Con’t – Psychology behind whipsaws, 20MA & current US market momentum

Alright folks I am back, after settling stuff. Market taking another round of beating as expected but I will re-evaluate before market closes today to see if I will take any action on my positions. I have moved from a downside bias to a neutral bias, since the US markets have hit my TP. Fast and furious! I mean, in just 2 days, over 900 points, that is a 10% drop. Did i expect that? No. i did expect my TP to be hit but not within 2 sessions. Then again these days, what is impossible? I find myself saying that these days. What is impossible? Can markets rally 10% in a day again? Why not? My new ‘kou tou chan’ (frequent phrase) is.. WHY NOT?

I am gonna head to the CTA class next weekend to volunteer. Part of my ‘giving back to society’ plans. Couple of people I know will also be attending the lesson so I am taking the opportunity to practice and hand-hold them alongside.

Alright so I covered the whipsaw part. I will discuss the 20Ma resistance part. How best to illustrate it? As a 20MA comes down, why is the price being suppressed? Here i am using Singtel as an example. 20MA heading down, suppressing the price. The 20MA is like a ceiling. U wanna jump and bounce up but you’ll hit the ceiling and come back down. Screaming in pain of course (cuz u went long and realised you bought at a high). But if you keep jumping, either you will get a head injury, or you will actually create a hole at the ceiling and you will eventually manage to break through! That is roughly the scenario. Most of the time the first test of the 20MA will see the price retrace. This is good. If it just broke through like the ceiling isn’t there, imagine yourself jumping so high you break through the ceiling, the roof and you actually jump some 1km upwards into the air. Is it sustainable? No. And when you do come back down, what happens? The higher you climb the harder you fall.

As for the US markets, in the first half we saw the action coincide with oil. When oil went up (those days when it was at $130 plus) the market will tank. When oil comes down, the market rebounds, intraday! It is very interesting. Today it has shifted to the USD. It has been happening for quite a few weeks now. USD drops, the market will rebound. The inverse is true. So it seems, USD is key. Why? I don’t know and I don’t care. The market is behaving this way now so one of my proprietary techniques is to look at what the market is seeking guidance from. USD has to come down for the market to rally, period. If it goes higher, the market will be capped on the upside. If the USD comes down, market rallies, oil will rebound too. Logic right? Even a economy-idiot like me knows. The USD charts can’t really say much. Am expecting a drop towards the 20MA. Oil on the other hand is at its low. Today it seems to have cracked below though so let’s see what happens. Intraday cracks, plus minus 1-2 days is ok. Unless it is a massive crack like a drop of 5 bucks to bring it to $55, then that is totally different.

So to summarise, neutral stance now. Neutral means no buying no selling. Holding till a confirmation happens. It is too late to short (unless supports cracks) and too early to go long. Either stay out, or hold. That is what I do. But by that, I am not enticing you to follow. Mid term, I am bullish. Interim bottom for the STI to me is 1647 region which is a 61.8% retracement. If it breaks below that, re-evaluation is needed. Else everything else will still be on track. 1647 is not a TP but rather a level I am watching out for, in case the trend continues to be down and turns from a retracement to a ‘dua lao’.

HSI is gonna open. Have a good remaining Friday peeps!