wake up. So, the default is given. It is a matter of time. And it should be soon.

SGX Market Review April 2011

April 2011 was a bull run for SGX with index continuously moving upwards almost without any pause for more than 2 weeks. The move started in mid March and ended in Mid April gaining almost 10% within a month. This is the strongest since year 2011. It nearly recoup all the losses for the year. Last week's trading was almost all negative. Will this be a signal of the end of bull or a small pause to re-adjust itself?
Market seem to be announcing good news continuously. Will there by bad news after that? Will the impact of Japanese Tsunami be felt worldwide in the tech sector come June and July? I have no solid figures to look into these. I can only be guessing. To play safe, should I be staying at the sideline until July 2011?

STI Market Direction April 02, 2011

Here I am back again after struggling for about 10 days to rebuild my computer after its graphic card gave way. I was trying to restore from Dell Datasafe backup utility and it screwed up because it did not cater for video card crash situation. I ended losing my data.
OK. Let's get back to the main topic.
Last 2 weeks, the market showed strength and seemed to have forgotten about the Japanese nuclear crisis. It seems that the market has discounted all the bad news and bounced back aggressively. Now the STI is just sitting below the resistance line which also coincides with the down trend line's top.
So, next week will be deciding factor to see if it will continue to move up. 2 weeks ago, we were waiting for to see if the market will continue its down trend. It ended up bouncing back strongly forming a double bottom. But the market did not break the neck line of the double bottom. It closed just short of that. This gives us a hanging situation. Anything can happen over the weekend.

From the look of it, the market favors bull. So far, the sentiment seems positive and volume has increased. US released more positive data last week. All these macro economic factors pointing to more bulls.

STI - Market had a good run up today

Today, the market had a good steady run taking up the first level resistance easily and closed above it comfortably. However, the volume seemed to be muted. Not very strong buying interest seen. The next few trading sessions will give us clearer picture of how the market will eventually move. Let's see if this is indeed the turning point for the market or just a pause.

High Probability of Market Down Trend 2011 Mar

I'd decided to take a closer look at the STI to see if there is anything that is useful from there.
Over the last 12 months, there has been 2 occasions where the STI is trying to move below the 200SMA. The first occurrence was in June 2010. This was quickly taken back with a strong rally of about 750 points until Nov 2010. The second occurrence was in Feb 2011. The recovery was not successful and resulted in recent sell down in Mar 2011 assisted by the natural disaster in Japan.

On the shorter term, since year 2011, the market has been embarking on a correction path.

Using Elliott Wave (I am not an expert on EW), we can say that it is Wave ABC, the correction path. That means, the next move will be reset to wave count 1 (EW1), which means resuming the upward climb. In that case, the magnitude of the climb could be around the size of previous pattern or around 750 (2650-3300) - a major move as seen from Jun 2010 to Nov 2010.
However, basing on the chart pattern, there is also a possibility of further down trend since the 3-month trend is down. Using trend line method, there are 3 important points to take note. One, the chart is making lower low and lower high in last 3 months. Two, it failed to break out from the resistance Level 2 during the last counter trend rally. Typically, a failed move will result in bigger move in the opposite direction. Three, it has recently broken the support Level 1 (now become resistance Level 1) with the help of Japanese Nuclear crisis and Tsunami. Of course, one can argue that event 3 cannot be counted since it is extraordinary event. The sell down is due to knee-jerk reaction. Market will quickly recover from there. If this is true, then, we will wait for next week to see if the market really recover and overcome resistance Level 1 easily and convincingly. If that happens, I think we can be convinced that this is Wave C and we will be having Wave Count 1 coming up.

In essence, next week will be a critical week to observe the direction. This will give us a clearer picture whether the recent sell down was due to knee-jerk reaction or the Japanese disaster was just and "excuse". If the latter is true, it means that the sell down will happen regardless of the Japanese disaster. To verify that, we need to see if the STI can clear the Level 1 resistance easily.

Key fundamental factors in STI:
1. IPO of GLP & HPH Trust - mopped up large portion of liquidity (-)
2. Economic still growing strong (+)
3. Valuation become less attractive to foreign funds - funds pull out (-)
4. Inflation fears (-)
5. China internal consumption increase (+)

There are positive as well as negative factors.

Looking back at the 2008 market crash, we may learn something from there.
Based on the 2007 pattern, the first warning sign happens between mid July to mid August 2007 where the market drop over 20% within one month. This was followed by very strong recovery over the next 3-4 months. Then, there is second major drop which saw similar pattern of over 20% decline within a month. Again, there is strong recovery which is short live this time. It lasted less than a month and it gave way again. Then next bounce we can call it dead cat bounce that lasted for just over a week. Then the down trend is confirm and there is no doubt about it anymore. To say that the 2008 crash came suddenly is not exactly accurate. It did give some signals along the way. We can only say that we did not notice those signals until after the fact. Given such a back drop, we may want to approach the next few weeks trading with more care and closer attention.

Market Performance After 2008 Crash

Just had a simple look into the market performance after the 2008 financial crisis triggered from US sub-prime mortgage problem. There are the comparisons between Asian markets with Dow Jones:

Index	2007-Peak	2008/9-Low	2009-End	2010-End	Current
SSE	100.00	27.21	53.55	45.88	47.48
STI	100.00	37.25	73.71	82.23	75.14
HK-HS	100.00	33.78	68.02	72.77	70.56
JP-Nikkei	100.00	38.22	57.63	55.90	50.31
DOW	100.00	46.00	74.46	81.67	83.71

The values are expressed in percentage using the 2007 peak values as 100%.
Since the crisis initiated from US, one would expect the Dow to be most affected by the crisis. Instead it was SSE (Shanghai Stock Exchange) that was worst hit. In terms of recent recovery, there were so much talk about China leading the world market in the economic recovery from the crisis. Instead, Dow was the best performer and SSE was the worst performer among these markets.

Plotting them on a simple graph for comparison. It can be seen that both SSE and Nikkei were the worst performers. However, we need to take into consideration of the recent drop in Nikkei due to natural disaster. Discounting that could have brought them back up by 10%. But still, they are the second worst performer in Asia.

The fact that SSE is not performing as expected is slightly worrying. One thing we can assume is that the SSE is extremely over priced in 2007 and now it is more reasonable priced. However, if the market in China is really good, why shouldn't it be over priced? Isn't the market suppose to chase after promising counters and ditch the unattractive counters? I thought market is always over bought on bullish sector and oversold on bearish sector. Maybe I am over paranoid. One other explanation is the QE by Fed really flooded the US market with liquidity causing the price to be overvalued. Another angle to look at it is the value of US dollar. How much has it depreciated against other currencies? Is SSE a victim of stronger currency? What about Nikkei and others?

Modified: 20-Mar-2011.
After the Nuclear crisis in Japan, the Yen shot up and the G7 work together to bring it down. A strong Yen will hurt Japanese economy more at a time when they desperately needed a weaker currency to build up their internal economy.

With a weaker Yen, there will be impact on the US economy and may cause bigger US trade deficit. The US has to again release more liquidity into the market by QE (3) and potentially will hurt China's export. So, what will China do in response? Will China take the reverse role with US by significantly increasing local consumption? How ready is China's economy to do that? How much real purchasing power do China have?

SSE Market is Trapped in a Down Channel

Since November 12, 2011, the Shanghai Stock Exchange composite index has been trapped in a downward channel. It tried to break away last week but was not successful. However, the time seems right now for it to make a second attempt and there is a high chance that it will succeed this time.
However, it all depends on the political development in Libya and Middle East. After Tunisia set a trend in toppling the government, many Muslim countries in the region are taking the cue and engaged in anti-governmental protests. The worrying thing in China is the Jasmin Revolution. This supposedly peaceful protest to be organized last week was quickly pressed down by the Chinese authority. Quick action ensure stability. The China government is under pressure to address the the issue of income gap. There is a major disconnect between the city folks and the village peasants. The income gap is huge and potentially dangerous.
If the SSE composite can break the resistant trend line, there will be hope to turn around. Otherwise, it will trade within the channel.

STI staged a strong rebounce Feb 25, 2011

After 2-3 weeks of corrections, STI and Asian stocks in general staged a strong re-bounce. It sprung back 1.8% and closed at 3025. That was a week when STI breaches 3000 over the last 6 months. It was also the first time a major upward movement seen after 3 weeks of near daily sell down.

Is this just a dead-cat bounce? From the strength of it, it seems to be a credible force. Its volume was healthy for any upward movement. However, given the backdrop of high volume sell down over the last few days, the volume registered may not seem high. This is a tricky situation. Even though the move seems to come from a credible force, there is overhanging worries. This is were Technical Analysis fails. In the end, we will need to see 2 main factors: one, the potential political turmoil in Asia particularly in China due to uprising in Africa and Middle East. The Jasmine Revolution movement has to be contained before it germinates. Two, the US economy recovery. Will the QE2 be pulled off the table sooner than expected? The pulling off of liquidity will certainly dent the market. Early next week will have to be closely watched. The Libya unrest and US Fed announcements will certain play the main role in determining where the market is heading.

From the look of it, this is a potential pivot point of the market.

Asia Market Trend - China SSE - Jan 2011

China Market is undergoing correction as can be seen from the chart. It is forming lower highs and lower lows and forming a tunnel sloping downwards with 50MA and 20MA pointing down.
This is not surprising as China is facing high inflation and the government has to do something to tame the inflation. More measures to slow bank lending and probably raising interest rates are possible.
It seems that the SSE will be ranging from 2300 to 3200 for the rest of the year.

STI Stock Counters showing donwtrend in mid term

Here is what I observed so far:

Only banks and Semcorp are showing new break outs recently. The other stocks are all showing signs of lethargy. Let's look at these charts:







There has been a lot of hope that STI will hit 3000 before this year end and many people are waiting to sell off their holding during that stage. Looking at this scenario, that might not be possible if the trend continues. Even though STI has finally broken off to the upper side from the range over the last few months, it is still to early to conclude that it is going to go up all the way.

My view is that even though in terms of GDP, the recession is technically over, but, the recovery is rather weak with job loss still looming over our head. I have no taken a good look at the make ups of the GDP number. It seems that we are having a lot of internal consumptions particularly from the real estate market. These are not productive activities. I am going to wait and see. Even though this means that I am going to miss the bull run. I think at my age, safe play prevails.

STI Chart Pattern - Market Review

The Market is turning bullish for short term now. Looking at the STI chart, you can see that it has bounced off the support for the second time and it stays above 20 Day MA. Apart from that, the 5Day MA is also above the 20 Day MA. That shows that short term, the market is still bullish even though there has been some corrections. There has been some strong buying early last week before the bad news set in especially the failure to reach agreement on bailout package for auto industry in US.