Friday, May 12, 2017

STI Analysis

Last March perhaps I was the few bold enough to state STI is on an uptrend (Has STI Bottom ?) and the subsequent 2 postings (What's Next For STI ? and STI Expanding Triangle ?) I maintained that analysis.  So, after 1 year and 2 months, with STI closed 3,249.97 on 9th May 2017, my bold analysis was indeed correct.  The reward for my bold and certain degree of confident analysis then was the capital gain I get from Nordic Group (Stock Incubator -- Nordic Group, Strategic Objective Achieved and Stock Incubator -- Nordic Group) in which I turned that investment into a mathematically impossible to lose money one.  Other is the Investment Portfolio I have which at end of April 2017, stood at +107.34%, inclusive of dividend return, realized gain and unrealized gain (Portfolio -- Apr 2017).  Ironically, when STI hit a high at the 3,500 level in 2015 before the big crash, the highest my Investment Portfolio value was only +93.30% (Portfolio -- Apr 2015).  That is something that I will be investigating on in the near term.

Now I believe it is the right time to bring up what's next for STI.

As can seen from the above STI chart, we are in wave 3 on the uptrend.  Where will wave 3 ends ?  The theoretical value that I analyzed back in April 2016 (What's Next For STI ?) was 3,392 and with STI now at 3,249.97, we are just about 4.2% away from achieving that.  For me the question is not where wave 3 will end but rather as known after wave 3 will be the corrective wave 4 then the final leg up wave 5 before the next big crash again.  I have read a lot of other technical analysis citing 3,500 is the target for STI and well might be correct if that high is the end of wave 5.  For short-term investors or traders might be feeling excited because still have the final wave 5 to profit from but for long term value and fundamental investors, this is the time of importance too.  This is the period (for me), to thoroughly prepare one for the next big crash.  Thorough research of what stocks to invest during the next big crash and this coming or existing uptrend is the best opportunity to filter off weak fundamental and speculative stocks.  Apart from that, preparing capital to capitalize on the next big crash should start now.  Some might think if there is a next big crash, it might be still some months or even next year then will happen but I will prefer I have ample time to prepare for it.  The advantage of Elliott Wave is that from now till the next big crash, there will be several check points to guide me with the preparation, namely, wave 4, wave 5, wave A and wave B.

The following analysis I'm going to make is another alternative, something that have been on my mind last year during my analysis but didn't blog it out as then the possibility of that happening was low.  However, looking at now, in term of chart and fundamental of economy, the possibility of that happening has risen.

This analysis will be scarier than the one above as it not only extend from last year market crash but the magnitude of the drop is even larger than last year.  The bottom of STI 2,530 last year was merely the wave A of the down wave and current up wave is just the wave B of the ABC wave nature.  As such, the final leg down, wave C will drop below 2,530 and could possible send STI down to the 1,865 region, which I first analyzed last January (How Low Can STI Go ?).  This possible scenario CAN ONLY  be ruled out if current uptrend hit pass 3,500, that is the peak before the crash in 2015.  If this scenario is indeed what is happening to STI in the future, then the current up wave (wave 1,2,3,4,5) is only the sub wave of wave B.  If such is the case, whatever you have vested during the market crash last year is after all not cheap !

It is a known fact that stock market is a forward indicator of the economy.  The market crash early last year also sent Singapore economy to register a lowest point of 1,9% GDP, the lowest since recovering from 2008 GFC later in the later part of 2016.  The rebound (or the existing up wave) also indicated Singapore economy hit the bottom and rebound as can be seen from its latest GDP figure.  While there are saying you can expect higher GDP in the next few months which I am not surprised as the up trend still have some legs to go (wave 3, wave 4 and wave 5), we should not be excited about as what happen after wave 5 is the down wave ABC and you can expect the economy growth to tank again.  Now, if the STI trend is indeed the bigger down wave which I have just mentioned, then you can expect more worse coming next, recession, real recession and not just technical recession.

Since recovering from 2008 GFC, Singapore GDP has practically on a down slope and STI still the only selective few that yet to hit the high of pre 2008 GFC.  This clearly signaled that those policies after 2008 GFC are not working at all.  Many will attribute that to the global headwinds but that is just an excuse, the 2008 GFC has brought out several of the fundamental flaws in Singapore economic model and if those were to be addressed and resolved, we should not have to blame global headwinds for it.  What's making matter worse at this junction is STI trend is pointing to a down next (maybe end of the year or next year) but those fundamental flaws still largely remained unaddressed or lack in appropriate measures to resolve it.  Instead, our focus now is on future (future skills, future growth).  If the fundamental issues are not corrected then there will be no strength fundamentally to carry our economy to the future.

This is one of the reason I'm posting STI analysis at this moment.  Hopefully, knowing what's next and what to expect, one can build up the safety net with the opportunity in stock market.

In Singapore, there is one big advantage in not 100% believe and trust the Government with their policies (too many can't think out of the box and only know how to mend the cracks along the wall), that is if things really fall apart, you will have 70% of the nation as your landing pad.

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