Saturday, August 9, 2014

Correction Mode in the Stock Market

S&P 500: Looking at this chart, there is a bottom forming in August. As I said earlier, cyclical bottoms are months of Feb, May, Aug and Nov. If this low supercedes the previous low, then the whole picture of a bullish trend is in question, at least for the medium term. On the other hand, if this correction can stay above the 1890 level, then we shall see the next top above 2000 in October. In general, cyclical tops are: Jan, Apr, Jul and Oct, with accuracy of + or – one month.

KLCI Chart

STI Chart

STI & KLCI: are in the same boat as the US market which is forming a bottom in this August due to geopolitical unrest in the Middle East and Eastern Europe; the outbreak of Ebola disease in the African countries; and the earthquake and gas blasts in China and Taiwan. Investors are feeling very unease with these developments in the world that claimed thousands of people’s lives.

Locally between Spore and Msia, we are concerned over the massive toll hikes at the causeway that may long term effects on the economies of both countries.   Investors sentiments are dampened, Singaporeans who want to invest in the Iskandar will pull their hand brakes, transport related business suffered the biggest blow as their business cannot survive due to the new measures,  Johor poultry and construction sector will suffer as their costs of doing business have gone up and if they pass on the cost to the end users in Singapore, in the long run, the Singaporean customers will turn to other neighbouring countries for alternate supplies. 

The biggest hit would be the Johor property sector as in the past, the Singaporean investors accounted a big proportion in the sales of the residential and commercial properties in Johor Bahru.  The Singapore government even encouraged their SME sector to relocate from the Jurong industrial estate to the Iskandar region to enjoy the low cost environment. However, the new measures will definitely cause some dampening effect on the relationship between the two countries. 

In short, if we see low volume trading along with low prices, then this correction should be mild, with not more than 10% price correction. 

On the palm oil, currently the price is US$703/metric ton, which is still about 5% from the target price mentioned in my previous article. In terms of time frame, in my previous post I mention the third quarter which is Jul - Sept. Hopefully, it will be bottoming either this month or next month.

Finally, I want to stress that there is no one person in the world can predict the market with 100% of accuracy including myself. What I'm sharing in my blog is for educational purpose. The work that I publish here are my own research. I treat myself as a new student and I'm still learning in this long journey in the financial world.