Continue from STI Analysis with Ichimoku AI System -- Part 3
Before the analysis, let it known that the app has been upgraded to v2.4 since the last analysis. Features were added to be able to fine tune the AI model's parameters to improve the prediction capability. Another is ability to switch between various final prediction strength.
After hitting an all time high of 4,005.18 on 28th Mar 2025, STI fell to an intra-day low of 3,372.38 on 9th Apr 2025 and rebound from there to close 3,823.78 on 25th Apr 2025. That is a recovery of 451.4 points or 13.38%. Naturally, people would suggest a buy. Is that really so ?
Above is the AI model prediction for any buy signals since the sell off. Like seen from the snapshot, not a single buy signal being predicted despite the 13.38% rebound. The last buy signal predicted was Aug 2024. The predicted probability for the buy signal still largely stay below that of sell and hold signals. Why ?
Above is the re-prediction by adding in other technical indicators (RSI, ADX, MACD, BollingerBand, EMA and OBV) along Ichimoku signals. It is very common people use several technical indicators together to provide better confirmation of signals as different technical indicator focuses on different aspect of technical analysis, some on trending and some on momentum and so on. Unfortunately, there is still not a single buy signal predicted despite the 13.38% rebound. We can see more buy signals generated (both strong and weak) compared with just Ichimoku signals only but still not a single buy signals since the rebound. The only bright side is the probability of sell signal has lowered than in previous case but the probability of buy signal still lying below that of the sell and hold signals. Why ?
Above is the prediction from the AI model after making several tweaks to it. Model's parameters were tune to focus solely on precision and recall in making prediction. The buy threshold was lowed to the minimum to relax the condition for the model to predict buy signal and the prediction strength is set to weakest so that any slight buy predicted can be caught. Still, from the snapshot, not a single buy signal despite the 13.84% rebound despite the model now is capturing more buy signals than the previous 2 cases. This is a way to force the model to predict a buy signal which should not be encouraged as this will introduce unwanted noise to the model to train and highly predict the incorrect outcome. The buy signal probability is increasing compared to the previous 2 predictions but still below that of the sell and hold signals.
From human eye the strong rebound clearly entice into thinking of buy signal but this is the opposite from the AI prediction. Why ?
Singapore GE2025 will be held on 3rd May 2025. Wait, don't get me wrong, am not going to talk about politics in this STI analysis. Just that in the politics world, I have the perfect classic example to illustrate my point. Since not having any political propaganda, will go direct and straight to the point. Go to the Straits Times Facebook page, look at the comments of any of the political reporting, be it on the PAP or any opposition parties. You can easily find a dozen of comments that have the following nature. "This MP has been working very hard for the past 5 years, vote him/her", "This MP is very friendly and helpful, vote for him/her", etc. Firstly, let be known that it is the primary responsibility of the elected MP to work hard and help the residents in the ward, they are being paid to do so. Do you not work hard in your company when the company pay you the salary ? Friendly is a subjective thing, so not going deep into it. Next, how to you know if an opposition candidate is voted in to be the MP of the ward, he/she will not be as hardworking, friendly and helpful (or better) than the existing one ? Do you dare to put your neck on the chopping board to affirm your stance ? This is weakness in a human being psychology, a psychological pitfall to be exact. One will only make conclusion on what they have seen or experienced (the result) and not think of the possible outcome (or result) that they have not seen or experienced. As such, they only make biased conclusion. To make a even more powerful example, Singapore since PAP took to power in the 50s has been government of the day uninterrupted till now. When asked stance of opposition parties forming the government of the day or a coalition government, you will likely get the response of "Do not think opposition parties are good", "PAP has records" and so on. Again, not a single day since 50s Singapore has been under the government of another political party other than PAP, how to you know opposition parties can't do the same or even better job than PAP ? You have not seen the result doesn't mean it is a negative. This is the typical psychological pitfall that majority will fall into. Even the more acute to psychology like people who majored in psychology or the professor who teach psychology in university cannot avoid falling into this pitfall.
So back to the main focus. It is this psychology pitfall that when you see STI rebound strongly from sell off and entice you to the buy signal. You cannot see the outcome of what you've not seen, that is not a buy signal. In AI, AI model was fed to historical data to train them to recognize pattern and sequence by computing on all the perspectives and eventually make the final prediction based on possibility of the possible outcome. It is the possibility of the possible outcome and not the simply True or False of the outcome. The AI model has already shown prior to the sell off that sell signals has been predicted since Sept 2024 without a single buy signal being predicted in between. With the psychological pitfall, one would not believe as STI kept scaling higher and higher despite all those sell signals and guess what next ? In fact, here, the AI model is being fed with 20 years of historical data (yes, typical Singapore KS style) meaning starting from year 2002 (since the start of the test data above is 2022) till 2021. During these periods, STI encountered the peak and trough of 2003 SARS, 2007-2009 US subprime crisis, the uncertainty from the Euro debts crisis from 2009 - 2014, the peak and trough in 2015-2016 due to concern of China economy and the latest 2020 Covid-19 pandemic. There are more than enough samples for the model to be trained and learned of the market peak and trough to make a reasonable prediction as of now.
In the politics world, you don't have the luxury of the AI to assist you in analyze comprehensively all the possible outcomes (what you can see and experience and what you cannot see and experience) and hence you are being dictated by the psychological pitfall of the majority for the future, it is quite a sad thing unfortunately. However, in the financial world, you have a tool in AI that can compensate that and why you choose to ignore it and instead continue to believe in your own eye ?
STI has rebounded strongly but there is no predicted buy signals, don't rush into it, wait in patience for one !!!
Background and Historical Facts
1. Around 2H2024, in an attempt to use the SkillsFuture credit before it expires in Dec 2025, I was snubbed by the snobbish SMU from attending the Ichimoku Technical Analysis course as I didn't attend the Basic Technical Analysis course conducted by them. Despite reasoning that I'm not novice to technical analysis and am able to even use Elliott Wave to analyze stock market, they still continue the snub.
2. Around end Jan 2025 when China's Deepseek AI shocked the world with its performance, I was inspired with it and couple with feeling unjustified and anger from the snobbish SMU's snub, decided to embark on a journey to develop an Ichimoku AI System to predict when to buy or sell in stock market.
3. Around mid Feb 2025, with the assist from Deepseek given the fact programming is not my major but I do possess the basic essential knowledge of programming (well few years ago, I did develop an app to calculate Elliott Wave), I have completed the automation version of the Ichimoku system. This has provided me the platform to develop the AI version.
4. By mid Mar 2025, the first version of the Ichimoku AI System has completed and was able to predict buy and sell signals with average or slightly above average accuracy. That was used in the post dated 27th Mar 2025 to predict STI direction.
5. In order to increase the accuracy and performance of the AI prediction, additional features and enhancements were made that led to v2.3 of the app being completed in first week of Apr 2025 to carry out the 2nd analysis on STI (this post)
6. Pass the first real test in predicting STI crash in the 1st week of Apr 2025. Prediction of selling signals started at least 5 months prior to the crash.
7. App upgraded to v2.4 after modifications made to be able to fine tune AI model's parameters to provide better prediction in Apr 2025
