Weekend Analysis

Hello folks. Yes I am back! Gotta admit I had to warm up the technical engine once again. Watching the markets move with no real significance, hence no update up here of late.  The trend had been going sideways (AGAIN!) making no headway whatsoever. But Friday’s closing was a tad interesting.

The DJIA appears to have formed a lower high from the last couple trading sessions as u can see.  I had a TP for the upside at 8460 which did not even come close. The S&P did however kiss that resistance and fell back down. Word on the street again is that the markets have not been able to hold onto any gains at all. Any gains, have been erased, within days. It then usually proceeds to head even lower. This is typical of a bear rally which everyone has been seeing on the streets for more than a year now. A bear rally is a cousin of a tech rebound, though the latter tends to last shorter and comes usually 3-5 days of a downside. You will find no stock or index can ever plunge many sessions without a tech rebound. There are quite a few reasons for it, one of which is normally due to short covering (profit taking). That’s how I see it anyway. The institutional funds have a different risk management strategy and they need to lock in gains periodically. Consolidation periods are a common result, such as bear and bull flag formations that come with decreasing volume. To be honest, I don’t use the term bear rally often. To me, dead cat bounce is the right term. A rebound, only to U turn and make new lows. Bear rallies to me are sustainable and it does occur during a bear market that can last for months! We have not seen any of it yet.

Turning back to the DJIA, the 50% retracement remains as resistance, with Friday’s action cracking the 61.8%. We need confirmation, and this would come if it closes below the minor support line at 7944. Tested and bounced off successfully on Friday. MACD has what I personally call a level 2 bear signal, which is a short signal.  MFI won’t turn downwards tlll the downward move comes with increasing volume indicating money flowing out of the market. Well, sorta anyway.

Watch for resistance at 8071and 8266.  Support at 7944. The one and only left.  Most indicators point to bearish sentiment still. I would recommend going short if 7944 cracks with volume, with a use of 8071 – 8145 as cut loss point.

As Koori correctly pointed out, STI hasn’t gone down as much as the DJIA. STI’s chart doesn’t mirror the DJIA. It mirrors HSI the closest. The effect the US market has would likely affect opening price only. Intraday movement may or may not cover any gaps at opening. I know at least one other analyst who uses another index to track the STI. If I recall, my upside target was lowered to 1850. This is partly due to chart formation and wave counts. The wave count suggests a lower high will be formed. The STI appears to find a top at 38.2% instead at 1780. This is within expectations. I would be VERY surprised indeed if there was no rebound and the index headed down non-stop. Then again in this sorta climate, what is impossible? Watch out for gap support covering (in blue shade) and a test of the major 61.8% support. I haven’t done any trades while on holiday as neither cut loss nor TP prices were reached. The closest was capitaland but it hasn’t quite hit my target yet. If it does however crack that target then I may add more shorts. I have a small position on this only. On the STI, lower highs (in blue arrows) and lower lows (in red arrows)? 1725 has been tested all too frequently and has turned support n resistance multiple times. It is currently serving as support. Immediate support is 1742 which is 50MA where the STI closed on Friday. Looking at indicators, this is not likely to hold for very long.

Flipping to the weekly chart, the shooting star observed in 2nd week (high volume) still sees the index heading down. It closed at 1806 for the week, with 2 weeks of black closing so far. Last week was a white candle on low volume (but there were 2 days of non trading periods). Consolidation? My TP remains at 1850. And by the way, the weekly 20MA resistance is right there now, setting bear rallies dead in its tracks right there. 200MA which has been horizontal has begun to turn down. Ahhh.. dua lao sessions up ahead in months?

Just flipping to the dow weekly chart is amazing. In october you see 2 big black candles. One of which saw the week open on 10th Oct at 10322, only to close the week at 8451. That is a 18% drop. It dropped 7.3% the week earlier, putting this to almost a 26% drop in just 2 weeks. CRASH. Because of that gigantic drop, we have been moving sideways since then. But within this sideway motion there’s a huge range of course.  9661-7446.

Look at the SSE. Can you imagine that it is rather bullish hovering above short term MAs? Despite that, look at where it is still. The idea is, there is only so much upside one can go. A bear rally on the other hand is nicer. Note my own personal definitions of bear rally, dead cat bounce, and technical rebound. There were big funds who went bankrupt shorting Volkswagon. True the price was on the way to hell but you have to find the right entry point to short. If you just join in and u get caught in a tech rebound and u get margin calls, you are SO SCREWED. When a stock has been beaten down a lot down to like a 1 dollar left, a tech rebound can easily see 20-80% rebound within a day even. Do u wanna be caught holding a short there? Needless to say, big boys died doing just that. Maybe some of you will say, ORBEEGOOD! Die while shorting. haha.  To me, someone who rushes in without risk management only has himself to blame.  I too make such mistakes. I only human what. But my own character never ever allows myself to be in a check-mate position. It applies to how I handle things out of the stock market as well. The market is neutral. It can kill both bulls and bears. As a trader, I am also neutral. I am neither bull or bear. That is my philosophy. Rationale? Being biased on one side will cloud my judgement and analysis. I must be able to do my analysis objectively.

Anyone of you hold say, long positions and then look at the chart and it is all bear but u tell yourself, hey the MFI is pointing up, this is up that is up, this is near support blah blah? That, is hope analysis for you. The chart is telling you one story but you insist on crafting your own story. TA will fail for you, not because it didn’t work. But because, you chose not to follow the script.

Flipping to UOB now. Why? Cause as a big cap, it became my largest holding LOL..

I am particularly bear on UOB. I did some calculations and I have lowered the upside TP to be 12.45. Unlike the STI which I have not lowered the target yet, UOB looks quite ugly.  12.20 remains as cut loss point (no I didn’t cut yet, was on holiday!) but I see a strong possibility of 10.9 being tested again at the very least.  U need to have a heart of steel to trade big caps like this. Especially when it goes like 60 or 70c up and down! In the past it had been doing $1 movements, with an even larger intraday movement. I know bummy may be shorting this based on fundamentals. U know, it is queer. I never thought bout someone shorting a stock based on fundamentals. But when I thought bout it, why not? If u buy on fundamentals, u can also short based on the same reason. If I held onto my osim shorts, I would have huat big time.  If they can’t survive in a bull market, and they don’t change things now, how to survive in a bear market? Could u buy their products? I admit I bought 2. One u squeeze for myself and another foot reflexology thingie for my grandma. I like it, and I paid over 600 for it. It isn’t meant to show off, and no one ever comes to my room anyway. But think bout it, people buy BMW, nice condo, why? Cuz it is nice? That is bull. You know, it is something people can see. It is visible to the public. But who is gonna look at your Osim chairs and all? Not unless they come to your place? So in my case, who is gonna see my u squeeze? Only my feet! But it enjoys it.. hehe. Fact is how many are like me though? Not a lot. I bet not many will even buy it if its at half price. And how many chairs can you have in a flat anyway.  Ron Sim has been trying to support the price by making personal purchases. A CEO’s confidence? NAH! In fact, if I were on the executive board, I’ll vote to have him fired. The best way to secure your own CEO’s position is to be the chairman too haha.

Anyway I digress. Short selling based on fundamentals. I like it! Think bout it for a while. UOB has been very strong, compared to Citigroup, HSBC etc. Fundamentals side, I told people last year cheap gets cheaper. They all bought Citigroup at between 12-14 bucks as they felt its so dirt cheap. I said cheap gets cheaper, but they didn’t listen. Last month he told me his wife has banned him from buying ANY stock, regardless of price. So what now. No more dollar averaging opportunity since he has been banned. So he is stuck with that 13 dollar Citigroup shares and wait for rebound. And then do what? Sell? Buy more at 13? Hold? For how long?

Juz cause I am not econs trained or some analyst from some big bank on TV throwing out terms and numbers the average reader doesn’t even understand, people didn’t listen to me. Seriously when these people watch the analyst, what do they look out for? After 5 minutes of rumbling, all they wanna know is which stock, buy or sell call, and what is the TP and follow it! That is one of the WORST things anyone can do. I believe many have realised by now how they ended up carrying ‘babies’ from these analysts. Is it a con job? No I don’t think so.  But if you follow someone’s call and lost money, you have yourselves to blame.  If everyone can just follow someone’s call, then there will be no funds, no UTs, no fund managers, and the stock market will only have a trading vol of like maybe 5 mil shares a day, vs 1 billion.

Hope I didn’t bore you at all! haha. Yes I am back, recharged and ready to take on the world! When the market crashed in Oct 2008, I told people around watch out for Q2 in 2009 which is around when the nonsense from the market will trickle down. It has begun to but I don’t see the full impact of it yet. So yes, I will say it again. Brace yourselves!

I came across a blog a while back, Q3 last year. Saying recession, what recession? His argument is that job cuts and all is normal, but it has been overhyped blah blah. The idea is, there was no financial crisis. This so called crisis is from our own paranoia. There is no root the problem. If any at all, it is our own paranoia. I think this dude is gravely deillusioned.  There is no doubt, we are in a bear market, deep in recession with possibly a lot more to go. The question is not if we are in a recession but rather, how long it will last.