Market Review

FMBEMAS Daily


After S&P 500 dropping from 875 points to 665 points in a month time, it was not surprising to see how strong the market over there rallied. In contrast, our market merely drops from 910 points to 835 points within the same time period. Thus, the rally on our market was rather muted, perhaps due to lack of short selling, meaning that market traders over here never had the motivation to sell and face panic buying.

However, what I find interesting is that in the next 4-10 weeks, either way I look at it, if you have strong holding power market seems to be a BUY. Allow me to explain my view.

Assuming that S&P 500 still has another round of correction, it should reach my target level of approximately 600 points. I am not sure at what level KLCI would be, since the absence of short selling has somewhat distorted our market, but it should be in the region of 800 points or lower. That would be the level and formation that I had envisioned since last year. Unfortunately, if that happens, I can’t really say that technically it would be a Buy because there would be no Technical Indicators that would suggest it is a Buy. It is more of an educated (hopefully) guess that market is low enough to do base building.

On the other hand, should S&P 500 reach 800 points and consolidate above 750 points, that would also change the Technical picture, and hence, would mean that Technical Buy would be triggered. I’ve mentioned many other times before in my previous reports that 600 points is only a level that I think should reach. What I was more convinced about was that, after S&P 500 points dip below 750 points, I would be actively look for a reversal signal.

Thus, whether market go up or down, I am convinced that it would be a Buy. The only difference is that should S&P 500 goes down to 600 points, we have to wait for a Buy signal to trigger, whereas if S&P 500 reach 800 points and consolidate above 750 points, we already have the signal.

To add to my conviction that the long awaited entry point is just around the corner, take a look at Crude Oil chart.



Crude Oil



Crude Oil chart is a textbook example of a Saucer formation. Now, it looks nice but there is still a danger that it might go down 1 more time. Still, that would also mean that if Crude Oil go to say, $25-30, it would be a Buy for me and if it close above $50 and consolidate above $50, it would also be a Buy.

Thus, in the next 4-10 weeks, we might be in an interesting situation, i.e. a buy-buy situation. Interesting indeed. Of course, do not expect to see your return to grow immediately. This will take time and will test your patience. I can assure you that the testing of your patience after this would not be how long and low market would take to go consolidate, but after been used to trading and fighting for scraps, once market has reversed its downtrend the mentality would be different. It might be difficult to hold yourself from selling your profitable stocks.