Like many investors or traders wanting to know when FTSE STI will peak and when will the crash eventually come, I have to analyze the market in every possible aspects to "estimate" or "predict" that. My past analysis which started in
January 2016,
March 2016,
April 2016,
May 2016,
May 2017,
August 2017,
October 2017 and
December 2017 unfortunately were unable to provide any clue as those analysis was done on that uptrend since the drop in 2016. To have a more reliable or precise analysis I have to look at the bigger picture and it really took me some times to gather all the data (probably not all but majority of the data that I required). Hey, ain't Singapore pushing for smart nation doing those big data, why on earth I find difficulty in getting past STI data ???
Before getting into the actual analysis would like to point out the basic rules of Elliott Wave and these should not be broken to ensure a proper EW analysis.
1. A complete cycle consist of Motive and Corrective waves in which Motive is sub-divided into 5 waves pattern (1,2,3,4,5) and the Corrective is sub-divided into 3 waves pattern (A,B,C).
2. In the 5 waves Motive wave, wave 2 does not move beyond start of wave 1
3. In the 5 waves Motive wave, wave 4 does not move lower than the peak of wave 1, that is no overlapping occurs.
4. In the 5 waves Motive wave, wave 3 cannot be the shortest wave.
5. In the 5 wave Motive wave, wave 3 always moves beyond end of wave 1.
6. In the 5 wave Motive wave, never are wave 1, 3 and 5 all extended.
7. In the Corrective wave, wave B never move beyond start of wave A for a zigzag pattern.
8. In the Corrective wave, wave B always retraces at least 90% of wave A for a flat pattern.
From Lim&Tan broker house, the data that I could extract as an accuracy of weekly basis can only be from 1995 till now. Below is the chart for that.
1996 - 2009
There was a peak in 1996 before the 1997 Asian Financial Crisis which STI hit rock bottom in 1998. After that despite the dotcom bubble burst in 2000, the 911 incident in 2001 and SARS in 2003, STI did not manage to sink lower than the 1998 low and the market move on to hit the peak in 2007 (all times high at the moment) before another Global Financial Crisis in the form of the US sub-prime crisis took place. STI then sank and hit rock bottom in 2009 before the recovery. The low in 2009 again did not manage to hit lower than the 1998 low.
From 1998 to 2009, we can clearly define 1 Elliott Wave cycle without breaking any of the EW rules listed above. That is to say from 2009 till now, we are in another Elliott Wave cycle.
2009 - 2017
From 2009 to 2015, there was a peak in 2015 which till now STI still yet to move past. It was tempting to define 1 complete EW cycle from 2009 to 2015 as the movement did not break any of EW rules listed above. However, the nature of EW cycle is that each cycle will end higher than the previous cycle and the peak of 2015 still way way below the all times high registered in 2007. As such, to conclude 2009 to 2016 is another complete EW cycle looked very unjustified. As such, STI till now can still be within the EW cycle that started in 2009. Hence, the closest analysis would be the low in 2016 could be the completion of wave 2 in which wave 2 is either a flat or triangle structure rather than the usual zigzag. Based on that, current STI will be in wave 3.
Interesting Statistic
To look for further evidences to support the above analysis, I restored to look at time frame to see whether there is any Fibonacci sequence relationship. While I am unable to find any specific Fibonacci sequence in the time frame but I discovered some interesting statistic. The duration from 1996 peak to 2007 peak is 11 years. The 1998 trough to 2009 trough again takes 11 years to complete. Whether that is just a coincident or a reliable statistic, I begin to search for data prior to 1996 to see whether that statistic is a trend.
From Yahoo Finance, I managed to get a chart dated from 1988, the missing part (1988 to 1996 from the Lim&Tan chart). With the knowledge that we have a market crash in October 1987, the famous Black Monday in global markets, it appears that we could have another clearly define EW cycle starting from 1987 low to 1998 (as shown in the above Figure). The duration from 1987 trough to 1998 trough is again 11 years. So where is the peak prior to the market crash in 1987 ? From Google search I managed to dig out
a piece of news happened in 1987 reported by The Business Times. STI hit a peak in July 1987, hitting past the 1300 level for the first time since STI (then known as Straits Times Industrial Index, STII) started in 1966. Though the duration of the 1987 peak to 1996 peak is just 9 years instead of 11 years, this statistic does look interesting in certain aspect.
1966 - 1987
Unfortunately, I could not find any data during these periods for STI (or STII then) except some key events. 1985 was the first time Singapore economy went into recession since independence in 1965. There were 2 market crashes in 1981 and 1985 (due to the first recession and Pan Electric crisis) prior to the 1987. Those information are insufficient to conclude any possible EW cycle. It will be worth investigating if more data I could obtain in the future.
Hence, based on concrete data that I have, the following can be deduced :-
First EW cycle : 1987 - 1998 (11 years)
Second EW cycle : 1998 - 2009 (11 years)
Third EW cycle : 2009 - 2020 (11 years) ???
Peak-to-Peak from 1 EW cycle to another : 9 - 11 years
Trough-to-Trough from 1 EW cycle to another : 11 years
The highest point of a present EW cycle is higher than the highest point of a previous EW cycle and that just fully conform to what EW cycle is about. 1996 high (about 2400 level) is higher than 1987 high (about 1300 level) and 2007 high (about 3800 level) is higher than 1996 high.
With the above trend or statistic, we can conclude with high probability that the current bull market since 2009 is yet to run its complete course. With a trough-to-trough period of 11 years, the next trough will be in 2020. This duration seems very consistent given the past statistic. With a peak-to-peak period of 9 years, there should be a peak in 2016 but that never occur. So with a peak-to-peak period of 11 years, the next peak will be 2018. However, as we did not see any consistent peak-to-peak period in the past statistic as compared with trough-to-trough, it could be happened this time with a 12 years period that is in 2019. With STI now at the 3400 level, just 400+ points or about 12% below 2007 peak, it is very possible to achieve that in 2018 or 2019 and even surpass that value to set a new all times high (probably hitting the 4000 level to conform with EW cycle nature of higher high from 1 cycle to another). With that in mind, if we map it to the EW analysis of we are currently in sub-wave 3 of the EW cycle, it is very possible to happen as sub-wave 3 is yet to run its full course and we still have sub-wave 5 to go.
Fibonacci Sequence
I also tried to map the Fibonacci sequence into the time frame of market events to see any correlation and perhaps able to predict what will happen next.
The Fibonacci sequence is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, ......
Firstly, the peak-to-peak and trough-to-trough period counting in term of number of years though do not land exactly in one of the Fibonacci sequence but they fluctuate between the sequence number of 8 and 13. I do come across some analysis in the US markets that time frame can be came close to +/- 1 or 2 from the Fibonacci sequence and that is what we are seeing in STI.
1987 to 1996 peak-to-peak : 9 (8+1)
1996 to 2007 peak-to-peak : 11 (13-2)
2007 to 2018 peak-to-peak : 11 (13-2) (if it happens)
2007 to 2019 peak-to-peak : 12 (13-1) (if it happens)
1987 to 1998 trough-to-trough : 11 (13-2)
1998 to 2009 trough-to-trough : 11 (13-2)
2009 to 2020 trough-to-trough : 11 (13-2) (if it happens)
Next, since Singapore first ever recession was in 1985 since independence in 1965, I did a Fibonacci Sequence on 1985 to see any correlation of known market events. However, I can't seem to find a consistent list of events but it did correlate some key events. I'll just list down for reference.
1985 + 2 = 1987 -- Famous Black Monday crash
1985 + 3 = 1988 -- Market hit a high after 1987 crash
1985 + 5 = 1990 -- There was a market crash due to abolish of dual listing of Malaysian companies on both SES and KLSE.
1985 + 8 = 1993 -- Market on a sharp rally
1985 + 13 = 1998 -- Asian Financial Crisis Singapore in recession
1985 + 21 = 2006 -- Singapore stock market gained 27%
1985 + 34 = 2019 -- ???
Interesting is the year 2019 appears in this sequence and it seems to match the above EW analysis that an all times high could be achieved there or any other key market event.
Whether are we going to see another all times high in 2018 or 2019 and a trough (another global financial crisis and global recession) in 2020 is anybody guess now. Though the above analysis points to a high probability of that happening, it is still not 100% spot on. However, I believe having a guide and remembering those years (2018, 2019 and 2020) will be very important if we were to build up or grow our wealth from stock investing.
Whether my analysis is dead right on the dot only in 2020 then we will know.
