some updates

STI has broken above the resistance of 2420 and soared higher. currently, it is trading at 2576, apparently with nothing to stop its paths. just to take note of the consecutive 3 day rise of the index. coupled with a weak show in the US market may trigger a short term correction or reversal.

if we look at the broader perspective, we have to analyse the reason for such a huge move in the singapore equities market. as compared to the US markets, the singapore index has been progressively charging up higher, almost back up to 50% from peak to bottom, whereas the US markets (namely the S&P 500) is around about 35% back up. one way to look at it is that the asian markets in general are doing better in terms of picking up the debris since the meltdown occurred 12 hours away. however, there is a pressing problem of over speculation.

i was looking though some key statistics and indicators of the economy and found that the current economic climate is still shaky and gray. most key indicators point to a drop in figures which doesn't really tally with what the index is reflecting. my fear is that over speculation of share prices may be what that is driving the index up. in my opinion, one contributing factor to the over speculation would be the notion that the recovery is on the way. because of this over optimism, prices and value tend to deviate, and prices would soar way above value.

then again, i might be wrong. but i have this feeling that it is not all rosy as of yet because at this rate, the index would be up to pre-crash levels by the end of this year. i may be a cynic, but i hope for another slide so that i can go shopping once more.

more on bollinger

i've been using bollinger for a long time to trace out potential movement of stocks or indices. this is because bollinger takes into account volatility as well as moving averages.

for example: a couple of days ago, STI surged up many many points, over 70 plus points and closed there at its high. that broke the upper band of the bollinger band indicator. the next day, the index gapped up close to about 40 points, now you won't expect the index to surge up again don't you? thats pretty absurd. a good indication to short at that point would be when the index started to drop 5-10 points. good to short.

nonetheless, the prices are still above the band, so we may see a few more days of red. simple logic. the surge caused many short term investors to cash in on their positions. selling pressure builds. short sellers then take over to further facilitate the liquidity of the transactions, pushing prices lower.

i don't know how far it'll drop. but my guess is that if it goes low, first point to look at is 2300. not that low, i know.

nice

i've been waiting for the S&P500 to drop. and finally it did! it was looming around the 926-928 levels for a couple of days. i knew it was impossible for it to go up any higher. i guess i was right. watch out for 892.

what's next?

in the next few days, expect some sideways action in the market. looking at the STI, it is possible that it may move back up to 2330, to where the last support turned resistance was. alternatively, watch out for tomorrow's trading action. a bearish move would signal a further downwards move to levels of about back to 2220. currently STI on my chart hit its 20 EMA, and closed down.

if it goes red, go for it.

how accurate

as perfect as it may seem, 2210 was really the support level i have pointed out. intraday levels was established. STI closed at 2226 today. we can expect 2210 to be tested again tomorrow, and it should head for the next support level once this level is broken.

enjoy :)

major exhaustion

today was a perfect example of exhaustion. initial gap up in the STI triggered intra day selling, which followed by a flurry of buying. from then on, STI began tumbling to close about 17 points below its opening. what does this mean?

the resistance was perfectly establish, intraday, at around 2303, a little short of my initial estimates of 2310. nonetheless, we can expect to see a further down move on the STI in the coming days. this is starting to get purely exciting. of course, there is always a possibility of the market going back up. just keep that trigger on the short side and look for potential selling signals.

july will be a trying month for equities. we may see a further retracement from the peak of 2400 not only to 2200, but even lower. that will be established later.

now why is this so? like i've mentioned before, the rally cannot last. when the fundamentals of the companies are still weak and posting losses, it is not possible for STI to keep charging upwards. now we will see the equities market moving back to value.

what can we expect?

based on the daily chart of STI with a 20 day bollinger band applied, the support was established prematurely at 2237. STI closed last friday around about 2270, which gives us a handsome profit of at least 130 points on the STI on the short side. those who were apt to notice the support levels like i've mentioned would have taken at most about 170 points on the short side from 2400. but where do we go from here?

firstly, the 27 day EMA is definitely going flat, possibly indicating a turnaround. we need to verify the downtrend when the 10 day EMA cuts it. STI may hover around this values for the days to come. however, if STI reacts correctly, we can see another day or two of green. possibly look out for exhaustion on the second day, a 2 day rise followed by gapping up and closing down. that should be at levels of around 2310 or so. from there we would need to establish the next targeted support level through the bollinger bands, possibly testing the 2237 support again. we would need the 20 day EMA to turn to establish out next target.

in the mean time, for longer term investors, it sure is a good time to sweep the floor for some bargains. of course, bit by bit :)

updates so far, and so far so good

first resistance to watch out for STI would be around 2200. just to take note, 10EMA cutting down 20EMA.

bolinger band is a good tool to use to determine correction points in a trending market. however, i prefer using envelopes over bolinger bands as bolinger bands tends to stretch once the market gets volatile.

anyways, the market today closed above its opening. a sign to watch out. this may slow down the decline or even reverse it. it is anyone's guess. but in my opinion, the reason for strong buying pressure today would be due to eager buyers buying at a weak support at 2265, and short term traders covering their short positions. we may not see another super slide unless something critical hits the financial scene. however, if the market still wavers, then some slight medium term profit taking may set it, coupled with short sellers driving the market down to further its correction.

just a note, the equity market as seen great gains for the past few months, and the correction is highly likely. however, with the underlying economy still being bruised, share prices will most likely readjust itself back to its underlying value.

round top

a few signs that i look for from the STI graph.

1) round top signalling slowing of upwards momentum.

2) failure to break 2420 resistance level.

3) breaking of the 2330 support level, and subsequently, breaking on the 10 day EMA.

some patterns i observed on the STI. there is always a retracement just above the 61.8% mark on the fibonacci retracement levels. this applies to the upwards move on 9 march, 1 april, 30 april, and 18 may. currently, the STI is hovering at a critical level where it always retraces to. what do we have to look out for?

firstly, tomorrow's trading bias. a further down move below opening and a move to the 61.8% retracement line would signal a short. this would also mean that it would be a short if the 20 day EMA is broken.

levels to look out for: the lowest that i set would be around 2100 (the support level on 18 may), 2190 to 2200 is a possible support level. keep a watch on how STI behaves.

macroeconomic analysis

i don't usually do fundamental analysis but i guess its good to analyse the underlying factors at what drives the markets once in a while. i'll be giving my opinions on the happenings around the world, and the possible outcome in the near future. for those who are unsure about investment opportunities, maybe it would be worth a read.

1) monetary policy in the US
central bank is increasing money supply, eventually, prices are going to increase due to inflation. however, the effects of inflation are not yet seen, or are not that drastic as of yet. inflation may be imminent, if the monetary policy keeps up.

2) shift of government investments
other governments around the world are aware of this situation and are pulling part of their investments out of the US treasury bonds. this is because the US dollar value has slid more than 11% compared to other currencies. bonds are essentially affected by currency values. as a result, they will have to invest in other instruments to ensure that part of their US investments in the US treasury bonds are hedged against the currency slide. instruments we are looking at are mainly commodities.

3) why commodities
commodities are priced in US dollar, and if inflation does set in, the value of the US dollar is going to slide further. as a result, the prices of commodities has to go up, hence a good hedging tool. besides, countries like china (a rising power) will want to acquire resources that they control so that they can be self reliant. with their recent purchase attempts, it shows that china has been strategically investing in its future growth.

4) where is the potential
the potential is definitely in commodities, as well as crude oil. the demand for oil will begin to increase once the economic crisis is over, and speculators are already pushing prices up bit by bit. i guess they are pretty much looking to push it up to $80 per barrell, and possibly $100. also, the potential also lies in asian economies, mainly hong kong, china, india, probably singapore.the money flow is now coming to the east asian region, so it is a good location for an investment.

there are still other factors that points to why we should look into these areas. definitely, when the recovery comes in around 4 years or so, the market leaders will definitely come from asia, and most likely, china.

for more investment opportunities, feel free to contact me :: es_mc2@hotmail.com