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.