Interim update of the week

Good day, good people!

A little intro, this post to kick start the action and bring a little life at this clean and green site.
Now let's have our market action updates.

Market Action
After 3 trading days as I last wrote about the retracement matter, we see that markets have plunged tremendously, exceeding our expectations of lows. This is partially because the turning points were a little lower than expected. Nonetheless, the expected has happened. We shall now brace for what is to come.

As this is being reported, the STI is at a low of 2886.56, the HSI at 22285.00 and Nikkei at 13159.45 All 3 major Asian indices have fallen considerably since Thursday. On the other hand, Wall street is rebounding from its low.

Insights and Opinion
Moving forward, we have our visual illustrations and opinions on where things are heading.



Starting with the STI, here we see a familiar candlestick. Not that this candlestick is a very special one and that its presence signifies a reversal about to happen, this candlestick after a gap down shows that a reversal is likely to happen. Throughout Tuesday, the market opened much lower and crept up slowly and quite surely, implying short term strength. This
together with our familiar candle is good sign.



On to the HSI. The latest candle is obviously a hammer. Although it is a black one, its presence in a strong bear market is a reversal sign.

Wrapping up, these signs are in line with previous estimates of retracement of the markets and projected short term up trend.

Say tuned for the next update coming soon, within the week, when we confirm this short term up trend and analyse the coming downturn.

Turning Point?

Market Action
Both the STI and HSI shed a bit of yesterday's gains (0.04% and 0.20% respectively) despite Wall Streets gains. The Nikkei is up 2.18% to 13603.31. The Singapore market was supported by gains in the banks, SGX as well as Citydev while other counters closed under the water.

Insights and Opinion
Following yesterday's Ichimoku charts, we have 2 charts on near term support and resistance.


This first chart shows the STI candlesticks. The top and bottom horizontal dotted lines are the near term support and resistance lines while the middle dotted line cuts the level at which a slight reversal is possible. The proportion here exhibits what can be believed to be, sacred geometry. In this case, it is just 1:2, where 1 and 2 are Fibonacci numbers. As the market is currently exhibiting a range phenonmenon, I have assumed the possible length of time this cycle will last.


This second chart shows the HSI candlesticks. The lines drawn here have the same meaning. Notice that the patterns for the HSI are similar to that of the STI. Considering the current macroeconomic climate, it is safe to assume that coupling of the markets shall persist for now.

The circled parts in both graphs give me a basis to believe that a short turning point will occur.

Once again, click on the charts to have them enlarged.

一目均衡表

Announcements
The inconsistent posting is regretted. Be sure to check this space every week. I will update it once a week from now on. No point updating everyday as I am not a reporter.

Market Action
Notice I dropped the "Today". I suppose it is more useful to share a boarder view.

The market seems bullish in the short term. However, near term correction is highly possible. Regional markets like the Nikkei and Hang Seng have had strong gains since last week. As of today, the STI gained 88.32 points to finish at 2978.32. In the region, the HSI gained a whooping 607.07 points to reach 23134.55 and the Nikkei also climbed 127.97 points to 13312.93.

Insights and Opinion
I have had comments that my insights needed to be a bit more "insightful". As I endeavour to upgrade the content on this site, here is the first invention to roll out. Introducing, Mao's Ichimoku.

The 一目均衡表 (Ichimoku Kinko Hyo) was invented in 1935 by a Japanese writer named 細田悟一氏. It is technical indicator used in technical analysis. Its full definition can be found at Investopedia.

For the purpose of my research, I have customised the Ichimoku for my analysis. I have attached 2 diagrams below to illustrate my findings using Mao's Ichimoku. The customised Ichimoku here has had its variables changed even though the lines are used for the same purpose. Mao's Ichimoku is used best to gauge quarterly (3-month) outlook. Click on the pictures to enlarge them.



Here we have the STI Candlestick chart with Mao's Ichimoku overlay. The Blue line is the Tenkan Sen, Red line is the Kijun Sen. These work like moving averages over a period of 8 and 21 days respectively. The Baby Blue line and Pink line are the Senkou Span A and Span B respectively. The area between the lines are the Ichimoku cloud which is a gauge for support and resistance.

From this chart, the STI is likely to retrace when it reaches 3030 to about 2940 levels. The retracement process will take 2 to 3 trading days. After this, it is likely to go all the way to a resistance at 3150. 3150 is the part just above the cloud. Due to the current state of the economic fundamentals, it is not likely to see the market break very much above the cloud. Technically speaking from the trend in the chart, it is unlikely that it will not reach for the resistance level in the short term.



Now for the HSI. The HSI is likely to retrace when it reaches 23300 to about 22400 levels. The retracement process is likely to happen within the next 2 trading days and will take 2 to 3 trading days to complete. After this, it is likely to go all the way to a resistance at 24500. Again, 24500 is the part just above the cloud. Economic fundamentals and technical indicators that apply to the STI are applicable here as well.

Hope you enjoyed this post and found the information useful. Feel free to comment :)

Posting resumes

Announcements
Apologies to those who read this page and did not find something new until now. I seem to be short of Thursday, Friday and Monday. The good news is, you have not missed much as TODAY is what matters now.

Today's Market Action
The market fell by 2.53% today, plunging 73.37 points and finishing at 2830.75. This has not happened since March. The market seems to be going down and completing its head and shoulder cycle. Sentiments are weak considering that Put warrants are in the Top Gainers and Top Losers are the index stocks.

Insights and Opinion
My near term estimate of 2900 +/- 50 has been broken. The market seems to be heading for a rebound, considering it is ranging. RSI and stocastics confirm this. However, I will not be too sure about when the rebound will start and when it will complete. In March, the market spent about 2 weeks at a low and took another 2 weeks to climb to 3150 levels. It will not be surprising if this happens again. I would expect to see "smaller scale ranging" phenomenon at current levels of 2850 +/- 50 for the next few days. But. There could be a chance of a longer recovery completing the U-shaped, temporary recovery. The resistance can be set at about 3050 +/- 50. This can be a good chance to long index stocks for a few weeks.

Further, fundamentals are weak considering the coupling of markets in the region with the US where things have not been doing very well. A rebound of equity markets would probably be fueled by a correction in commodity prices as a lot of people are expecting. Market movements are, a self-fulfilling prophesy.

Short Memory, Quick Reaction

Today's Market Action
In the news today, various sources have voiced out opinions that eased yesterday's fears and the US market reversed. This has sparked our local market to gain a solid 31.00 points to 2917.62.



From the chart above, the HSI seems to be experiencing more volatility than the STI. The Nikkei which closed a little earlier did not get to experience the rebound. Markets are currently still closely coupled.

Blue-chips ruled the Top Gainers while index Call Warrants rules TOp % Gainers. On the other hand, Put Warrants dominated both the Top Losers and Top % Losers.

Insights and Opinion



Nothing much happening now is changing the short term range outlook. I read an article about the softening of the commodities market today. Hard commodity prices seem set to correct themselves especially for crude oil, which analysts think, will return to its fair value later in the year to surge again early next year. Not much to comment about commodities as I am not an expert, however, the effects of this could be beneficial to the equities market which everyone seems to be underweighting now.

The major indices around the world have been negatively correlated to the price of oil and even gold. If these hard commodities are set to soften in prices later in the year, we can well expect a late year rally in equities. Even though it is hard to say when this will happen, it may be beneficial to collect what people are dumping now, equities. However, we do have to keep in mind that not everything is very cheap even now when the market is not in a strong uptrend. In fact, most counters in the Singapore market are hanging in a "neither expensive nor cheap, no one can tell what is going to happen so don't rush in" state.

Even though the current sentiment is to hold cash, I cannot help but think that cash in my bank account is depreciating at a rate of about 6% this year. When interest rates are low, fixed income instruments are not attractive. Reasons: 1) At low yields, fixed income instruments are relatively expensive. 2) Liquidity is not optimal (At least for me. As a calculative risk taker, you can see where my interests lie).

Reversal

Today's Market Action
New worries in the US on Freddie Mac and Fannie Mae have caused the US market to reverse from previous gains. The same goes here when the market action from the US is continued in this part of the world. The STI shed a solid 47.50, losing all it gained yesterday to reach a low of 2886.62. The number looks nice but it is not. Put Warrants dominated the Top Gainers and Top % Gainers. Top Losers were blue-chips and Top % losers were Call Warrants.

Insights and Opinion
Feedback from someone who read this space is that we need more than just commentary. So here is more.

As I have mentioned, yesterday's uptrend was not sustainable. Today's worries have brought the reversal back very soon. Looking at the action in the market, it can be noticed that volatility is well managed with the use of CW and PW. A point I failed to address clearly in the last post was the idea of hedging. Warrants are used to hedge the opposite movement (just in case one is wrong). Although the cost of hedging can eat away profits, this cost is well spent when we think about managing our risk. Think of it as this, "it is easier to make less profits than it is to make large profits". So when we hedge and make less profits, risk is lesser and we make profits easier. If this is scaled up, it can make more, in terms of absolute amount of profits, with lesser risk.

Keeping "hedging" in mind, the activity of PW does not necessarily translate into an expectation of a bear market, it also shows that some are hedging against potential downside by shorting the Put when going long on the underlying. This takes into consideration that some may be doing this while trying to take advantage of lower prices.

Rebound

Announcements:
Posts from now on shall follow a specific format. This shall give readers a better and more systematic view of daily insights. And YES! Daily posting shall resume since there is something new in the market everyday.

Today's Market Action:
The local market surged 41.58 points today to close at 2934.12. CityDev led the Top Gainers, up $0.400 or 3.7% together with other index weights. Call Warrants (CW) dominated the Top % Gainers. Gold 10US$ led the Top Losers falling $1.52 or 1.6%. Standing with it are Put Warrants (PW). Top % Losers include blue-chip Calls and index Puts. The STI seems to have moved closely in tandem with the HSI and the N225 for today.



My Insights and Opinions:
The market has kept within my estimated band of 2900 +/- 50, hitting a low of 2862.27 on the 3rd of July. The current uptrend seems strong but a little too strong to be sustainable in the short term. Relative Strength Index (RSI)* from the 3-month chart shows that the market is moving into "range" territory between 40% to 60%. That can be a good sign in times of economic weakness. A future breakout may indicate a start of a recovery.



CW in the Gainers with PW in the Losers are a clear sign of a very short term uptrend. However, due to the implied volatility that CW and PW are subjected to, this clearly shows the volatility and corresponding uncertainty of the current market.

Considering the above points, my view on seizing opportunities still hold for a longer term outlook. However, current prices are unattractive in the short term.


*RSI = 100 - 100/(1 + RS) where, RS = Average of x days' up closes / Average of x days' down closes