Xmas Crash

Hey Folk

Here we go, the FED finally rise interest rate after so long. It raise to 0.25-0.5%.They project to raise gradually to 1.375% by end of 2016. Historically when the FED hike rate it is good for the stock market. However, in theory (textbook) it should not be. Which is true to a certain extend.

School do not teach human behavior, that why a lot of us will missed many important point. Usually when the first rate hike after a prolonged low interest environment will encourage people to borrow more as they are afraid that the next rate hike will come and increase borrowing cost. The borrowed money are circulated in the economy thus making the stock market alive.

I think the market will start to be very shaky on the third rate hike. So far there is no sign that the market is going to crash. The bonds relationship are good, the yield curve relationship are good. There are significant buying from the big boys. Rally is in till year end and also start of next year.

Bingo on the market rally on the FED hike day.

I had long entered on Monday on the S&P, exited majority on Thursday and reenter long on Friday.

Sorry for the late post. This part just added. We are still in a uptrend. The drop on last thur and fri maybe due to most contract expiry altogether as is the last trading Friday of the year. FYI option expiry on every third fri of each month. At the same time there are many futures contract also expiry concurrently on the same day last week.

No more post till start of the year.

Cheer

Down or up

Hey Folk

Next week we will have the FOMC meeting on 15 and 16. I think the rate will rise on Wednesday which is on the 16. Stock market will rally.

This week I will use some charts to illustrate what is happening.

The S&P500

This is the monthly chart of the S&P500 we are looking for long term when we look at monthly chart.

The MACD are showing little divergent for the current up move, which mean it may turn to downward movement. ADX are also showing that there are no strength to the upside. However it can also be the case of the circled area in 2011. Where market still turn up.

Next the relationship in weeks between bonds and stock.

There is no sign of collapse in the bond market. Look at the fundamental, the COT, commercial are buying into bonds heavily. Which may translate that the bond market will go up higher. This may temporary depress the stock market a little ( I do not mean crash )but will lift the stock market up again due to the relationship. Study the chart carefully to find the relationship.

COT data for stock are showing buying activities. Yield curves have not shown a zero or negative gradient yet. So the up move in the stock market are still intact in my opinion.

Last chart, is the relationship since 1970s of US dollar, oil and gold.

Dollar rise will depress gold and oil. It happen in the 1980s. See the similarity we are now and 1981. Currently the 3 instruments are crossing each other in term of sigma. This further explain that gold and oil are having downward pressure. These also coincide with the raising interest rate in the 1980s period.

History never change because human never change. But history may not repeat itself in a timely fashion.

Cheer

Year end forecast and discuss

Hey Folk

Announcement: Zurich Life in Singapore will ceased operation. They will only maintain existing business. No affect for all term and condition for all policies holder. Zurich had also transfer us to a Independent Financial Advisor where I can offer financial services from almost all companies. So is a better thing for me. Just awaiting to get all the coding from all the companies.

Economy and Market

The economy for next year is not going to be very fantastic. A lot of countries around the world are facing problems already. There are lower PMI recorded for all the emerging countries and Singapore as well. Russia is already in recession, Canada is on the brink of recession. Some of the country like Brazil and South Africa may sink into a Great Depression. 2016 would not be a easy year for the economy.

Our PM had already warned about this in Oct- Nov 2015 and I mentioned in my post. To reflect back many years ago when I am a student in NTU, I attended a seminar by the Late LKY. He warned about market top way ahead of the last crisis. I have to say I benefited from his seminar and alot in the crisis in 2008-09. So our people up there, they know their stuff.

Moreover, when interest rate rise this December, it will further drive USD up. Which may most certainly drive the already weaken commodities prices even lower. Usually the lowered commodities price will impact emerging market more as they are the producer’s countries. A lower than now commodities price will really affect those countries significantly.

Moreover, it will surely affect those weak holders on their properties purchased. A increase in rates it going to affect short term rate very quickly and in a significant scale which may force their installment rates to increase and hard to afford. This may lead to another force selling.

Let look at some oil stories

http://b-gat.es/1LSKfPF

Take a look at this video of Bill Gates talking about renewable energy.

Courtesy from Gates Notes

Look at the chart above, demand of oil maybe way lower in decades to come. There are a few factors to consider.

1)    The world’s billionaires setting up funds to research on the renewable energy.

2)    The world now alerted on issue of global warming,

3)    OPEC have structural issue

My take is the world’s billionaires are trying to find a news source of energy so that in future they will be richer and more powerful. Remember how the oil companies and countries do it in the past, they are finding this opportunities. Also with global warming issues, many government are trying to do something about it. So it affect the oil companies.  

The other thing is in 2007 crisis, oil drop because of credit bubble. Now oil drop is because of structural problem. There are problems in the OPEC as well and many other reasons. Oil is deeply entrenched in a down trend. I had warned about it long ago using COT data. However, there is a significant lapse in the timeframe between news and the COT. COT data had already shown the collapse many months ago.

Stock market wise, there are no sign that the market is giving way. In fact a lot of big boys are buying. A lot of indicators, relationships, and fundamental have not shown that the market is coming off. They are still showing and reflecting a buy. I still think there will be a rally into the year end. Probably into early 2016 as well. These do not suggest that the up move will be daily. They will be down days. All these down days are buying opportunities.

Question why are there no selling but buying by the big boys if the economic situation mentioned above are so bad? Probably the big boys are buying to set up for a sell to retail investors. They want the market to go into euphoria, where a lot of people will participate in it. So they can distribute them to the late comers. They will cook up nice stories to attract buyers. While they will distribute their holdings for cash. Or maybe they have more advance news than us saying that things are actually better. Who knows.

The US market, German, Euro Stoxx index and China market are the better bet for the up move. The weaker market are all the emerging market and also Singapore.

 I will do a separate post on my take of 2016, I have not got enough data yet. Last year in 2014, I predicted that in 2015 will be a up year. Let see how it turn out.

Oil and Gold will still drop further. Maybe I do a hit and misses of mine records for the year as well.

There are people who ask me which sector that will be affected in Singapore market. They are the commodities companies and REITS. Slowly it will affect the property firm and the banks. Well for me I still prefer to deal with indices as there are regular activities and volatile enough.

Cheer