Sunday, May 20, 2018

Elliott Wave Analysis on Singapore Political Landscape

Elliott Wave principle is predominately used in analyzing prices in stock market based on investors psychological behavior toward it.  Should said subject also involve mass population then it should be possible to use Elliott Wave principle to analyze it too.

The Singapore political landscape does involve mass population (citizens of Singapore) to vote in the political party the right to govern the nation or to vote out the political party who deem unfit to govern the nation.  Thus, the possibility of Elliott Wave principle is able to describe the political landscape is there.

Below is the detail analysis.

Elliott Wave Analysis on Singapore Political Landscape -- Part I
Elliott Wave Analysis on Singapore Political Landscape -- Part II
Elliott Wave Analysis on Singapore Political Landscape -- Part III
Elliott Wave Analysis on Singapore Political Landscape -- Part IV

From investment perspective, knowing the political landscape can no doubt bring opportunity, a probably once in a life time opportunity since any change of political landscape happens in multi-decades time frame.

Wednesday, May 9, 2018

STI Analysis -- the next peak and trough ? (XIII)

Continued from STI Analysis -- the next peak and trough ? (XII)

As mentioned previously STI is currently doing an Intermediate degree Wave 5 Minor degree Wave 2 correction.  As it is dealing with Minor degree level, have to look at STI on hourly basis to really see the correction pattern.

The above chart clearly showed that STI has developed into an Expanded Flat pattern.  Expanded Flat pattern or rather Flat pattern in general is a 3-3-5 structure and what STI is now is at the "5" segment meaning doing a 5-wave impulse.  Furthermore, the 5th wave is an ending diagonal rather than a straight impulse.  The ending diagonal is yet to fully run its course.  That is to say there could be further downside to STI and potentially it could end up around 3,500 level, the 38.2% Fibonacci Retracement level.  It is too early to call that STI Intermediate Wave 5 Minor Wave 2 correction ends with just an Expanded Flat as that Expanded Flat could be just one part of a combination (double-three) with flat-zigzag, flat-flag and flat-triangle are the likely combination to complete the double-three.  Should it just end as an Expanded Flat then the correction will be a shallow one compared to the norm of Wave 2 usually does a 61.8% Fibonacci Retracement.  If STI were to do a between 50% to 61.8% Fibonacci Retracement, the likely outcome would be a double-three combination of Expanded Flat-Zigzig.  The outcome should be known within the next 1 to 2 weeks.

While STI after this Minor Wave 2 correction will resume the uptrend to complete the rest of Primary degree Wave 3, that cannot be said for all the stocks (sectors), in particular the FTSE ST Financial Index (banking stocks).

The chart above is the FTSE ST Financial Index.  While the rally for STI since the bottom in 2016 has been largely contributed by the 3 local banks (DBS, UOB, OCBC), that doesn't mean going forward any more upside will be 100% contributed by the 3 banking stocks.  The above chart clearly showed the FTSE STI Financial Index is at Primary degree Wave 3 and appears to be at the end of Wave 3 too.  The volatile movement lately appears to be forming the ending diagonal of the Intermediate degree Wave 5, ripe for correction.  After that will be the Primary degree Wave 4 correction with a drop of not hitting below 935 (the peak of Primary degree Wave 1) so as not to violate Elliott Wave rule.  A look at the chart for the 3 banks all exhibit this "ending diagonal" pattern.  Thus, must exercise CAUTIOUS to the banking stocks now.  Though the general trend is still on the upside as still have Primary degree Wave 5 to go but the question is can you stomach the Wave 4 correction ?  If takes Venture Corporation price correction as a guide when it falls from peak of $29.65 to low of $18.30, that kind of magnitude will be apply to DBS and UOB (percentage of fall applies to OCBC).  Most (analysts and bloggers) are bullish on the banking stocks with some even dishing DBS hitting $40 to $50 price target mainly due to improvement in global economic condition and US Fed rate hike BUT before you can see those target can you really stomach the Wave 4 correction, the way the price swing like Venture Corporation ?

The above chart is the FTSE ST REIT Index.  The chart clearly showed it is already in Wave 4 correction and it is either 2/3 or 3/4 done.  Some might be having bearish view on REITs with one I came across crying for a crash.  The reason was interest rate is going up and US 10-yr Treasury yield hitting 3% or higher.  If just bases on these reasons to call a crash then one probably do not really understand what does the word "Fundamental" mean.  For past couple of years, S-Reits has been out-performing STI and it is no surprise that FTSE ST REIT Index is now doing a Wave 4 correction but STI still in Wave 3.  The call for "crash" unfortunately comes 5 months late.  The FTSE ST REIT Index Wave 3 peak in December 2017 and now the correction has been going on for 5 months.  Though it still have some downside, the last drop for the A-B-C pattern but in order not to violate Elliott Wave rule, the drop cannot overlap the peak of Wave 1 which is around the 778 level.  Wave 2 drops between 61.8% to 78.6% Fibonacci Retracement level and Wave 4 should drop to between 38.2% to 50% Fibonacci Retracement level due to the alternation nature between Wave 2 and Wave 4.  As such, the downside is pretty much limited as shown from the chart.  S-Reits at the moment is very in sync with STI in term of direction or a leading indicator for it.

Some might question if the banking stocks going into Wave 4 correction then how can STI resume the climb ?  STI is not just make up of the 3 banking stocks, it has 30 component stocks from various sectors.  The climb still can continue without the banking stocks.  In fact FTSE ST Oil & Gas Index still on the uptrend, FTSE ST Real Estate Index behaves the same as FTSE ST REIT Index.  Thus there will not be any issue STI can continue the climb without the banking stocks.  Looking at another perspective, FTSE ST Financial Index will be undergoing Wave 4 correction while STI resumes on Wave 3 climb.  By the time STI going into Wave 4 correction, FTSE ST Financial Index should finish the Wave 4 correction and embark on Wave 5 climb and thus supporting the drop in STI Wave 4 correction.

Make sure what to long for STI resume of climb so whatever you long will not diverge from STI direction !