16/5/2020 Weekly Chart Update

KLCI: The KLCI was bugging the trend with a gain of 21 pt is or +1.5% for the week at 1403. The index is above the 20day MA but below the 200 day MA. The good performance of the index was mainly due to the glove manufacturing companies Top Glove and Hartalega, KLCI component stocks that had risen 5%-10% on a daily basis from Tuesday to Thursday due to good future earnings. Perhaps we need to ask ourselves is this future earnings sustainable? How long are we going to see the pandemic last? What will happen to these earnings after the pandemic? Moving forward, the sustainability of the index to stay above the 1400 level depends on the broad market sentiments for next week. The index is not sustainable with a few component stocks well performing. Next week the index support is seen at 1375, resistance 1425.

On the other hand, the S&P 500 lost 61 pts or -2.1% for the week at 2863. The index was once below the 20 day MA on Thu but it managed to closed above the 20day MA line on Friday. The index trend is weakened however, the weekly chart saw a tail in the candlestick chart pattern which indicated some support for the market. Economic data continued to worsen around the globe which is considered a historical moment as many of us have not seen this in our life time. Nevertheless, next week the US market may be choppy as there is a fight between the bulls and the bears and investors will be looking at the technical charts more than the economic data. Next week S&P 500 support is seen at 2800, resistance 2900.

(S&P500 Daily Chart)

(S&P500 Daily Chart)

 

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Unemployment Rate and the Stock Market

Unemployment Rate and the Stock Market

When it comes to measuring the health of a country, investors will look at the GDP and the unemployment rate. Since 2008 Subprime mortgage crisis, we saw the unemployment rate for the US shot up to double digit growth for the first time since the Great Depression. GDP was negative and the stock market crashed 50%!

As Ben Bernake and Janet Yellen, both the former chairperson of the US Fed was focusing on the unemployment figure, they lowered the interest rate drastically to save the economy. In addition, we also saw the US Fed launched quantitative easing (QE), ultimately buying trillions of dollars of government bonds and mortgage-backed securities. Between 2008 and 2015, the Fed's balance sheet, its total assets, ballooned from $900 billion to $4.5 trillion. 

This round, during the pandemic Covid-19, before we saw the unemployment rate increase, the US Fed had even more drastic move, by end of March 2020, the Federal Reserve balance sheet was at $5.3 trillion, up 12.4% over the last week of March. The central bank was greatly increasing the amount of Treasurys and other assets it owns in an effort to keep markets and the economy afloat during the financial crisis.

With the "experience" of the 2008 recession, the Fed offered forward guidance on the future path of its key interest rate, saying that rates will remain low "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals." 

Let's take a look at the US Dow Jones Industrial Average chart:

 The above chart is a comparison of the different recession events with respect to their duration to reach bottom in the stock market. The 2000 Dotcom bubble from peak to bottom took almost 3 years. While the 2008 financial crisis took half the time of Dotcom to reach bottom. However, if you were to look at the steepness of the chart, the duration of the 2008 financial crisis was shorter and the graph is steeper. The price drop was more drastic than the Dotcom as well. Hence, this gives us some idea what will be the outcome of the current Covid 19 recession. Firstly, in terms of steepness, the current one is the steepest by far as we witness the DJIA had 3 times triggered the limit down circuit breaker. However, in terms of duration, it would be too premature to conclude that the crash was over as based on the previous 2 events, the duration seemed more than 12 months. 

Nevertheless, this round we see governments around the world are employing massive fiscal and monetary policy measures to save their economies and the stock markets. For example, in the US, the Fed had announced that it will buy unlimited treasury securities and government guaranteed mortgage backed securities to shore up the liquidity in its financial system. These efforts have pushed the US stock market to the recent high with S&P 500 almost nearing the 3000 level (the peak was 3400 level). 

The recent unemployment rate of 14.7% is just the beginning. There will be more weak economic data releasing globally. The financial markets operate in a big ecosystem of retail investors, fund managers, financial institutions and government agencies. How these market players interpret the market news will in turn affect the sentiments of the markets, which will determine the next direction of the markets.

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Weekly Chart Update 25/4/2020

Technically, the following 3 markets namely US, Malaysia and Singapore are all in bear market with short term rebound. As indicated in the GMMA technical indicator, these markets are struggling to break out of the bear trend.

S&P500

The S&P 500 fell 38pts or -1.3% for the week at 2836. The index has remained above the 20 day MA but below the long term 200 day MA resistance line. The week started with WTI crude oil May futures contract closed at negative USD37 per barrel as speculators who bought the futures contract were desperately looking for buyers who were willing to buy the contract from them at any cost, as these speculators didn’t expect the WTI fell so much and they didn’t want to take the physical delivery as there is just no more storage for them to keep the oil. Hence, we saw the Crude oil futures turned negative for the first time in history. This black swan event has exposed the vulnerability of the crude oil industry due to the Covid-19 pandemic that curtail all the demand for oil. Next week the S&P 500 may continue with the retracement and support is seen at 2750, resistance 2875.


KLCI

 

The KLCI fell 38pts or -2.7% for the week at 1369. The index has remained on above the 20 day MA but below the 200 day MA. Our KLCI retraced due to the collapse of the crude oil futures. Currently, the index is resting on the 20 day MA, should the index move below this support line, it become short term bearish for the market. In addition, the extension of the MCO to further 14 more days will mean more harm to the economy but this is necessary as we treasure human lives more. Hence, you will see our market moving 3 steps forward and 2 steps backward, mare like a horizontal trend but on a upward bias. Next week support is seen at 1340, resistance 1400.

STI:

 

The STI fell 96 pts or -3.6% for the week at 2518. The index is short term bearish now as it is below both its 20 day and 200 day MA. The Covid-19 confirm cases has remained high daily in the migrant community. Singapore's industrial output beat market expectation and rose 16.5% in March on a year-on-year basis vs -0.7% in Feb,  as pharmaceutical production more than doubled. Next week support is seen at 2475, resistance at 2575.

 

Gold Bull Market Has Awaken

Gold Bull Market Has Awakened

In Seeking Alpha's April 15th article, the heading "The Long Term Bull Market Has Awaken", they are referring to the Gold market.

Indeed when looking at the gold chart, we can see that the gold price started the trend in May 2019 when the US and China was in the midst of US-China trade war.

Gold price seemed to perform well when there is war threat or political instability.


The late 1970s saw many upheavals, including the Iranian Revolution in 1978, the Iran-Iraq war in 1979, the Soviet Union’s invasion of Afghanistan in December 1979, and the Iranian hostage crisis in 1979. Gold prices rose 23% in 1977, 37% in 1978, and an incredible 126% in 1979.

During the first Gulf War, when Iraq invaded Kuwait in 1990, gold prices soared again. However, soon after the war was over, gold prices continued to soften, and by the end of 1991, they had reached almost the level they were at pre-invasion.

In addition,  interest rate also affect the gold price. Since August 2019, the US Federal Reserve Bank has been lowering their interest rate which may reduce the value of US dollar, pushing gold price higher (because gold is denominated in US dollars). Other factors such as the poor performance in the equity market will make investors turn to gold as safe haven too.

If you are the type of investors that invest with trend, below is the survey done by Kitco to gauge the investors' sentiments towards gold. Majority are bullish in the gold market especially the general market participants from the main street.

Below are some investments in gold that you might be intereste:

Unit Trust:
1. RHB Gold and General Fund
2. RHB GOld Fund
3. UOB United Golden Opportunity Fund

ETFs:
 1. GraniteShares Gold Trust (BAR)
2.  Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL),
3.  iShares Gold Trust (IAU)
4. SPDR Gold Shares (GLD)

If you would like to add more to the above list, kindly add at below's comment. It would be helpful to readers.

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KLCI Weekly update 18/4/2020

Weekly Chart Update for KLCI/ S&P500/ STI

For the past 8 weeks we saw global stock markets tumbled and rebounded like nobody's business.The coronavirus pandemic has forced many countries to shut down economic activities and put everyone at home to prevent the contraction of the deadly disease. To date, the virus has infected more than 2 million of population across 200 countries with death toll more than 150,000. 

By March 23rd, the US Dow Jones Industrial Average tumbled 35%, Singapore STI lost 32% , while Malaysia KLCI lost 25% to 1200. Now many are wondering if the KLCI will reach 1200 again and unfortunately no one can give a clue on that. My objective to re-open my blog is to offer my two cents of opinion to help Malaysian investors to navigate through this turbulence time. 

Let us recap the stock market performance for the past one week:

The S&P 500:  
 
The S&P 500 gained 86pts or 3.1% for the week at 2874. The index has crossed above the 2780 neckline and it is currently short term bullish at above 20 day MA but below the 200 day MA. The tech sector has performed well during the pandemic as the lock down has force people to go digital. The Nasdaq however has crossed above its 200 day MA and it’s now above both the 20 day and 200 day MA. Markets were encouraged by Gilead’s remdesivir anti-viral treatment that pushed up stocks this week. Next week support is seen at 2825, resistance 2925.

KLCI:
 
The KLCI gained 50pts or 3.7% for the week at 1407, it has crossed the 1400 psychological level. The index is currently short term bullish at above the 20 day MA but below the 200 day MA. KLCI was trying to fill the gap down occurred on March 13th which was at 1419. The stock market sentiments have improved as Malaysia has reported 69 new covid-19 cases which is the lowest since the movement control order (MCO) came into force on Mar 18. Next week support 1380, resistance 1425.

 STI:

The STI gained 43pts or 1.7% for the week at 2614. The index is currently short term bullish at above the 20 day MA but below the 200 day MA. While the covid-19 new cases has become the highest in Southeast Asia but the Singapore's non-oil domestic exports (NODX) unexpectedly surged 17.6% yoy in March 2020, accelerating from an upwardly revised 3.1% gain in February. It was the second straight month of increase in NODX, and the strongest since October 2017. Sales of non-electronics products jumped (20.5% vs 3.2% in February), along with non-monetary gold (242.5%); specialised machinery (54.2%), and pharmaceuticals (48.6%). Also, sales of electronics went up faster (5.8% vs 2.5%), including parts of ICs (60.1%); disk media products (50.6%), and ICs (6.7%). Next week support is seen at 2575, resistance 2675.