by ckchoy
Recently, the topics of Europe debt crisis are being brought back to table of news speculation, this of course has been causing market in downtrend correction mode. Greece further downgraded, rumours of debt crisis spreading to other richer countries like Italy, and so on. And now rumours of a high chance of US economy double dips are also surfaced.
If you believe smarts money are smart, then you will notice world indices are still holding well. Eg STI still above 3100 level now. We can make a mathematical measurement as such: STI hit a high around 3900 just before the sub-prime crisis started and hit a low at around 1500 in 2009 Mar. So if this debt crisis is really scarely and serious, smarts money would have left the market and do a reverse short and I would guess STI should be around in the mid of these high and low, ie average of 3900 and 1500 = 2600. But the fact is STI is still around 3100 level, well above 2600, hence I would guess most of the smarts money do not bet on double dips recession to occur.
Simple reasons why you should cut your cash holding: interest rate remains low, inflation high -> your cash value will become smaller and smaller. We should manage our portfollio and reduce cash in hand and put money into commodities. The fact we can see is gold in high level.
What should we do now?
My advice:
For those conservative investors, you may wish to wait for the volume to come back first before jumping into the market. For now, you may start to do your homework, ie screen out your favourite stocks in term of FA and get ready to spot TA entry.
Currently, STI volume is around 1 - 1.3 Bil. Wait for it to break up to 1.5Bil in a sustainable pace for a change of a better sentiment to start.
When volume reaches 2bil, then market is back to lively mode.
When volume reaches 2.5bil, then a broad bull market is here and most of the people including retails can make money easily.
But if you wait for the volume to start to pick up, you may wish the rock bottom prices. Give and take.
For those are more aggressive and confident, you should start to accumulate shares now. And for deeper pocket investors, you should buying into dips in this market condition. You will be rewarded handsomely.
What sectors, counters to look out for?
It really depends on your style and investment risk.
My suggestions:
Looking into property sectors eg Capital land and OUE and so on. Then those badly beaten down fundamental stocks like Cosco, YangJiZiang, Noble, IndoAgri and so on
Lastly, there is no sure win in stock markets, to protect your fund, you may wish to apply buy-cut-buy strategy ( buy-cut-buy ). Many like to aim for 100% win in stock markets but in reality there is not a case. The profitable successful investors do not win all the time, they only make sure wins > loses.
Be decisive, Be patient, Don’t be greedy, Don't be stubborn
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Saturday 28 May 2011
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