DJI forming Double Top

Dear Readers,

How was your trades over the week? have you taken profit? if not you better do so!

Following from last week analysis of DJI and SSE, i concluded that the risk was not at the acceptable level due to anticipation of major hurdles in coming weeks. Now lets take a look at the chart after one week.

Yesterday (7Dec2010) a "beautiful" shorting star was formed in DJI at 11450 level ie at the previous high on 5nov2010. This is the prelude of a Double Top is in the making. So, if you are short term trader be extra cautious!


Ok lets take a look at SSE. SSE is not going anywhere! Have been moving side-way for a month with volume retreating. Obviously, SSE is awaiting for orders and directive from the market. The phenomenon of i wait for you and you wait for me will persist until clear direction is apparent. Usual year end holiday season is just around the corner. Do not expect any impressive ending of equity market.

I would say high chance of DJI & SSE lackluster in coming weeks before the year 2010 ended.



Huh, look at KLCI this morning, chalking up impressively, +11 points. i have a feeling kindly of like, some pro are pushing up the market to distribute to you. ok! well you could continue to blame why such thing happen in our market. Probably this is against your believe that market is efficient as all information should be reflected in the market. But i think generally, this phenomenon is common in all "small market" in emerging country. Small market is easily "move" by some "big" hand, which hinder the efficient market hypothesis. Imaging this, KLCI market cap at the moment is around RM1 Trillion (=RM1,000 Billion). Just EPF alone its fund size stand at Rm300 billion. If you take into consideration Khazanah, PNB, Tabung Haji and so on what is so difficult to maneuver the market. furthermore they all listen to one boss ie PM.

So be cautious of the invisible hand.

Cheers Happy Trading.

Update on Mr Market's Health

Shanghai has been in 1 and half year bear market! It has broken above the upper down trend line convincingly in mid Oct 2010. However not able to hold it and slip below the trend line again.

Hang Seng seems to be more interesting. After the break above the upper down trend line in mid Sept 2010, it has marched ahead thanks the US QE2 of US600 Billion. Currently support level was formed at 22900 level. But watch out, a H&S formation is in the making. So for short to mid term (up to 3 months) traders beware, the market does offer opportunities at the moment but risk not at acceptable level yet.

Cheers Happy Trading.

Has the market correction completed?

Hi, i m back again.

Market seems to be a bit bullish today, DJI closed with +250 points (+2.3%), marvelous! Is this the sign of completion of market correction due to resurgence news of sovereign debt issue in the PIGS countries in Europe and potential war in Korea. To answer the question, let ask the Mr Market

The DJI weekly chart shown a double top formation at 11250 level which is a hindrance to bullish advancement of DJI. Taking closer look at DJI daily chart shows that DJI is retesting the 11250 level yesterday. Do you think this resistance level will be taken out? My guess is not yet.

11250 level is critical now. Any retracement from this level market will turn in short term bearish again. ie lower high from the previous high achieved on 5 Nov 11440. Hence it is too early to enter the market now. We shall wait for the Mr Market to rebuild his confidence and strengths to cross the 11250 hurdle first. Then we have a more interesting play to look up for.

Following from the analysis above, let take look at local market.

10.35am KLCI + 13.76 points (+0.93%) not to bad, impressive rebound. The play should be cautious based the analysis above. No doubt that a lot of second tier blue chips have corrected to an attractive level. But the play short be quick and window of opportunity may disappear fast should DJI make a U turn tonight. Whether this will happen, you should ask yourself whether there is any favourable events up coming, otherwise, the DJI rebound was merely smoke in the mirror.

Cheers Happy Trading.

My Blog Revisit

it has been a long time i did not update this blog. Time files, not realising, the blog is two years old. i have been busy for the last one year on my job as also continue to research on how trade for a living.

i have started to trade for the last six months, results was not favourable. As at to-date, i have lost total of RM3,000 with pure application of technical analysis. the poor results show that there are lot more knowledge to be acquired before my plan to be financial independent materialise.

Paranoid theories cannot take the shine off gold

Have u ever wonder why people like to choose gold as an avenue for store of value. Apparently, there is a belief on a conspiracy theory that some invisible hand will continue to make sure gold price will be maintained or increased overtime. The goldbugs that continued to belief into this theory has been wright for the last 100 years i guess and based on the current trend of gold price, this theory is continue hold. if you wish to know more

By John Dizard

Published: October 9 2009 20:21 | Last updated: October 9 2009 20:21

They asked me to write about the goldbugs’ point of view, including the paranoia and conspiracy theories about gold. You know. “Them”. The request could have come in any number of ways: a note composed from cut-up newspaper headlines, or a “suggestion” from a muffled voice over the phone. In this case, it was an “FT editor”. I can only speculate about his true identity.

If you immerse yourself in the world of goldbuggery, the nothing-is-what-it-seems worldview can become that infectious. The paranoia of the goldbugs, die-hard believers in the value of the metal, has been with us a long time, intensifying since the collapse of the last great gold bull market in the early 1980s. Now, though, the goldbugs’ resolute disbelief in the legitimacy and value of official currencies is influencing mainstream market opinion, helped by this week’s record price of $1,061 per Troy ounce.

The fundamental premise of goldbug conspiracy theory is that the metal would have continued to hold and even increase its value over the years against the “fiat” currencies if there had not been a sustained, secret intervention on the part of some powerful group of market manipulators. The speculated-upon identity of the “Hand”, or “Seller”, or “Manager” varied over the years, from JPMorgan, the US Federal Reserve and Goldman Sachs (of course), to miner Barrick Gold or George Soros.

Underlying all the conspiracy theories are two convictions: gold is the only true measure of value, and the people in charge share the goldbugs’ belief in the centrality of the gold market in the organisation of the economic and financial world.

The first premise has both a material and a religious aspect. In the material world, gold’s chemical stability, rarity and ductility have in all societies made it a precious asset. However, that very scarcity and weight, along with the need to re-assay gold offered as payment, limit its usefulness as a medium of exchange for a world with today’s volume of trade. While it is a useful, and, over the longest term, essential, store of monetary value, there is a limit to the degree to which it can substitute for paper or electronic currencies.

The utility of gold as a store of value can, for the obsessive, verge on religious devotion, or even love, despite the Bible’s admonition that “the love of money is the root of all evil”. A true goldbug would probably say this applies only to the government’s money.

The second premise, that the committee or committees which run the economy do so through their setting of the gold price, had some basis in truth when governments or central banks were willing to buy and sell gold to set their currency’s exchange rates. The US government’s willingness to do that with the public ended in 1933, and its sales of gold to official counterparties ended in 1971.

For a few years after the 1971 “closing of the gold window”, the end of US government gold sales, there was residual interest in foreign governments’ valuation of their gold reserves. A website popular with goldbugs, Zero Hedge, recently revealed a 1975 Federal Reserve memorandum to President Gerald Ford, in which an argument between the Treasury and the Fed is outlined. Zero Hedge describes the memo as a “smoking gun”, and goes on to say: “So to all conspiracy theorists claiming that gold is being manipulated on a daily basis by the Federal Reserve: when it occurs over and over, and is so well documented, it is no longer a theory.”

The memo itself is rather less dramatic and has nothing to do with manipulation on a daily basis. Essentially, the Fed chairman, then Arthur Burns, was telling Mr Ford that if the French buy lots of gold it will lead to an increase in world liquidity and more inflation. As usual, Mr Burns was wrong. Gold was not necessary to inflate or deflate world liquidity; that could be done through money market operations by government currency issuers, including the French and the Americans.

Gold could move the larger financial world directly if central banks tied the level and rate of currency issuance directly to their gold reserves or to the metal’s price. Central banks, or a shadowy Doctor Evil, do not need to manipulate the price of gold if the price does not limit their freedom of action. What matters to governments is their ability to finance themselves through bond sales. This would be hampered if the bonds’ value was being eroded by higher inflation, or by devaluation of the currency relative to other currencies.

And that is what the gold price is beginning to tell us. The investing public may be too worried about imminent inflation; more likely, given the continued weakness in employment and wages, not to mention housing, we will have weak dollar-measured general price inflation. However, in spite of mantra-like official statements to the contrary, it would seem that the US government wants to competitively devalue its way to national prosperity.

That hasn’t worked yet, since the trade-weighted dollar is about where it was at the beginning of the crisis, but I am confident that if a government wants to debase its currency, it can ultimately succeed in doing so.

One of the advantages of being a goldbug now, or becoming one soon, is that it is one commodity whose price is not likely to be manipulated below its market-equilibrium level by the US government (“Them”, if you prefer). There will be attempts to limit speculation in such essential commodities as oil, grains, or base metals, but a gold price rise would simply represent a successful devaluation.

So while the goldbugs’ conspiracy theories are chimerical, their investment strategy is at last aligning with that of the real world.

The writer is an FT columnist

Revenue Recognition vs Respect Recognition

Yesterday I was reading an article written by the current president of MASB about revenue recognition for property developer. The crux of the issue was whether current practice of recognizing profit based on % of completion is appropriate. He further elaborates that if % of completion method is not applicable complicates related issues on taxation and borrowing cost of property project. The standard did discuss on whether a developer is in a business of

1. selling finished products or
2. rendering construction services

Situation 1 means developer only earns it revenue after property is completed and delivered to customer. Situation 2 means developer earns revenue on stages as the construction of property progresses. Hence, the corner stone of this topic is you register a sale only when you have EARN a revenue irrespective of circumstances.

Lets not getting over zealous on technicality of this concept, leave it to all smart accountants to find out.

Coincidently, knowing an accountant who is an expert in applying revenue recognition concept but fail to apply the same concept in gaining respect from others – Respect Recognition vs. Revenue recognition concept.

It relates to a tale of a very senior accountant who is in late 40s trying to introduce concept of respect to an organization she newly joined. This senior accountant is leading a team of approximately 10 accounting staff. Due to working culture differences between this senior accountant and the existing staff has led to an exodus of massive departure of staff. The main crux of issue was senior accountant represents that she does not receive “respect” she deserved from staff for being the most senior accountant in the company.

Now i wish to remind all my readers, respect is like revenue, must be EARNED not BEGGED. I do recognize that you could rarely learn anything from accountant about life, but this one might be a relevant application of accounting concept into our daily life. Please leave me a note if you beg to differ.

Happy Chinese New Year

Investment vault wishing all readers Happy Chinese New Year. May the Bull wake up from its hibernation for past one year and live up the spirit to chase the Bear Nian away.

Trading results after a week

As promised, i will post my trading records here. From the table, as you can see, i have started with a higher volatile equity product - warrant. As the market is expected to be volatile for Q1 2009. We should ride with the wave of the volatility.

Bought 25k of Ramunia-WA and sold all at different day. profit RM257, return 8.8% in a week, not to bad ah.
Ok good news is told, now is the bad one. On 6 Jan, 50k Resorts-CH was bought at RM0.85. Currently, i am sitting with paper loss of RM700 just for this counter. that translates to 16% loss. Do you find any error in in writing??

Actual the purchase price is RM0.085 not RM0.85 (first line third para). i was supposed to queque for RM0.085 (it was traded at RM0.09 at that time), unfortunately i have keyed in RM0.85. As a result, the system will match the best price at RM0.085 instead of what i keyed in.

Lessons learn:
1. any derivatives products are highly volatile, it surges fast, slump quciker, for starter dont start with this prodcut;
2. start your paper trade, learn or season yourself with the trades of trading first.
3. start as early as you can, as you are probably aware, its darker before dawn, all bad news has been looming around the world, but market has reduce to go down further, probably in 6 to 9 months time, we will have switch strategy to investing instead of speculating.

Happy trading.

Start My Trading Adventure

Today is the first day in 2009. Wish to take this opportunity to express my greeting to all of you Happy New Year 2009. Have you completed your New Year Resolutions and wish list or to do list?

Well, for me i have finally decided to start my virtual trading starting from tomorrow 2 Jan 2009, the first trading day in 2009. I have been educating myself for the past two years in stock trading and investment through reading lots of books, blogs, research reports, reading about technical analysis, fundamental analysis and so on. As rightly pointed out CPTEH, education is a critical factor to have edge in stock trading.

For the past two years, I have enjoyed the education journey and it has really expanded my knowledge on various aspects of world and local economy. I have also learned that we should have our independent view of the state of economy of the country rather than relying on the news from the local politically controlled news paper. I do not need to name it, you should know. I have decided to discontinue the subscription of the local English paper instead subscribed for the Edge.

Besides, learning about the co-relation between the state of world economy and the local economy also enhance my understanding as to why movement in DOW has an impact on other stock market worldwide. As you probably hear before that “When the USA sneeze, the world will catch a cold”. It shows that the state of health of the USA economy is a barometer of the state of economy world wide. However, opposing to this belief, there is also a group of economists strongly suggest that the economy of Asian countries is slowly de-couple from the US due to the relentless growth from the countries like China, India, Vietnam and some of the countries from South America.

The idea I wish to highlight here is economy is a very complex subject. Various economists equipped with different school of thoughts will continue to bring forward their argument on certain economic topic. It is rather confusing to all beginners who have problems in understanding the topic discussed. DON’T WORRY, I was one of them before this. After two years of bombarding myself with all kinds of investment books and readings, my advise to you is sum up as that all economy has a cycle to follow ie peak and trough. Whatever predicted and argued by the economist is NOT crucial from the stock trading point of view, as the stock market is a voting machine in short term and a weighing machine in long term, all information should have been discounted into the price of individual securities.

Stock trading is a zero sum game, ie someone need to pay for your profit you made. There is general belief that only 20% of the market participants make money from stock market while 80% of them continue to loss. Hence, before your start your stock trading journey, I suggest you do the same as me spend a year or two to re-educate yourself in finance as I wish you will in the 20% category. Please take note that by virtue of you reading my blog, you are already in the right track marching to 20% category. After all, it only makes sense to be in market if you are able to beat 4 participants at any point of time as occasionally we will be beaten by the insides who are deemed to be privy to the certain information that is not flows to market. Stock trading is a high risk game, so get yourself prepared before you enter.

I will try to post my stock portfolio starting tomorrow, if possible. Let see how many participants I can beat. Once again, happy new year.



Wishing you and your Family
Happiness, Success & Good health

Is Malaysia in recession already?

I guess this is most talk-about topic among us. I m sure for the white collar around the country ie the more educated ones are wondering whether they will be out of job when the financial turmoil finalist hit our shore. The next category of people that discuss this same issue will be a bunch of uncle – aunties ie retirees whom normally are usually free to only read the headlines of major news daily without in-dept understanding of the state of circumstances. Finally, we have a group of people, be it educated or not, rich or poor, smart of dumb who do not care less of the current status now. Well, let me guess, I hope I am wrong, first group consist of 10% , second, 10% and the third group make up the most of the Malaysian say 80%?

This question really stings me because as we are aware, Malaysians generally do not like to read. Go and check with the major book store they will show you the statistic of readership in Malaysia compare to Japan, Singapore or HK. The consequential question is do the general public in Malaysia equipped with a “wave-sensor” to detect the strong “under current” of financial tsunami started from the US that has slowly hitting our shore.

What even more worries me was the 80% category do not care to know more about the state of economy of Malaysia in addition to the 20% category MAY not obtain sufficient independent and reliable information for their consumption. There seems to be a double whammy effect. If you monitor local news reported on major news daily quoting our big-shots in field of politic and government agency (not to mention name here, otherwise this blog will be frozen under ISA) that Malaysian economy is slowing but is strong to withstand the strong under-current of financial tsunami. GDP growth of 3% is still achievable!! Well, well, I am not an economist, neither that I am expert in this field to comment whether what they said is truthful.

As a layman, we should, common sense will tell, verify their statements worth trusting. With proliferation internet, there are various useful sources of information on the net for your consumption. All you have to do is some minor effort to do some internet research. What’s more can you ask for while all information is free of charged?

Following are just snapshots article and readings I came across during the weekends that offer some independent source of information pertaining to the burning question above:
1. Asia’s economies are imploding fast
SYDNEY, Dec 13 — World trade, especially in Asia, continues to plummet, pushing China closer towards recession while Japan is now deeply depressed.
In China the falls are almost as staggering as the incredible growth the nation has seen in recent decades. While recession in developed nations is defined as negative growth in gross domestic product over a year — or a few quarters — in China, 5 per cent growth is……………..

2. Retail sales and prices fall again
WASHINGTON, Dec 13 — Signs that the US recession will be long and severe mounted with a fresh round of bad economic news, including plunging sales from manufacturers to stores and falling prices that raise fears of dangerous deflation.
The widening economic troubles did put a lid on inflation. But they raised concerns about the opposite threat — the potential for a bout of deflation that could drag down incomes, clobber home prices even more and shrink corporate profits.

3. China and India: Suddenly vulnerable
LONDON, Dec 13 — The speed with which clouds of economic gloom and even despair have gathered over the global economy has been startling everywhere. But the change has been especially sudden in the world’s two most populous countries: China and India.
Until quite recently, the world’s fastest-growing big economies both felt themselves largely immune from the contagion afflicting the rich world. Optimists even hoped that these huge emerging markets might provide the engines that could pull the world out of recession………………………..

4. CIMB ECONOMIC UPDATE
12 December 2008
Industrial Production
Oct 08: IPI flags a markedly slower 4Q08 GDP
AYSIAL603 2084 9667 – hengguie.lee@cimb.com
IPI contracts further in Oct. Malaysia’s index of industrial production contracted further by 3.1% yoy in October (-1.7% in Sep) for the second consecutive month. This was largely attributable to the fallout from external demand while domestic demand also softened. This came in slightly better than our estimates for a decline of 3.4% but worse than market consensus for a drop of 2.8%.

Contractions across the board. The manufacturing sector registered two straight months of decline in October (-2.5%) and -1.0% in September. The mining sector declined by 5.4% in October (-4.8% in Sep) while the electricity sector declined by 1.6% in (+0.1% in Sep). Industrial output should weaken
further in response to a worsening external environment as well as weak domestic conditions.

A poor start to 4Q08. Together with the contraction in exports and other forward indicators, the decline in October’s IPI signals a markedly slower growth in 4Q08. Hence, we expect the economy to downshift further to an estimated 3.0% in 4Q08 from 4.7% in 3Q and 7.1% in 1H08, taking the full year growth estimate to 5.6% this year. The biggest drag on growth is the manufacturing sector. With a
severely deteriorated trade picture and the outlook on the US economy weakening, we estimate 2009’s growth to ease sharply to between 2.5-2.7% in 1H09 before picking up moderately to 3.0-3.2% in 2H. This brings the full year growth estimate to 3.0% for 2009. We see a 30% of a technical recession in 1H09.

Comment by this Blogger:

From the first article, we know that the world trade is dwindling and plummeting fast in wake of the credit crunch furiously eroding the US economic health. Due to the erosion of the consumers’ and business community’s confidence sentiment in the US, technical recession was already wide talk-about in the US sometime 6 months ago. As the negative sentiment hitting the climax arising over bankruptcy news of among the largest investment banks, AIG, the big three auto companies, the fearful sentiment was looming the household in the US and the business community. Murky outlook coupled with the continuation of more bad news to come, how this circumstance could calm the market sentiment of the consumers. With the entire environment brace with gloom and doom news, the immediate response is to cut spending in order to conserve resources to face uncertainty in the coming months, hopefully not years.

The US being the largest market for consumers spending, consumer more then half of the goods and services produced in the world. As the consumption rates in the US continue to dwindle, importers in the US have started to reduce imports from all over the world. As the demand for their goods and services started to fall, the other part of the world in turn start to reduce import of various source of the raw materials and inputs. In summary, world trades are facing severe contraction to a level which has not seen before. A good barometer to judge the pace of world trade is by referring the Baltic Index which hits its five years low.

The condition could get worse, as evidenced by the Second article. Please observe, the price fall again, indicating the consumer sentiments are not seeing its bottom anytime soon yet.

The Third article is giving us an idea how the erosion of the US consumer confidence has impacted the most promising economy in the world currently. Couple of months back, China was deemed to be less affected the US financial tsunami cushion by its large and ever growing consumers market. But now, that assumption and prognosis no longer hold water. Its exports to the US has contracted seriously and the worst is yet to come, millions of the people will be out of jobs, take home income will erode, property bubble is major cosmopolitan will burst, crime rate will rise………………and so on.

Let come back to the local front, the US is one of the biggest trade partners of Malaysia. As this dirty partner playing around without taking precautions, has passed on the virus to us. Malaysia could continue to claim innocent and probably naïve with its leaders continue to “artificially optimistic” about the country’s economic outlook. Well, as mentioned before I am not an expert to advise you neither I am here to dispel the truthfulness of our local leaders’ optimism. I am only here to provide you additional independent information for your consumption. With that I end with the last line of the fourth article: “We see a 30% of a technical recession in 1H09”*.

* PS: this statement was arrived based on Oct 2008 statistic. Assuming the best scenario that Nov and Dec 2008 are able to maintain the number achieved in Oct 2008. The 30% probability will hold. What if the statistics in the last two months become worse? Could the probability become 50% or 70% or 100%? Well, whatever chances it is, get yourself prepared for worst to happen.