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 ?

STI breaking out of head and shoulders

STI seems to have broke out of the reverse head and shoulders formation but it din really broke out nicely. The breaking of the trendline was not coupled with heavy volume and on the last closing, STI seems to have fall back on the resistive turn supportive trendline with heavy volume. The bearish divergences on the indicators are still intact.

Straits Times Index:

The worst seems over

I know my title sounds quite obvious cos it seems to everyone that the worse is over. I can feel that the retailers are trading albeit with more caution this time. On the Dow Jones, it tested the 200DMA as resistance with an inverted hammer and the chart is showing some divergences on the indicator. Personally, I feel that it is not a big issue cos I dun see what else can hit the market. We should be looking at a breakout above the 200DMA soon. The last time DJIA ever kiss the 200DMA was a good 5 months ago. But chart-wise, let me just take it objectively that DJIA has failed to break above the 200DMA and the 200DMA is a resistance level currently.

Dow Jones Industrial Average:


The Straits Times Index seems poised for a breakout for the reverse head and shoulders formation. It seems to be a breakout but it is good to wait for one or two more closings to decide. Chart-wise, all indicators are still showing bearish divergences.

Straits Times Index:


These days, I feel pessimistic when the indices are moving north instead of being optimistic. The more the indices plunge, the happier I am and I think I am sadistic. For me, I feel that I will have to wait quite long to pick up counters at a discounted price. I guess it is exactly the feeling of how an auntie goes for bargain shopping :D. Besides, the last few months are a bad time to go long.

Missed out on formation on the STI

Yup, I realized there is a reverse head and shoulders formation forming for the Straits Times Index while browsing at other blogs. I have marked out the shoulders and heads with the arrows. However, do bear in mind that it still have not break out from the trendline yet.

Straits Times Index:

Back from a long respite

I took a break from blogging due to some personal reasons and besides I'm in midst of my examinations with another week to go. It's been a really long time since I posted anything. Guess I needed a break to consolidate my thoughts and to plan for the future with a longer time frame.

There has been a lot of interesting movements in the charts. I must admit that this period is a very hard time to do any trading as one is prone to whipsaws. 12800 was the crucial level for the Dow Jones. After it broke the 12800 resistance with a shaven white candlestick and coupled with heavy volume, it seem poised for a strong run upwards. Alas, it fell back below the 12800 and a whipsaw happened. And the strange thing that happened after this was that it tested the 12800 successfully with a hammer. Thus it is not an easy time now.

So what do I see now for the Dow Jones ? My opinion is that the trend up is weak given the declining volume. Besides that, there is a bearish divergence on the MACD histogram and there seems to be some divergence too on the RSI though I did not label it. The nearest resistance would be the 200 DMA.

On a side note, the chart seems to display a valid confirmed double bottoms formation that has breakout successfully. I do notice this formation is rather prone to failure and whipsaws and this is what is happening now. Let's just observe to see how DJIA test the 200 DMA.

During my break, I went to take a look at the DJIA past history spanning the past one to two decades. A fall from the peak of around 14000 to 11600 seems to be a lot. But compared to the past history, this fall seems to be only a small blip on the chart. Currently, it has only decline 24% from the peak. Fundamentally, we may be in a bear market due to the subprime issue which cannot be solved within a few months. But technically, the market is not reflecting it with such a short decline of 24% only for the DJIA and nowhere we have seen the signs of a bear market. I would prefer to label it as a transition market. I do have my nagging fear that the next selling wave is coming soon. Well, what I am saying is just my speculation and I can be wrong :)

Dow Jones Industrial Average:


There is something interesting on the chart of the Straits Times Index. These days, I placed less emphasis on the STI now. The 3 indicators are showing 4 bearish divergences signals and these signals are of the strongest kind since the index made a new high but yet all 3 indicators showed a new low. So far in the all charting I did, I have never encountered such a situation before. Well, it looks nice on the chart though :) Will these 4 bearish divergences signal predict the next selling wave ? It can only tell us the probability of the next wave is rather high but it does not indicate when will this wave arrives. Let's see whether these bearish divergences will work well !

Straits Times Index: