Back from 3 months hiatus

I am finally back from a 3 months hiatus. The last post I made was on 7th of May which was like 3 months ago and that is such a long period of time. During this period of time, I was attached to the main shipyard under Sembcorp Marine. I guess I was also pretty drained from blogging on a regular basis so I will be blogging when there are important stuff for me to post or just to share some of my observations.

During this hiatus, I actually completed the 'The Intelligent Investor' by Benjamin Graham which I bought it 4 years ago but I always cannot find the determination to finish it. It is ironic that I only finished reading it in a month's time during my internship. I must say that it has been an eye-opener as I learned the concept of buying undervalued companies and the all-important concept of margin of safety. Suddenly, terms like NAV, NTA, P/E, ROE and all the weird-sounding acronyms made sense to me now and I will definitely be doing additional readings on this subject. I have also completed half of the 'Encyclopedia of Chart Patterns' by Thomas Bulkowski and it was a rather refreshing read for me. This is definitely a good book to have since the author has done extensive research on the different types of chart patterns and I must say that after finish reading this book, a lot of technical analysis books in the market pales in comparison to this book.

Technical Analysis is now just a tool to me. Just like an painter has various colours on his palette, it is good to acquire more tools. A painting will not look that great with only just a single colour unless the painter is exceptionally skillful.

For the past 3 months, I have been watching by the sidelines and waiting to collect some counters cheaply. The blue chips seems to be at fair valuation now since they are only trading slightly lower than than the historical average of a P/E of 14 to 15. I have been observing some of the movements for the Dow Jones Industrial Average and the Straits Times Index and I do notice something interesting.

If you look at the weekly chart of the Dow Jones Industrial Average, you will notice that the volume of the market has been increasing ever since the bear market started close to a year ago.

Dow Jones Industrial Average:


Now if we take a closer look at the Straits Times Index, you will notice that the volume has been receding ever since the bear market started. Another important fact is that the Straits Times Index has not broke it's lowest level yet.

Straits Times Index:


Now the conclusion seems to be more tricky to me and I do have problems interpreting it. For the Dow Jones Industrial Average, I can conclude that the heavy increasing volume is due to real panic and bearishness in the market. I doubt the end is even near since the volume do not seems like it is going to recede anytime soon. As the saying goes, the bottom for a bear market is found when no one wans to buy any equities and this can be seen technically by the low volume. Now for the Straits Times Index, the volume is already receding. In my opinion, this does not mean that the bottom is near since this depends on the Dow Jones Industrial Average. So the question I posed to myself is that will the Straits Times Index continue to head south slowly by it's own weight or it will recover sooner than the Dow Jones Industrial Average since it has not breached it's lowest level yet ?