Got this from CNA forum, which i think will be useful
stibreadth wrote: Hi Random
I saw your message. Anything you read here, please treat this as information. Do analysis yourself and my decision yourself.
As I am writing here, I am watching on DJ. It has been quite some time I had this habit to look at the Market at the other side of the world. Even though lately STI hasn't been tieing with DJ performance anymore, I still believe that everything has relationship with each other.
Look at how the forumers interpret US condition as non-Singapore issue and the Singapore Market now (should I say Asian Market). The Market nowadays has increasing amount of Bear arising. Bear was Bull at the beginning. The conversion has brought their amount to an equilibrium last week. You can see the Market does not changed a lot. That's why I said the Market has changed and it is not the Market that you used to know. Being able to adaptive to the changes can help you a lot.
At the state of equilibrium, Market is easily being influenced by external factor because the 'player' does not have direction. Bull and Bear keep interchanging lately compared to the Market you used to know, going towards one direction. So, try to learn the current Market these few days and make your decision on Monday.
Another factor going on is the stock price of those institutional investors in US for example Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup is going down quite a lot lately. Where should they get money to please to settle their problem? Who knows?
How I derive my STI support?
1) 50EMA and 100EMA support. Take note, 100EMA cannot be breached on market closing. Once breached, it will triggers a massive sell down and a temporary short term bear market will starts.
Eg: Last year May, 100EMA is breached. We have 3 months of bear market. This year Feb, STI rebounced at 100EMA therefore the dip recovers very soon.
Currently,
50EMA: 3555 (Breached)
100EMA: 3445 (Rebounced today)
2) Weekly 5MA Chart. Currently, support at 3587 is breached.
Risk Assessment
Partially of the 'player' who still Bullish will buy so that they could buy at dip. Partially of the market is waiting for any news breakout during this coming weekend. Partially of the market has closed their position cutting loss (about -10%).
It is good to see 100EMA still holds as the index rebounds shortly after reaching 100EMA. However, 50EMA has been breached so 100EMA is the immediate support which likely to trigger massive sell off.
So you have to analyse what is the risk. Let say:
- STI rebound upside about 10% gain after buying at dip. (STI may take longer to recover to the Market that you used to know on June)
- STI breached 100EMA on Monday. We are going down for some time. By looking at the retracement of STI from Feb 2007, 61.8% (3405) 50% (3320) 38.2% (3234). The downtrend may reach few of these retracement line supports.
So, win you have 10% gain, lose you have 30% loss. We love to win anyway so if you have money to hold you are advised to hold strong fundamental counters. There is another option. Cut loss of 10% and buy at dip. Which is more profitable? Imagine you have $10,000.
Option 1) After gain: $11,000
Option 2) After loss: $9,000. Buy at dip to earn 30% more. Therefore final gain: $11,700.
Looks the same but what if Option 1) is wrong. Your $10,000 will become $7,000 (if you are lucky). Buy at dip, final gain after market recover is $9,100. If Option 2) is wrong, you loss $1,000 and another opportunity cost of $1,000. That's why cut loss limit must be set for non-long-term investor.
I guess you are the neutral one, neither buy nor sell. Therefore, make a wise decision on Monday to decide which side you belong to. (Plus you have so much counters like Rally previously, have to be more agile).