DJIA - STI - SSE ... Pieces in the Puzzle
In May 2009, the following made NEWS (BBC, UK):
Here we are 15 months later : Today's news, Saturday, July 24th 2010, is about stress tests having been performed on 91 European banks. The result: 7 of them appear to fail the test, less than 8% of all tested banks, needing a bailout sum of US$ 4,5 billion (around 6% of what was needed in the US).
.
In the US the year before, every other bank failed the test, and stock markets showed little regard to their plight! This time, a small percentage of Euro banks are suffering because they did not clean out their nest when they had the chance. Any reason why we should be more concerned NOW? Hmmm!
In the US, 9 banks have gone out of business year-to-date, and foreclosures in the industry are accelerating by comparison with 2009. All these events are the result of political decisions taken early last year, - and are really part and parcel of the inevitable, healthy shakeup. Most professional investors see this as a positive sign, and so the stock markets keep rallying.
Short Term Investment Conditions
Heightened volatility in the stock markets is poised to bring nice and nasty surprises in quick succession for many more weeks. This is a clear sign that the built-up tensions and anxiety of the last 24 months continues unabated. Common sense and careful reasoning have been laid to waste.
As a result, short term considerations feature higher than longer term plans and good investment principles. In the hand of the inexperienced investor this can spell disaster, but for professionals, experience demands that we take one day at a time to harvest the winning trade.
These are the typical preconditions for market sentiment to run wild (up at first till early August), or - even amok (by the time we get into September).
Last week, I showed the potential path for the DJIA over the coming weeks. The path remains very valid: crunch time is expected over the next 3 trading days, - and thereafter I am expecting some mighty jumps, positive ones. The upside momentum is perfectly on target for the highs we expect in the DJIA.
But it is clear that the current path, steeply rising and inside the Ichimoku cloud, is unsustainable and a pullback would suit us just fine . It must happen in the middle of next week (28/29 July?), or even earlier, if current huge steps in index valuations are anything to go by.
How did we deal with recent market changes?
Our ProActiveManagement investors saw their first tranche of cash move into equity last Monday,July 19, - yes, the lowest point since the failed run up. Second tranche was on Thursday and the last tranche should follow soon. Actual portfolio returns for the week will be visible next Tuesday or Wednesday probably, due to forward pricing in funds. Short-term performance in funds we chose was quite superb, with quite a few rising more than 3% in as many days.
Comparing with the DJIA, things looks a little different in Singapore's STI:
As you can see, the index is above the Ichimoku cloud indicating that the uptrend continues unabated.
A few days ago, the set up still looked like a head & shoulder forming, which could have cast a negative light on the current trend. But with the index now having closed above the 2,960 level, I doubt whether this formation will pan out.
The"hanged man" candlestick (see yellow arrow) also suggest that a pullback in the coming days would be ideal. As it is, the index looks a little lacklustre, and will have a tough time overcoming the big psychological 3,000 point level (see red circle). The 3,000 is just points away from a longer term - and therefore crucial - Fibonacci level. This the STI must overcome convincingly. Otherwise any advance will stall around 3,038, only about 2% above current valuations.
Where is the necessary impulse likely coming from?
Mainland China has corrected 30% since August 2009. It is at a position from where it is almost certainly going to find strong support for a sizeable advance. A rallying SSE will spill over into the Hang Seng and the STI - and all other Asian and indeed global indices.
That is what I am banking on!
If you wanted to find out just how important China's rise is for the world at large, here is your chance: We are running a seminar on
The topic:
I should add: for the first time, I will be outlining the forward looking cycles facing China, Hong Kong and Asia - for the next 12 months. Of this I am sure: you cannot find this anywhere else in Singapore.
To register please e-mail me. Or use the contact details on the flyer.
See you there!
"Ten of America's largest 19 banks need a combined $74.6bn (£50bn) of extra funds to boost their cash reserves.
That is the main finding of the so-called "stress tests" to see if the banks have sufficient capital to cope should the recession worsen. Bank of America is the most at risk, needing an additional $33.9bn."
So, one in two of the largest US banks suffered extreme stress then. That's something, - but US stock markets continued their upward trend regardless, till January 2010.Here we are 15 months later : Today's news, Saturday, July 24th 2010, is about stress tests having been performed on 91 European banks. The result: 7 of them appear to fail the test, less than 8% of all tested banks, needing a bailout sum of US$ 4,5 billion (around 6% of what was needed in the US).
.
In the US the year before, every other bank failed the test, and stock markets showed little regard to their plight! This time, a small percentage of Euro banks are suffering because they did not clean out their nest when they had the chance. Any reason why we should be more concerned NOW? Hmmm!
In the US, 9 banks have gone out of business year-to-date, and foreclosures in the industry are accelerating by comparison with 2009. All these events are the result of political decisions taken early last year, - and are really part and parcel of the inevitable, healthy shakeup. Most professional investors see this as a positive sign, and so the stock markets keep rallying.
Yet, still many more investors (especially those sitting on the sidelines waiting for that elusive bull market) are just as anxious TODAY as they were in May 2009.
Heightened volatility in the stock markets is poised to bring nice and nasty surprises in quick succession for many more weeks. This is a clear sign that the built-up tensions and anxiety of the last 24 months continues unabated. Common sense and careful reasoning have been laid to waste.
As a result, short term considerations feature higher than longer term plans and good investment principles. In the hand of the inexperienced investor this can spell disaster, but for professionals, experience demands that we take one day at a time to harvest the winning trade.
These are the typical preconditions for market sentiment to run wild (up at first till early August), or - even amok (by the time we get into September).
Last week, I showed the potential path for the DJIA over the coming weeks. The path remains very valid: crunch time is expected over the next 3 trading days, - and thereafter I am expecting some mighty jumps, positive ones. The upside momentum is perfectly on target for the highs we expect in the DJIA.
But it is clear that the current path, steeply rising and inside the Ichimoku cloud, is unsustainable and a pullback would suit us just fine . It must happen in the middle of next week (28/29 July?), or even earlier, if current huge steps in index valuations are anything to go by.
How did we deal with recent market changes?
Our ProActiveManagement investors saw their first tranche of cash move into equity last Monday,July 19, - yes, the lowest point since the failed run up. Second tranche was on Thursday and the last tranche should follow soon. Actual portfolio returns for the week will be visible next Tuesday or Wednesday probably, due to forward pricing in funds. Short-term performance in funds we chose was quite superb, with quite a few rising more than 3% in as many days.
Comparing with the DJIA, things looks a little different in Singapore's STI:
As you can see, the index is above the Ichimoku cloud indicating that the uptrend continues unabated.
A few days ago, the set up still looked like a head & shoulder forming, which could have cast a negative light on the current trend. But with the index now having closed above the 2,960 level, I doubt whether this formation will pan out.
The"hanged man" candlestick (see yellow arrow) also suggest that a pullback in the coming days would be ideal. As it is, the index looks a little lacklustre, and will have a tough time overcoming the big psychological 3,000 point level (see red circle). The 3,000 is just points away from a longer term - and therefore crucial - Fibonacci level. This the STI must overcome convincingly. Otherwise any advance will stall around 3,038, only about 2% above current valuations.
Where is the necessary impulse likely coming from?
Mainland China has corrected 30% since August 2009. It is at a position from where it is almost certainly going to find strong support for a sizeable advance. A rallying SSE will spill over into the Hang Seng and the STI - and all other Asian and indeed global indices.
That is what I am banking on!
If you wanted to find out just how important China's rise is for the world at large, here is your chance: We are running a seminar on
Friday, 30th July, from 10:00 to 12:00( and we even finish off with providing a nice buffet lunch). It's at the HDB Hub.
The topic:
China's Importance for Global Equity Markets - with insights into its cultural heritage.By mixing investment outlook and investment strategy with first hand information about China's intriguing cultural background promises a highly interesting, lively session.
I should add: for the first time, I will be outlining the forward looking cycles facing China, Hong Kong and Asia - for the next 12 months. Of this I am sure: you cannot find this anywhere else in Singapore.
To register please e-mail me. Or use the contact details on the flyer.
See you there!
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