S&P/ASX 200

The chart above is the daily chart of the S&P/ASX 200 cash market. As we can see, it has been contained nicely in the lower rising channel since May 2010, but recently broke below it and it headed to the trendline drawn. Given the recent barrage of bad news, especially the poor unemployment report in the U.S and the unexpected drop in non-farm payrolls, one would be tempted to go short on the basis that the U.S might head back into recession in the near future. However, i beg to differ. Therein lies a great long opportunity after the S&P/ASX 200 has fallen about 460 points from the top on 12th April, a retracement comparable to the one made earlier( see red box) Even if it is poised to break further down below the rising channel, i think a relief rally is due here and there is still good money to be made. Besides that, from a contrarian perspective, there is enough pessimism built up to sustain a move up to at least the middle channel line. One should look out for base building action, or initiating buying for confirmation of the continuation of the uptrend. The strong swing up and down nature of the S&P/ASX 200 means one should be looking for a swing trade should the opportunity arises.

MSCI

The chart above is a daily chart of the MSCI Singapore index futures. Since the last post where i mentioned that we are close to an intermediate top, SIMSCI plunged about 50 points from the high set in mid November last year, a correction comparable to the one triggered by the Euro Crisis back in May 2010. As you can see, SIMSCI is well-contained in the blue uptrend channels drawn since apr 2009 and was poised to rebound nicely on its third touch at the lower channel only to close below it when unexpected news from Japan broke out. Since then, the market has recovered strongly in the backdrop of geo political situation/natural disaster/high oil prices/ongoing crisis in Europe. i think such market action is very bullish and reinforces the fact that we are still at the early stages of a bull market. After the SIMSCI bottomed out in late May during the Euro Crisis it began an intermediate upward move that took it about 75 points up. A similar move up from the recent bottom at 342 would bring it to 417. I expect the SIMSCI to continue its upward move and retest the upper rising channel.

General Update

 

Judging from the amount of bullish sentiment that has built up over the new year, i think we are very close to an intermediate term top. Analysts and financial experts are predicting a good year for the economy as well as equities, and i think the general public has gradually accepted that we are already in a bull market. So does it mean that we should fade the rest and go short on both fists now? Well i think it never pays to go against the intermediate trend in a bull market. You never know how far the investment crowd formed will bring the market above value. 

MSCI

The rally on Wednesday burned out many bears. I mentioned a while ago while the market was on its way up, that the media was selectively focusing on news that were in line with sentiments. The Euro crisis was a backdrop that did not receive any attention, until coincidentally when the market peak formed.

Although it came quick and scary, i conclude that it is a correction rather than a trend reversal.

My strategy for the next two weeks is to get on the long side above 377.3 while staying out if it falls below (not short). If my position is triggered, stop@ 370.9 (below MA)

General Update

I have to admit i underestimated the strength of the current leg up, and was quick to lock in profit. This is always the case in a bull market and that is why it is so hard to out-perform a buy-and-hold strategy.

  

Anyway, the Shanghai Composite Index tanked 5.2% today, the worst 1 day fall in more than a year. The media was quick to shift the momentum back to the bears as we can see from the above report. No signs of complacency, and i think this portends much higher prices ahead and we are still at an early stage of a bull market. The report even suggested more downside ahead, but i think we are nearing the end of a reaction and the market should resume its upward move sooner than you think it should.

General Update

Since my last post where i mentioned that we have an intermediate term bottom, STI has been heading north for 3 straight weeks and now we are in the making of a fourth. My HSI longs are well in the money and the index traded as expected. So what's next? I think it is always hard to trade on the long side when the market is overbought, for example right now, i believe many traders have taken profit too soon only to see the market grinding higher.

After 4 weeks of strong initiating buying, i still do not see any signs of extreme bullishness in the media but instead, news like the above after a small pullback. I think there is only one way we are heading which is northwards.

For the time being, i will be looking for short term trades and any upside will be small till the market is back to oversold conditions.

Bank stocks

Despite the STI rallying close to 80 points since breakout at 3000, the 3 banks have not been performing. In fact, the 3 of them are testing support near their respective support lines. The main component stocks that have strapped the STI along the rocket ride are mainly Genting ,Jardine C&C as well as the commodity stocks. Should the banks break below 8.70 OCBC, 13.80 DBS, 18.43 UOB, i believe one should be wary going long for the time being. The correction in financials will take a toll on the index and especially if Genting's steriods run out.

On the other hand, this will be a good opportunity to load up on the bank stocks should the price action prove that the sector finds strength in the pullback to rally further. In that case, the process of playing catchup will mean the upside could be pretty violent. Keep a close watch on the financials.