what will happen next?

as i have mentioned in my earlier post, the market seems to have some more room for a downwards move. this is the path of least resistance. right now upon analysing STI, it is clear that it is being driven down heavily on fundamentals, primarily the weakened banking stocks. and so what is next for the market?

investors would be please with the current market climate. right now, investors should be keeping high levels of cash and liquid assets, or safe yields. my suggestion would be a 1-2 year government bond just to get a higher return on your cash. banks do not offer much except for their timed deposits. 1-2 years? yup. isn't that a little too long? yup, i'll explain why later on.

now, speculators like me will expect further shorting opportunities after a slight technical rebound. STI is currently nearing its 52-week low and is exhibiting slight buying pressure. monday might see the continuation of the rebound up to 1570, depending on on how the market opens and reacts within the first hour of trading. high chance of it testing 1470 if the market gaps up and shows strong selling pressure.

now, what will happen once peace and order has been restored? the market will go into a consolidation phase, just like the scene of a war movie where the dust settles. during this period, individuals are starting to gain confidence in the market. this would be led by bold investors who are ready with cash on hand to grab up bargains. the market will move sideways, probably in a channel.

you may ask, how come the prices still go down in an uptrending market? well, profit taking will set in and traders will lock in their profits once a targeted price has been reached. and to those of you who says technical analysis is bullshit, well think again. the market is made up of individuals who react based on history. like previous highs and lows.

once confidence in the market is fully restored, we can see another slow bull run to the next top, and an even further top when greed drives prices way beyond what they are supposed to be. like if i sell you an apple for $5 per apple.