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.

where is the bottom?

lets hit some boring topics for the day.

i've been observing the market patterns these few days and the only conclusion i can get from it is that investors are in a state of confusion. from the looks of it, STI is heading downwards, and this is primarily due to the banking stocks such as DBS, OCBC and UOB. i could still remember a few months ago when someone told me, "hey, DBS is quite cheap now, only at 8 dollars plus, i think it may be good if i buy in some."

and my typical response was, "the end is not over, this isn't the real bottom."

people would ask me how i would know such an absurd fact. honestly, i am only speculating. that is my job. but if i were to give a rational presentation of my speculation, i would not make sense for a market recovery when most of the world's financial situation hasn't been solved yet.

i'm not an investor honestly. but i do look at the overall picture. i look at how the market operates. just like a doctor, i study the inner workings of the markets.

now, selling has set it. however, we have to cautiously tread this volatile market. the final wave, in my opinion, is now. but instead of a violent wave of selling, we are seeing a different last wave. this would be a slow but painful death. a high likelihood that this retracement will take the market back to the pre-bullish period of 2002/2003.

we'll wait awhile till DBS touches 6.25 to 6.50. currently, it is at 6.91.

invest? whats that?

most of us are unaware. but if we do not make our money work harder, they would eventually decay and succumb to the effects of inflation. when we talk about working harder, investments would be the natural course of action. however, many are unsure of how to go about investing their money, let alone classify and identify the risks of investing. those who are aware may be wondering: when is the right time to invest?

let me help you guys out. there are many ways to invest, and many sectors to invest in. think of it as a vehicle that brings you from point A to point B. the vehicle you choose determines how you are going to get to your eventual destinations.

high risk investments can be seen as a car strapped with rockets. or maybe a motorcycle. fast and can eventually lead you beyond your destination. the speed at which you reach your destination is in relation to the investment returns you are getting. of course, a car strapped with rockets isn't the safest form of vehicle you would want to ride on. furthermore, it may crash, and hence need some repairs (costs or losses) before being able to proceed an reach an eventual destination.

low risk investments are the opposite, and well, should be self explanatory.

of course you wont say "i want to invest in a rocket car", but you might say "i want to invest in an aggressive fund that carries a high weightage of equities and derivatives". the choice is yours.

now many people ask me about the right time to invest. honestly speaking, there's is no 'right time' to invest. investments ought to be viewed as a long term commitment that when you eventually foresee that you may need to cash in your investments, you have a significant amount of gains.

some may ask whether now is a good time to invest. i say why not. warren buffet may say why not. if you go to the jewellery shop one day and you find that the diamond rings go for one dollar a piece, would you tell yourself that you'd buy it another day because the valuation of diamond rings are so bad now you want to wait for the price to go up to maybe $100 then you buy them? well to put it simply, buy when something is cheap and wait for its value to appreciate, rather then miss out on the opportunity that lies ahead.

for more info, i'll be more than happy to share.