Market Trend: A Whole New Cycle Ahead...

An explosive fireworks finale to mark the end of the cycle which ended yesterday, November 12th... We hit a low of 801 on Oct 28th and that subsequently, triggered off an explosive display of strength. Composite Index hit a high of 926/7 level on Nov 5th and has since mellowed southbound with dwindling volume.

What this new cycle is going to bring us remains everybody guess..

After applying the cycle approach and knowing that we are into a new cycle starting today, we may now take a look at the all the factors and parameters available. This would involves piecing work like trying to piece a jigsaw together.

From the recent market movement, we can see that it was quite a broad base movement. One interesting sign that needs further behaviour studies. Was there a round of sweeping up undervalued stocks? Or was it a just a short play up to distribute whatever position 'they' took during the heavy margin force selling earlier? Only further observation can tell with time. 'They' refers to the hands behind this movement.

And from other parts of the world, Dow is trading at near its critical level now. A breach at this level would see a new low for Dow indices. Real economy is of no help either. Indicators continue to show major slowdown with threat of increasing unemployment. Europe? Like I have said way earlier, Europe is going to bear the biggest blunt of this subprime bubble. Simply because they were at the receiving end at the subprime peak.

Back to the local front, my immediate take is that we may have to go through another cycle of consolidation with more downside. Since volume has fizzled off quite substantially, there will be selective manipulation of certain stocks. Be wary and don't get trap into their distribution game. Critical support stands at 832/33 level. Critical in the sense that a breach would triggers off a 'hell breaks loose' market meaning that a low in the Composite Index would be set.

A conservative approach is to stay on the sideline for more concrete signs. Don't be fooled by the recent fireworks finale. Trade the futures. Short on strength for the time being.

Until the next update, good luck!

Market Trend: Urgent Update...

Did some calculation.. So I thought it might help to give an update here.

KLSE Composite Index broke through 905 level this morning and went through a correction to close at 905 level. First, the 905 level in my calculation is the strongest resistant level. Once breached, a correction would occur. KLCI did correct and bounced back to close at 905. From my experience, when we have an intra-day correction, market is bound to attack higher. That's what I call 'momentum'. Market did an intra-day correction and when the recovery step in, we get a rotation in stocks play. Very systematic. Play is still on. There is no trap set yet.

Like I have said earlier, fast rotational play is one of the sign to a trap is being set. Watch out for that over the next two or three days for confirmation. Immediate resistant stands at 920 level. I believe it will be breached with ease to test the 951/952 level.

Remember Nov !2th... Will keep all of you posted. Trade if possible but must move fast with the flow. Any 3 consecutively days of rotational play means that a trap has been set. That should be the key. Overheating volume would be another concern.

Good luck and trade cautiously.

Update (07th Nov 2008 7:57am)

Something crossed my mind this morning while driving to work. Something for us to ponder on. I noticed the Yen has weakened drastically against the USD. I do hold this belief that this subprime turmoil was the creation of yen carry trade. Cheap yen's loan created excess liquidity. And excess liquidity created easy credit. And when yen carry started to unwind, Yen strengthened against the USD and at the same time, punctured the subprime bubble. Thus, came all these adjustment to fill in the vacuum left by the unwinding of yen carry. Could this weakenning in Yen against the USD indicates the emergence of yen carry?

I would like to think that there is a possibilty. Why not if it has become so cheap for them to come in and rule the world financial scene once and for all. One economic war, indeed, where victim's pocket become the target. Not life threatening at all.

If what I think here brings truth, we are in fact in a new era.. an era where it requires us to adjust accordingly to the whole new concept. And if it is true to my criminal thoughts, then we may have a good run ahead of us. Keep your eyes open...

Wait at least till after Nov 12th. This run-up could well be a fireworks finale to mark the end of this cycle..

Market Trend Through The Eyes of Cycle....

Equity markets around the globe has risen remarkably from their lows after a Fed move to reduce the interest rate coupled with the US general election which is schedule for later in the day Eastern Time.

Do this equity market improvement signifies the end of the credit crunch problem? Is the worst over?

Despite all the desperate attempts by world leaders to plug this rot, let us not be swayed by the recovery in global equity markets. Many negative factors remain. Slowdown in global economy cannot be ignored. Serious damages has been done worldwide with the recent plunged in equity and derivatives markets. The magnitude of these damages cannot be ascertained. But a layman rough estimate could send chills down your spine.

In other words, uncertainty still looms despite the fact that there are serious attempts to address this major crisis. Its still too early to tell. Best is we may avoid Depression but a severe recession is definitely inevitable.

Now the interesting part... the local front. Remember my postings on cycles? We are now at the tail-end of another cycle which is suppose to end on Nov 12th and after that we would embark on a whole new cycle. That should roughly explains the stirring actions that have been churning over the past trading days which came after a drastic margin clearance force sale. There is an unseen hand behind these movements. Familiar play pattern to me. The same group who created the corridor and oil and gas play. Powerful group and this time they target second liners like Genting and IOI. The rest just follow the trend.

My advice is to exercise caution as we head into the next cycle. This is temporary. Signs to watch are quick rotational play and dwindling volume. When you see any of these signs, run for your life. One correction can be expected to today or tommorow. Stay on alert come next week. Trade is posssible if you are sharp. Levels will be provided later as I have been out of touch for quite awhile now.

The Door to Depression swings open...

Another Black Monday in Asia market. Hang Seng got hammered down by 12.70% to close slightly above the 11,000 level while Nikkei continue to slide to close at 7162 points, down 486 points (6.36%). European markets all opened down between 4 to 6% with Dow and S&P 500 futures in negative 4% territory.

Metals and commodities continue to tumble. Even Gold was not spared.

So, what do all these tell us?

Doomed!!

The concerted effort to address this crisis has failed miserably. All financial markets indicators fall further into uncharted territory. The bottom remains a mystery. Signs are very much similar to those 1929 era except this time, this is going to be of a much greater destruction.

Is there any way out?

Beyond help!!

Everything have to fall further to fill up the vast vacuum which was left behind by the subprime's bubble and the domino effect that came with it. Just like what we are facing now globally. Further destruction of wealth. Further deflation of values. In other words, we need to get our feet back on the ground again after decade long of value inflation and wealth creation. Human kind have to face the the wrath of their intelligence and their weakness to greed and temptation. And when that happen, we will all be equal again. The poor cant go any worse while the rich would have to make big adjustment to their lifestyle.

There is nothing the world leaders could do now except to slowdown the impact of this destructive force. Do not depend on them. Start doing adjustment yourself. Whatever it is, take it in your stride. Do not take it too hard on yourself. Life does goes on.. Any northbound market is to be view as temporary. This one definitely takes time. Time to bottom out.. Time to consolidate and lick wounds. A lengthy process indeed. There will be trading opportunities. Timing is crucial. Remember Trade.. not Hold! Not a time for long term hold.

Asian Markets Plunge: Chaos on the local front...

Asian markets plunge across the board with Kospi (-10.57%) taking the lead followed by Nikkei (-9.60%) breaking the 8000 point level with ease while Hong Kong and Singapore both down slightly more than 7% and counting...

Further devaluation of global wealth as the wrath of subprime collapse continues to rear its ugly head despite the global concerted efforts to address this destructive force.

While there are still ongoing debates by different quarters on the status of their economy, our government chose to be in denial as to our status. Some analyst predicted that our country would be in a technical recession next year. Technical recession? What the hell is that? It is whether we are in one or not.. not a matter of technicality. Want to talk about technicality? Allow me to provide you with some layman technicalities.

KLSE Composite Index stands 859 points from a high of 1526 points in January. And this is non reflective of the true situation that has been plaguing our exchange. Take a look at our broader market. Blue chips have fallen more than 50% while many 2nd and 3rd liners have fallen even more. Some as high as 90% and more. Translate in into market capitalization value. This would mean that at least 30B in value has been wiped off from this exchange itself. Conservatively Where did these money go? Ask ourselves these questions: How much did the foreign funds take out? How much of this portion is under margin financing?

It does not takes a rocket scientist to figure this out. There was this vast vacuum in our financial system created through the process of value inflation since end of 2006. And there have been series of systematic implosions since last year as funds started to unwind through the help of rating agencies.

Lets talk about the real economy. What do we have except for the NSEW corridors hype? What happen to them now? Conveniently shelved taking global situation as an excuse. In the first place, it was just a hype creation to enrich themselves through the process of inflating the share prices and distributing it at higher levels. Yet again, the investing public became fools to find themselves caught in their trap. There was no concrete move by this administration to ensure the welfare of our real economy. All talks that create hypes that doesn't work well for the real economy.

Technical recession? Hum-buggers them all!!

Forget about the 5B to ValueCap. Two possibilities here: First, it can be used to bail out selective idiots like it was done during the 97-98 financial crisis. Or it can be used to prop up selective shares... this is dangerous as it can easily be subjected to abuse if there is no transparency. The mobilization of this funds can only benefit certain individuals who have access to it. It is our money and this proposed move in no way can benefit the country as a whole.

So what is in store for us now?

Hold cash. Avoid all forms of investment. This destructive force is too strong for us to try to be smart. We are in uncharted territories. More serious consequences loom. Businesses is going to face hardships with dwindling global demand. Our 26M million population cannot consume what our country produced. So forget about self-reliant domestically. Self adjustment main priority. Consolidate your finances. Take time off to enjoy your liberty.

Global Markets Rebounded: Is The Worst Over??

Dow up by 11% last night. Europe all up between 8-12%. All up on news of Europe bail-out plans for banks couple with the expectation that Fed's announcement over the utilization of US250billion of the US700billion rescue package today.

Only on Friday (3:43 Malaysian time), I made a call in my post:

For traders, I would suggest all of you to take a look at the S&P 500. You may consider taking a calculated risk to call for a buy when S&P 500 hit 800 and below. Why the 800 level? Layman instinct. But the truth is... remember last year when someone took a US1B bet on S&P 500 futures to hit 800 points by a certain period? See, so simple from layman. I just take that as a guide. Crude may bottom out after hitting around the US77 mark.

And on Friday, S&P500 hit a low of 839.80 before staging a rebound. Crude oil closed at US77.70. Well, it was slightly off but given the panic that plagued the glodal equities markets at that time, the timing and the margin of error can be considered reasonable. Again, the timing of entry is important. If you would have committed yourself a day or two days earlier, you would have panic sold by early part of Friday when the Dow at one point was down more than 700 points. So you must understand, one cannot afford to get his timing wrong especially in this volatile market environment. You would be pushed to make all the wrong decisions.

What would happen from now? Is the worst over? Buy on rumours, Sell on news?

Let me start off by answering 'Is the worst over?' question. These facts remained. 1) Real economy remains gloomy. 2) Rescue package is insufficient. 3) Serious damage has been done. Based on the following, I would foresee a market trend where Dow would rangebound temporarily within the 8300-10600 range more towards a near-term, medium term and long term downside biased. We are still staring at the door of a Mother of All Depression. What IMF and G7 could do is to soften this landing. Now that they have committed themselves to rescue banks, what is left for them to do is to pray that this could work. Chances are slim here.

On the local front, we are more on our own. Foreign involvement in local market is next to none. Political uncertainties coupled with administration incompetency could only worsen the situation. Forget about Nor Mohammed Yakcop statement over the government's confidence on the country's ability to register growth. He is talking cock like singing song. Who is he trying to lie to? Government spending stalled, local businesses facing slowdown coupled with higher costs, etc. etc.. I supposed he meant Umnoputra growth through pricey projects and purchases. Maybank-BII is definitely one of them. A deal that made many riches from Malaysia to Indonesia via Singapore. Public money again being misused to add to their coffers.

Cash is still king. Not time for one to depart with it yet.

For futures traders, I am at a lost now. Personally, I would more or less favour a short on strength approach. Patience is Virtue.

Global Financial Crisis: Further Meltdown today...

Iceland went bust and slipped into abyss.. Who is next? I am not joking here. We are talking to a tune of US 360 trillion of subprime mortgages at its peak. Easy loan through inflation of assets value. In this particular case, housing asset. And all these mortgages turned into financial papers which became tradable and spread across the global financial system.

Originated from the US and found it's way to Europe and some parts of Asia. Now, US is having big problem trying to withstand this destructive force, what more can we expect from Europe? From my stand, European countries are going to be the biggest loser of this subprime turmoil. While its impact on Asia remained manageable. Perhaps, South Korea would be the hardest hit. Other than that, the exposure can be considered within safety limit.

The questions now are: When will all these be over? Where is the bottom? Is all the recent rescue packages enough? What about the synchronized interest rate cut? And we even get controversial views arguing over the state of US economy: Whether they are already in recession or going into one?

I find all these jerks disgusting. Look at the bigger picture, all of you hypocritical jerks!! Keep yourselves abreast with Reality and stop living in your enclosed world of technical analysis filled with false hopes. And then came one jerk from Merill Lynch trying to be smart. He presented the dividend yield watchamacallit and claimed that the market remained bullish as the dividend yield in US is still above the 3% level. See what i mean? Pathetic!! Humbugs all of them.

Finally get to release my disgusts here.. Allow this layman to answer some of the questions above. Is all the rescue packages enough? If we look at the size of this subprime, we easily need at least US 80 trillion just to fix this problem worldwide. Consider what they have proposed recently, it's just chickenfeed as Alan Greenspan has put it. Interest rate cut came a tad too late. In fact, they reacted too slow in addressing this problem. Damage has already been done. Not much of hope now. We could be staring at the door of depression now.

McCain claimed that he knows how to get US out of this financial crisis during his 2nd debate with Obama. He shot himself in his balls. If he really does know, why the need to wait till he get elected as president? If he is true to the people and the country, he should be doing it right now. Isn't this a threat or a blackmail? Obama remained realistic. He told the people he would try to make everyone keep their home if elected. Here's the hint to the two aspiring Presidential elect.. Keep to basics and don't attempt to touch on this financial crisis. There is no way to get out of this now. Just face this hurtful fact!! Pit-less bottom and may take years to recover. This ain't over yet for sure.

For traders, I would suggest all of you to take a look at the S&P 500. You may consider taking a calculated risk to call for a buy when S&P 500 hit 800 and below. Why the 800 level? Layman instinct. But the truth is... remember last year when someone took a US1B bet on S&P 500 futures to hit 800 points by a certain period? See, so simple from layman. I just take that as a guide. Crude may bottom out after hitting around the US77 mark. Just my layman prediction. I got the top right. Well, almost right. Missed by a mere 73 cents.

Don't trust jerks with your money, especially in times like this.

- Parting words of wisdom

Global Market Meltdown: Another Black Monday indeed!!

Asia bourses down between 3-5% today. European bourses plummeting between 5-10% at the present moment. And Dow is struggling to avoid a more than 5% plunge... Surprising? Not at all if you believe my layman view in all my previous blog posts on market trend. Perhaps, all of you would find me unconvincing due to the lacking of the macro and micro economic terms used. Who is having the last laugh now??

So now, who would you believe? Those so called geniuses that CNBC and Bloomberg interviewed or one layman who happened to possess some basic knowledge but enough experience to look beyond.

For the past one year, they have indeed been investing in a state of denial. Creating false hopes and breaching the rule of thumb which is in this case "'hope' is forbidden in equity market". New rule of thumb? Well, it is new to all of you but definitely not to me. This one belongs to me. My creation through my experience. 'Investment based on hope' Kills!!

Subprime failure was the main market force this time. The moment subprime crisis started to erupt, the whole financial foundation from the US through Europe started to crack. And when the cracks appear, it is only a matter of time the whole infrastructure would collapse and bring along everything that was resting on top of it. One thing good about Market Force is: Market force does not discriminate between the rich and the poor. And it is color blind too. Once it strikes, it would just take everything that stand in its way. Our job is to Stay Clear. So simple. Do we really need Oxford's or Harvard's grads or those daily gurus who were picked to give their views over the television to tell us what to do?

Even at this very moment, Bush is talking bulls 'live' on TV trying to hoodwink the Americans.

Go back and read my previous postings for more clues. Catch the main underlying tone. I hope you have learn a thing or two from my layman explanation here. I welcome any challenge from around the world. Please contradict me... Depression? Tell me about it!

Wall Street As i See It: The Truth Hurts!!

Wall Street Volatility: Hedge Funds Unwinding??

The recent signs of desperation by US authorities seeking a USD 700B bailout plan for Wall Street is clearly an admission by the administration on the seriousness of the problem that plagued the country's financial system and the recently announced economic datas (declining manufacturing data and rising unemployment) further indicate that the country's real economy is heading for further steep decline.

Knowing these facts together with mixed comments by those so called gurus (80% bullshitters) interviewed on CNBC and Bloomberg, there are indeed uncertainties over the workability of this USD 700B bailout package. It doesn't matter how they want to term it. Rescue Plan or a Bailout Plan? Just a propaganda delusion trick! The fact remained no matter how want to call it. US is already in recession and this time it is going to take a long time before they can recover.

With this uncertain scenario, one only need to ask themselves this question: Is Dow attractive enough for hedge funds to remain invested in there? Don't listen to Bernanke or Paulson. They are just political puppets and their credibilities have been flushed down the drain ever since the subprime problems emerged. All their lies and assurances only delayed the truth of this financial holocaust.

We only need to understand the behaviour of hedge fund here. Would any hedge fund place their money on markets with gloomy days ahead? It would be stupid for any of them to do so. Only logical thing for any hedge fund manager to do is to cash out now. And how are they going to do it? They are going to make full use of news and economic datas to unwind their position. That should explains the volatile behaviour of Dow.

As a layman, it would be advisable and cash out on strength and consolidate your finances. Do not tread the equities as you would most probably be getting yourself into trouble. Do not hold any long term view for the time being. If you intend to trade the volatility, use the 'hit and run' technique with a 5% stop loss point.

From where i stand, it would be better for one to stay clear as the return is not worth taking the risk, not to mention those stress involved.

Ignore George Bush and with all due respect, ignore Warren Buffet too. Bush doesn't know a thing about economy and it doesn't hurt Warren Buffet at all if he makes a USD 10B mistake. Can anyone of you afford further losses?

In other words, It is Time to Fold!! We are not even near the bottom yet. Better bet is to trade the Dow futures. Short Dow futures on Strength. Concentrate and Be Patient. Hit only when you feel the Time is Right.

For God sake, learn to filter off those interviews over CNBC and Bloomberg. Full of garbage. Full of baseless false hopes. Avoid those who talked with a saleman's pitch for example, that Kudlow guy. I bet if he put his money where his mouth is, he would be Dead years ago.

Market Trend: Cash Is King!!!

USD 700B bail out? Full of craps. Subprime problem exceeds at least USD 20 Trillion conservatively. USD 700B proposed by Treasury, Feds and SEC is only for bail-out of companies related to them. Why the selective rescue plan? Why Fannie and Freddie and not Lehman? Explain to me about it.

So what if US lawmakers push this proposal through? Maybe it will stabilize Dow for another 2 weeks. But when this USD 700B fail, we are talking about the Mother of All Depression. I have already see it coming months ago. Further financial collapse is expected. Read here..

With such worrying scenario, Cash remains the King. Why would investors risk their money in situation like this. Other than cash, Gold would be a better instrument to invest in to hedge against the sorry state of US economy coupled with all the 'scandals' behind the bailed out.

Sorry to be sceptical here. Sorry if I am being too direct here. Just my nature to make my statement the way I see it without holding back. The lawmakers can say what they want but the truth is they knew US is fucked for sure. High chance that US economy is heading towards Depression. How one country survive would very much be dependent on the efficiency and the flexibility of the administration. How are they going to cope with such negative scenario?

Bailing out is not the answer here. Not a time to be aggressive. Keep interest rate low. Push for more mergers and acquisitions.

Time to consolidate and feel the pain.

Update 10:45am

The House's rejection of the bailout package throws the future of the proposed bailout into confusion. Dow plunged 777 points. Read more here and here.

So what would happen from now? Reasons for bail-out not convincing enough? Perhaps, this bail-out package needs more transparency. After all, the manner of which they came out with this bail-out thingy is enough to stir up suspicion of a scandal behind this move. Malicious when they imposed a No Short Sale rule in the middle of the game when all the cards are opened up to them. Sure win situation for the bankers.

Whatever it is, Just Hang On to Your Cash. You may find it useful few years into the future. You may even feel the real satisfaction of holding cash as there will be abundant opportunities to grow your cash.

market trend: a whole new horizon?

Just as i posted my view on US Treasury call for a balance sheet cleanup, the US authorities jointly came out with a rescue plan to save Wall Street:

The buyout plan—with few firm details—is announced. President Bush says the move puts "a significant amount of taxpayer dollars on the line," but he says the risk of not acting "would be far higher." In additional actions, the Treasury and Fed act to guarantee the assets of money-market funds, which had been threatened by the meltdown of the financial markets, and the SEC places a temporary ban on the short-selling of nearly 799 financial stocks.

Indeed, some very drastic moves by by the authorities which could very well change the face of the US financial system forever. A step away from what they had preached for decades - a financial deregulation. It is like imposing a capital control only stopping short of currency peg and a regulated flow of dollars.

The ban on short selling prompted a short covering spree by shorties resulting in a 368 points rise in Dow.

So what will happen now? What will happen to Dow after all the short covering is done? Is the further injection of USD 700B enough to turn everything around?

All these drastic moves can be translated as a serious failure in US financial system. A USD 700B is just an insignificant figure given the seriousness of the subprime mortgages which have clearly wiped out tens of trillion in terms of market capitalization worldwide. Not mentioning the damages from the the wild swings in derivatives markets.

However, these moves can also be seen as the beginning of a consolidation stage where everything will more or less stabilize from now. Don't dream for an instant recovery. Rule of thumb applies. No instant recovery when damage is of such magnitude. The recovery factor rest on the real economy from now. All these takes time. Real economy remains gloomy. It may takes at least 5 years before US could find it's footing again. Again, these measures only tell the weakness of US and it does not change the poor fundamentals of US economy and financial system. Dow would remain downside biase after the initial uproar over these measures.

Temporary ban on short selling. A drastic and draconian move subjected to open abuses. Congress should call for an investigation into substantial long trades taken days before these moves were announced. If they can do it for 911, they need to do the same for this situation especially so, for those 4 powerful guys pictured above. Nevertheless, this very move by the SEC has incurred the wrath of all hedge funds. Once that happened, be prepared for a longer consolidation period as hedge funds would move away to markets with greener pastures.

These moves has indeed created a whole new horizon for other parts of the world as the exodus of funds will begin sooner. Whether it will reach our shore remains very much on the ability of our administration to reform the rotting system.

With the recent development, it would be advisable to stay on the sideline. For the index futures traders, it is almost impossible to trade with contracts crossover activities about to start soon. When this activities happen, the futures trend would move independently without regard to the cash market. It's a transferring activity from the left hand to right hand and looking for suckers to kill at the same time.

Stay neutral for the next few days with eyes on volume and index. Very good indicators with this battered market condition.

market trend: some interesting points for all to ponder on...

Oops! a two months lapse since my last update. Well, that end of August thingy did happened. When i posted my comment then, there was no news on budget being brought forward. And bang!, there it happened. Anybody caught on short would have soiled their underpants on that budget day. Sad to say that i was one of them( short Sept on 29th August at 1056.5). Ironic, isn't it? But i truly deserved it.. That's for going against myself. Once we get caught on the wrong way, it actually mean that we lose out on opportunity to make both ways on index trading. I sat on my paper loss and came September, the market started to turn negative again. I sat because the volume was unusually thin. We haven't see this volume for quite some time now. Anyway, I managed to make some money out of this trade. Covered my last lot at 1016 on September 15th because of the 916 hype about change in government. Moral of the story: It's alright to be smart but don't try to be too smart.

Enough said here. Just another repeated mistake on my part. Even after i realised my mistake, I had two chances to cover back even and turn long but i didn't react. Stubborn and indiscipline or whatsoever but it was blatant stupidity.

So, what now? Subprime woes still looms. Fannie & Freddie bailed out. Lehman Bros busted. AIG screwed up. Surprising? Not really though. It was all there waiting to be exposed right from the beginning. It was them living in state of denial.

So much have been written off and it is still not enough. Now, Paulson wants a balance sheet cleanup. All illiquid assets have to be written off from the balance sheet. Sounds familiar? Lets go back to Year 2000 with Mahathir-nomics... Tax free year with base accounting at Year 2000. In another words, it is balance sheet cleanup. All illiquid assets is being taken off from balance sheet through write-offs or transferred out somewhere. For our case, it was danaharta. From that base year, the future operating accounts and balance sheet will reflect positively. Yeah, taking it out from the accounting system and parked it somewhere off the record. Another way to buy time and create a positive perception toward the health of the the country's economy. Lets not talk about the scandals behind this move on the local front.

Allow me to do my layman view on this balance sheet cleanup move by the Fed. Illiquid assets from subprime carries in balance sheet at high value (probably at 90% of the asset valuation during the peak). With the housing market slump now, the value would have fallen by a conservative 50% ( many which are rotting away in ghostly residential estate). This is indeed a major one time write off. I don't really have the exact figure but this amount could very much be in the region between 15-20 trillion USD.

The message here is clear. It is time for us to lick our wounds and pray that our Real Economy is going to get us out of this subprime shit. That is for US and these will definitely takes time to materialize. To me, Dow is going to remain volatile for the time being with more downside until the state of their Real Economy dictates the direction of their capital market.

When US goes into that mode, then only we can see some actions in other part of the world. Simply because funds cannot lie ideal for long. There will be some creation of themes and hypes. Asia would still be their favourite haunt as Asia countries were spared from subprime woes.

And for us, we clearly have our own problem here. Politically, we are at a crossroad. Uncertainty looms. And it is not about who wins or who prevails at the end of it. It is about whoever that leads this country having the ability to reform and steer us away from this regulated system. Good human rights record, free market, good business climate and good governance are some of the important factors that funds look at. And until we straighten out ourselves, don't expect too much here. In fact, my calculation tells me we have 2-6 months to do so. That's based on cycles.

Technically speaking, our index broke 970 level momentarily with the help of a 4 over percent drop in Dow. That was a strong support level. Anytime when there is a breached of support level, a technical is inevitable. I did made my stand known to 2 friends but i was reluctant to commit due to our political scenario.

The USD247B injection into capital market would stabilize the world market momentarily. It is seen as a measure to soften the landing but the fact remains: damage has been done. Not forgetting the recent collapse in commodities derivatives... many funds got burnt and yet to unfold..

On the local front, again we need to monitor the volume. Overhead resistant is cap at 1035, 1056/57 and the strongest is at 1067/8. Again any breach of these level, do expect a major retracement. Catch my hint??

Personally, after missing that 970 yesterday, I would stay sideline for the moment. Once volume dwindle and resistant level hit, i might take a short and go for 20-30 points.

Again, the index futures is still a better instrument to make a punt. Forget about shares for the time being.

market trend: no promising sign with further setback from our incompetent government..

TheWhisperer said...

"My calculation tells me the oil bubble may burst once the price hit USD148.

Local economy is right about depression.. question is whether the world is well equip enough to avoid it.

Subprime at its peak totalled up to USD300 trillion. A conservative 10% non performing loan (NPL) would actually translate into a USD 30 trillion that need to be written off. And so far what have been written off is less than a trillion. Sub-prime woes ain't over yet.

That should explains the transfer of funds from equities into commodities and metal derivatives. Record prices been set mainly due to excessive speculation..

Dangerous precedent that could spell destruction to the world. That is why it is better to hold cash now only if we have any left by now.. lol"

27 June, 2008

That was my comment on crude price which i posted on http://hishamjabar.blogspot.com/ article titled 'Crude Oil surpass the USD140 mark!!' when everybody was singing to the tune of crude price could reach the USD170 mark. Look like my calculation came close to reality for the time being. Please don't ask me how i arrive at that magic figure as it only came into my mind at that instance to add, subtract and multiply using levels and percentage. I now have the slightest idea on how i arrive at this USD148 figure.

Another similar incident happened during the late Feb 2007 stock market plunge. When it started, it occurred to me that i must calculate and try to get the bottom level. There i went adding, subtracting and multiplying on my calculator and i concluded that 1090 would be the bottom. And it happened exactly on the dot and came the big push. I did tried going backwards with my calculation and till today, i don't have any idea how i came to that 1090 level. My friends did suggested that i should keep a log on my calculations. Nah, it can never work that way. It has to be spontaneous at that instance when the mind is in the right frame with the fingers doing all the punching. And also the fact that each situation requires different sets of calculation as the factors involve varies.

Since my last post on June 5th ( i apologise for the long lapse ), i mentioned about the breach of 1200/1201 level would spell disaster to our market. A breach of this level would see an index-low lower than the August 2007 low. Please do not ask me what would be the low this time as my mind is still on holiday mood. However, i assure all of you that i would post it up immediately the moment my mind come out with one.

So, what is in store for us now? With the total daily volume been dwindled down to barely 300M, i expect this market to continue remain listless with downside bias. From the market cycle point of view, i suspect that we are going to have a downward trend for the first half of the cycle follow by a uptrend for the second half. To piece all these together, i foresee another wave of downtrend in August.

What we need to do now is to look for sign of a consistent build up in volume. Critical timing would be the last week of August and the first 4 days of September. Get ready to be involve then. Like i have said earlier, i don't have the index bottom yet but nevertheless, i will try to feel for one the soonest possible.

Meanwhile, sit back and relax. Unless you are involve in the futures derivative. This is the only place we can make our money for the time being. Short on strength but be careful towards the end of August. Don't get caught on your short position as the damage can be of serious consequences.

Again, it's only my 2 cent take here. So tread and trade at your own risk. I am just going to put my money where my mouth is.

market trend: where do we go from here?..

Huyoh! Composite Index down 34 points as of now, a reaction to the drastic fuel hike following an earlier downgrade by Goldman Sachs on our market based on the reason of political instability. All these events add in activities to our otherwise listless market.

So what have we learn from last Friday's sudden surge in volume? A sudden surge in the form of a big wave crashing into the shore without the initial retreat. That was also why i advise all of you to pay more attention to further signs. And on Monday, our market volume fizzled off by more than 50% from Friday's volume. That was a very bad sign indeed, so to speaks.

Never mind all that. It had already happened and there is nothing you can do about it now. What you need to do is to learn your lesson. And this is also the main reason of the existence of this very 'market trend' column. Again i would like to stress here that it is not my intention to prove myself nor am i expecting to be rewarded in any way. My primary reason is to part with some of my experiences to those who have the initiative to learn a bit more.

The reality about this share market is that it is more or less a 'dog eat dog' world out there. People tend to be selfish when it comes to sharing knowledge. They will envy when you make money and when you made a bad decision, they will be the first one to run you down happily. My peers told me 'everybody have to get burnt to learn' when one is involve in this industry. Perhaps, i wasn't that lucky. I indeed got burnt and i learnt. A bitter lesson which i am sure many of you shared with me.

However, i beg to differ from their so-called myth. Nobody need to get burnt to learn. Be humble and learn from those who was burnt. But it is sad you cant find many of these species around to share due to the fact that majority of them still don't know what hit them last time while those who have learned chose to be selfish with their knowledge. They believed that if everyone become knowledgeable, there will be no fools. And with less fools, their making money opportunity will be affected. I know they are right in certain sense but at the end of the day, discipline matters too. Market will never runs out of fools as there will be new fools born everyday on top of those habitual repeated fools like me... but anyone of you can be better than me just by employing better discipline. Trust yourself and trust what you have learned.

So back to business now. Where do we go from here? Forget about those price hike and those downgrading by Goldman Sachs. Lets see it from market cycle point of view. Like i have said earlier, we are going towards the end of the cycle and the ending of each cycle will bring about an opposite cycle. And with all those negative news coincide with this end cycle at the right time will tells us that this cycle will be completed in a matter of days. This is the sudden pull back that i talked about in my last posting. It is like a sea retreating now getting ready for the formation of a new cycle.

What do we look for now? Well i would look for the sign of margin force selling as a sign of major shake down before the run up. My first level of critical support have been broken so the CI will definitely hit 1216 and below. My next critical support is tagged at 1200-1201 level. Any breach of this level between now and next week would consider a good buy for a technical. Please remain cautious as a breach of this level would spells disaster. My advice is to commit yourself when the market start to turn. It is okay to buy a bit higher knowing that the market have hit a bottom or a temporary bottom. And do expect some volatility and some quick rotational play.

Until then, good luck.

market trend: telltale sign of some thing's cooking out there in the ocean?

Only Thursday i was there bullshitting about cycles of share market and signs identification and there it happened on Friday.. the very first sign of stirring action pointing to something must be happening out there in the centre of the ocean.

What we had on Friday was a sudden surge in volume. Our market volume increased from 457M shares to 818M shares traded. An increase substantial enough for one to consider paying more attention to the market by looking for further signs to substantiate this sudden change in volume pattern. After all, things do happen for a reason.

What can we expect? As i have mentioned earlier that we are at the conclusion stage of a full cycle, it is normal to have choppy waves reaction near the shore. So do expect some volatility for the next few days be it index wise or stock wise.

What we need to look for? Market volume has always been a useful indicator to gauge the market interests and sentiments. What would be appropriate will be a volatility in volume in the region of 500M to 800M shares traded. Likewise for index to maintain a choppy range with a critical support line tagged at 1238.

From my experience, i would favor a sudden pull back in index at the end of the cycle as the start of a new cycle will always reacts oppositely to the reactions of the end cycle. Be it a last shake out before a good run or a trap before a plunge.

Meanwhile, look closely now.

market trend: market cycle explained..

Since my last update on 14th May, our CI did attacked the overhead resistant of 1297 and trend slightly higher. That momentary attack was however short-lived with overseas markets being attacked by records setting crude prices and recessionary pressure on US economy. And our domestic market was further pushed into the realms of uncertainties with the sudden twist of events in the political scene.

Let me spare you from all those bullshit explanations on what had had happened... The true fact was that we were still at the vicious consolidation cycle. Now that we have come towards the end of the cycle, we would want to know what is in store for us in the coming cycle. Is this going to be a 'calm before a storm' scenario? CI have in fact retraced lower with daily volume getting thinner by the day.

What the next cycle is going to bring us remains everyone guesses. And with so many negative factors affecting the current world economies, the near future looks bleak to the eyes of those who monitor the situation. Further drastic write-downs from sub-prime mortgages is expected at least till the first half of 2009. What about crude price? Is the price being speculated beyond the actual demand and supply theory? The sudden volatility in crude prices this week- was that a sign of further inflation of the oil bubble? What would be the effect of an oil bubble burst?

When one have so many questions hanging over the head, it actually tells us of the uncertainties that lurks around dangerously. However, i am going to ignore all these as i believe markets around the world have reacted enough to those sub-prime woes. In other words, it has already been discounted and reflected in the current market prices.

Please sit back and allow me to take you through the journey of cycles in a stock market. Each cycle is like the waves of the sea. As we know, a wave always starts from the centre of the ocean and moves towards the shore and splash! And it all ends there which is exactly where our cycle is heading now. Shoreline is already visible ahead. In other words, a complete cycle is the formation of the first wave from the centre of the sea to it crashes into the shore.

The intensity of each wave is determine by the forces of the surrounding pressure and an experience seaman will know in advance when there is a big wave ahead just by looking at the telltale signs from the surroundings.

The same principle is applicable to observers of share market. We are standing at the shore looking at the waves crashing into the shore. How do we know when there is a big high intensified wave already forming at the centre of the ocean? Simple, isn't it? Just identify those telltale signs from where we are standing. After all, the sea will retreat miles before a tsunami strikes.

Now that i have given you an insight of market cycle and that our market is reaching the conclusion of a cycle, our job now is to lookout for signs that will determine the start of the next cycle and its intensity. Those telltale signs will be visible in the form of volume traded, behaviour of the movement of index etc. etc.

At the moment, the behaviour of our market is consistent to the behaviour of the wave reaching the shoreline.. fading as it comes nearer to the shore. Consistent in the sense that our market was going through a whole cycle of consolidation for the past few months. Identical trend will takes us way back to May 2006 during the World Cup period.

I must end my journey here and i hope you have learn something to guide you in managing your money by applying the rule of 'investing through cycles'.

Be on alert for the next 10 trading days for telltale sign.

Comments and further queries are most welcome through this blog.

market trend:my 2 cent take..

I wanted to post my comment last night but i wasn't feeling exactly too well. Slept before 9pm last night and i never find the time to post my comment this morning. And now, i don't know whether it is appropriate to give my view on the trend especially when we have tested 1297 level yesterday and again today. Yeah right, an immediate double top in 2 consecutive day and that puts us in a neither/nor situation.

Nevertheless, i will take this as a challenge and try to apply all my know-hows to this current situation. First, we have to look at what are the signs available. Volume wise, it's still healthily consistent. Momentum wise, steel stocks are ready to take a correction. So beware..

To keep the momentum going, there is a need for rotation play. Look into water stocks and selective glcs stocks preferably related to iskandar southern corridor related stocks. However, i strongly advise against speculation as it is not worth the risk to go on speculation at this stage when our market is still at the tail-end of the consolidation cycle. Risk reward ratio is still not in favor of speculation. One need to be very sharp and precise. Daytrade if possible.

Index wise, the immediate resistant is still at 1297 and it is critical that this level have to be tested and break out again tomorrow. Otherwise, it will be another range bound market. One positive indicator will be from the futures today. The futures index did break its short term resistant at 1297.50 momentarily before it corrected and closed at 1295. Under normal circumstances, i would take the cash market as the guide but today i chose to take the lead from the futures market.

Yes i would take a small long on the futures tomorrow with a stop loss point at 1288. Still it is favorable to punt the futures as the risk reward ratio is of equal status.

Good luck to you till you hear from me again.

market trend: parting with experience..

When i started this blog last month, some of my best pals suggested that i could use this platform to express my view on our local bourse and perhaps i can turn this blog of mine into a money spinning machine. Haha... I must thank them for the faith they have in me.

But rest assured, this is not my intention to spin money out of my blog nor am i trying to seek fame through my posts. This is the platform where i can pen down my opinion or thoughts. It is more like a log to register what i think of things and events that happen in front of me daily.

My master once told me this.. ' to survive the stock market, one have to look beyond the nose' which actually means one have to be able to look one step ahead. And this is no easy task with the ever changing economic climate where uncertainty looms especially so these days with the crude prices hitting record highs weekly and now the food commodities rising more than 200% in recent weeks. The wrath of inflation is beginning to rear its ugly head...

Before i start, please let me qualify myself that all comments and opinions expressed here and thereafter are purely opinions out of my own judgement and are expressed without malice. Therefore, i cant be held responsible for any liabilities that in any event, should arise from the publication of this post. The posting of my commentary shall be at my discretion. However, i do entertain request, comments from those who begs to differ and help from those wants to offer.

Our bourse CI hit a double top high of 1524 on 11th January and 15th January and went into a correction and consolidation cycle with a low of 1157 being set right after the 12th general election. From there, our CI have been inching up on a monthly basis with a high of 1305 being set on 29th April. Since then, it has corrected to a low of 1271 and have been range bound till today.

On the bigger picture, there is a head and shoulder formation. That means there is a risk factor involve here that our market may turn down and test lower with a critical support at 1238. To get out of this head and shoulder formation, our CI need to break higher to test the 1340 level. Instant indicator will be the breaking of 1296/97 level.

The chances of breaking out from uncertain trend is everybody guess. However, since we are at the tail-end of the consolidation cycle, i would say that our CI is going to test higher with a cap at 1340 or 1385 (preferably) depending on the momentum when it happen. Prevailing indicators remains positive despite the setbacks of our government policies and the world economic climates.

One more important factor is that our bourse is not moving in tandem with the international bourses. which means we are very much on our own now. Foreign funds are adopting a 'wait and see' attitude on Malaysia. As far as i can see, foreign funds had sold down to their base holding and they are nibbling back on stocks with viable businesses and good governance.

Despite all that i have painted here, i remain positive for short and medium term.

That's all till my next update.