The market crept at a low after it gapped lower in the morning. It finished at its lowest in the past 8 sessions at 3042.96. This followed Friday's drop in the US markets.
A 6-month chart of the STI shows a downtrend that would probably find its way down to around 2800 points. No fret here. A range market seems to be highly probable, unless the market breaks its support of around 2750. If the Bear is in, it shall be slamming the market below its support.
Looking on the bright side, buyers can look forward to another buy session coming soon in May. Technically, from a wave principle perspective, this could be the last bump in the Bear trend. There is also a good chance that Leather (or Beef) shall be in vogue thereafter and last for a good few months for us, small fries, to surf on a wave.
In contrast to employment trends, the stock markets are leading economic indicators. Fundamentally in the news, the US expects to pull out from this momentary recession in the second half. This positive sentiment may well bring a ray of hope to the markets to fulfill this self-fulling prophesy.
Monday, 14 April 2008
Saturday, 12 April 2008
Trading with Candlesticks
Another day of market info and knowledge sharing!
I have decided to add some fun facts to complement each day's analysis. This is to spice things up. I did like to differentiate myself from the regular columnists in the newspapers.
Before I begin my column on Candlesticks, Friday's market bounced back rather well. The STI closed up 62.27 points to finish at 3126.87 and closing in on what it lost in the past 2 days. This is either a clear sign of a range market or a show of regained strength in a very early part of a new market cycle. We shall continue tracking the performance and sentiments of the market to know for sure. My outlook stands at "Range" in the short-term for now.
Now for Candlesticks.
I have mentioned Candlesticks many times in my daily analysis but have never explained it properly. Candlestick charts are an option for technical analysis of charts. This option can be found in your internet trading account or sites like on Yahoo! Finance.
Now what makes a Candlestick?
A candlestick of each trading day is formed using 4 prices: Open, Close, High and Low. The Open and Close prices make the body of the candle. The gap between opening and closing prices determines the height of the candle. If the day closes higher than it opened, a white candle is formed. A black candle is formed in the opposite situation. The High price determines the point of the top wick and the Low price determines the point of the leg. For example, a counter opens at $2, hits a low of $1, rises to $5 and closes at $4. A white candle of $2 in height is formed, it has a top wick of $1-high and a $1-long leg.
How to use candlesticks?
Candlesticks can be used to judge market sentiment, giving rise to buy signals or sell signals. This is to put it simply. One of the better free resources that I have found is the Candlestick Trading Forum. Here you can find out what candlesticks mean and much more information on candlestick patterns which I shall not repeat here.
I shall be covering other topics regarding technical analysis and simple techniques that are commonly applied to chart reading. Watch this space!
I have decided to add some fun facts to complement each day's analysis. This is to spice things up. I did like to differentiate myself from the regular columnists in the newspapers.
Before I begin my column on Candlesticks, Friday's market bounced back rather well. The STI closed up 62.27 points to finish at 3126.87 and closing in on what it lost in the past 2 days. This is either a clear sign of a range market or a show of regained strength in a very early part of a new market cycle. We shall continue tracking the performance and sentiments of the market to know for sure. My outlook stands at "Range" in the short-term for now.
Now for Candlesticks.
I have mentioned Candlesticks many times in my daily analysis but have never explained it properly. Candlestick charts are an option for technical analysis of charts. This option can be found in your internet trading account or sites like on Yahoo! Finance.
Now what makes a Candlestick?
A candlestick of each trading day is formed using 4 prices: Open, Close, High and Low. The Open and Close prices make the body of the candle. The gap between opening and closing prices determines the height of the candle. If the day closes higher than it opened, a white candle is formed. A black candle is formed in the opposite situation. The High price determines the point of the top wick and the Low price determines the point of the leg. For example, a counter opens at $2, hits a low of $1, rises to $5 and closes at $4. A white candle of $2 in height is formed, it has a top wick of $1-high and a $1-long leg.
How to use candlesticks?
Candlesticks can be used to judge market sentiment, giving rise to buy signals or sell signals. This is to put it simply. One of the better free resources that I have found is the Candlestick Trading Forum. Here you can find out what candlesticks mean and much more information on candlestick patterns which I shall not repeat here.
I shall be covering other topics regarding technical analysis and simple techniques that are commonly applied to chart reading. Watch this space!
Friday, 11 April 2008
Inflation and you
Inflation. The topic that has everyone talking recently. People are getting more concerned about the value of their money, their assets, their pay and the list goes on. Thursday, the STI closed in a black candle. I have not much to comment on that given that I have no change in my outlook for now. I shall use this entry to discuss a topic which I promised to discuss.
I guess everyone knows what is inflation. Basically, the prices of things go up. Consequently, the money we possess buys us less things.
Inflation is the reason I invest my money. One has to do something to my money in order to maintain its value. A savings account that gives me a 0.25% return annually means that my savings devalues at the rate of (Inflation rate - 0.25)%. This is not good because at a rate of 4%, it will half in 20 years and become a quarter of its current value if I retire 40 years later!
This covers the first 2 concerns listed above and now for the third...
Inflation causes people to panic about their pay. "My earning power is reduced if my pay does not increase more than the inflation rate!" people say. The cruel reality is, that if people maintain the same level of disposable income in a high inflationary environment, prices will continuously be driven upwards. Businesses will find it expensive to produce and supplies do not increase as drastically as demand. This leads us to another cruel reality when it comes to increments. If the proposition above holds true, businesses have no reason to give better increments for 2 reasons: 1) that the inflationary environment will continue and, as a result, drive up operating costs and reduce profits. 2) Profits will be further reduced if human capital costs increase due to increments. There will be no sense in giving staff more than the business can profit. For example, if my profits are 5% before budgeting for increments, there is no reason in giving my staff increments greater than 5% because my business has not been growing that rapidly.
The markets have been uncertain and crawling at a low. The outlook for the coming months is not very bright either. What will you do if you own a business?
I guess everyone knows what is inflation. Basically, the prices of things go up. Consequently, the money we possess buys us less things.
Inflation is the reason I invest my money. One has to do something to my money in order to maintain its value. A savings account that gives me a 0.25% return annually means that my savings devalues at the rate of (Inflation rate - 0.25)%. This is not good because at a rate of 4%, it will half in 20 years and become a quarter of its current value if I retire 40 years later!
This covers the first 2 concerns listed above and now for the third...
Inflation causes people to panic about their pay. "My earning power is reduced if my pay does not increase more than the inflation rate!" people say. The cruel reality is, that if people maintain the same level of disposable income in a high inflationary environment, prices will continuously be driven upwards. Businesses will find it expensive to produce and supplies do not increase as drastically as demand. This leads us to another cruel reality when it comes to increments. If the proposition above holds true, businesses have no reason to give better increments for 2 reasons: 1) that the inflationary environment will continue and, as a result, drive up operating costs and reduce profits. 2) Profits will be further reduced if human capital costs increase due to increments. There will be no sense in giving staff more than the business can profit. For example, if my profits are 5% before budgeting for increments, there is no reason in giving my staff increments greater than 5% because my business has not been growing that rapidly.
The markets have been uncertain and crawling at a low. The outlook for the coming months is not very bright either. What will you do if you own a business?
Thursday, 10 April 2008
2 black crows and counting...
In a time of crisis, capital markets are closely correlated i.e. their betas with respect to one another tends to "1". The markets have been heading south at the same time. The market indicators in my Tiger Dashboard show 5 blue-chips and 5 major indices all in the red for Tuesday and Wednesday. In Asia, markets have been falling with the Hang Seng at the lead, losing 1.35% and the Nikkei close behind with a 1.05% loss on Wednesday.
The STI shed 40.70 points on Wednesday after a good morning of treading above the water. It has been 2 black crows and I expect to see another one coming. The next resistance point to break is 3000 points. Once it starts trading consistently below this mark, I would expect it to remain below for a few months to come.
The STI shed 40.70 points on Wednesday after a good morning of treading above the water. It has been 2 black crows and I expect to see another one coming. The next resistance point to break is 3000 points. Once it starts trading consistently below this mark, I would expect it to remain below for a few months to come.
Wednesday, 9 April 2008
Unemployment and the market
Today, I shall skip chatting about the 51.50 point loss in the STI by writing on a more interesting topic of employment.
Unemployment rates have increased recently and this tells a good sign. Economists use employment rates as a gauge of market conditions. When the economy is good, there is more work to be done, hence more jobs and a higher level of employment. In a downturn or recession, the opposite happens. Interestingly, as businesses take a little time to respond to market changes, there is a lag between the market and employment. Employment rates can hence be a lagging indicator of economic and market conditions. When unemployment rates show an all time high, i.e. employment is low, this will be a lag from a low in the markets. This implies that market lows are over and we can expect a better outlook. However, the assumption that employment has reached an all time low is questionable.
Globally, we see that hiring has slowed down and that businesses are keeping a tight budget for manpower. We can expect this phenomenon to sustain for the next 12 months as annual business cycles determine such measures.
I shall be covering the topic of "Inflation" in the coming days if the markets show no interesting signs. Today's big black candle does not affect my outlook as it is still within range of the market movements of the past 5 trading days.
Unemployment rates have increased recently and this tells a good sign. Economists use employment rates as a gauge of market conditions. When the economy is good, there is more work to be done, hence more jobs and a higher level of employment. In a downturn or recession, the opposite happens. Interestingly, as businesses take a little time to respond to market changes, there is a lag between the market and employment. Employment rates can hence be a lagging indicator of economic and market conditions. When unemployment rates show an all time high, i.e. employment is low, this will be a lag from a low in the markets. This implies that market lows are over and we can expect a better outlook. However, the assumption that employment has reached an all time low is questionable.
Globally, we see that hiring has slowed down and that businesses are keeping a tight budget for manpower. We can expect this phenomenon to sustain for the next 12 months as annual business cycles determine such measures.
I shall be covering the topic of "Inflation" in the coming days if the markets show no interesting signs. Today's big black candle does not affect my outlook as it is still within range of the market movements of the past 5 trading days.
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