Dissecting the trio of SPX, SSECOMP & STI
On 10 Feb 2020, 4.28pm, I emailed my Clients my latest post titled 'Dissecting the trio of SPX, SSECOMP & STI'. Below is the full transcript of my write up: 'Dear Clients
It has been an enormously busy start for me in 2020, from monitoring volatile markets, onboarding new clients to launching new marketing initiatives! I have to apologize for not being able to update more regularly.
Now, for easy reading, I've penned my post in point form instead:
S&P500 Index (SPX): - SPX & Dollar positive feedback loop continues - Trio of Euro, GBP & Yen turning down gave a boost to the Dollar - With China being the epicenter of the corona virus, a halt in trade has weakened Chinese demand for commodities - Weakened commodity prices is linked to weakened commodities export oriented countries' currencies (think CAD & AUD) which in turn also feedback into Dollar strength - US seemingly not affected by the virus (yet), thus continued Dollar strength gave rise to even more demand for US assets (eg equities) - From the Chart, It appears that the US markets trading mantra 'BTFD (Buy the f****** dip)' is back in play as price action bounced off from the lower Bollinger Bands segment line and continue the rally. - As a side note, until some support is broken down convincingly, the 31 Jan 2020 SPX low may just mark the beginning of a new 39-day cycle rally.
Shanghai Composite Index (SSECOMP): - As I mentioned in my 6 Jan post (https://www.facebook.com/whatsyourTA/posts/807767526354429), an authoritative break below 3000 will negate the original bullish pattern and we have to reassess the chart again. - At the moment, SSECOMP is simply doing a relief rally. - Attempting to close the gap is a good start but IMHO that is still not sufficient, we need price action to reclaim back to the upper BB (Bollinger Bands) segment to signal more concrete bullishness is playing out. - If price action starts to turn down soon instead, expect more painful days ahead - From the Chart, closing the gap at 2958 coincides with the 61.8% retracement & the red 200-day EMA (light green box). When Price, Moving Average & Fibonacci Retracement levels converge, the significance cannot be overstated. Let's watch this space.
Straits Times Index (STI): - Earlier in the past week, SPX's strength & SSECOMP's relief rally naturally gave a boost to STI, thus giving a false sense of stability to everyone. - As mentioned many times before, STI usually follows the weaker chart action of her two big brothers (US & China). - If either big brother falters in the next few weeks, it is likely STI will follow the weaker one. - Friday's announcement of Code Orange by Singapore's Ministry of Health will likely suck out any false sense of bullishness left.
As you may see, the development of the virus situation is commanding the headline news and forcing STI price action to react accordingly. There is not much of a mid-term trend to speak of. - If you are a short-term trader, this could be your game. - If you are a longer term investor and wish to buy low, you can buy with STI PE between 8-12. As I write, STI is trading at PE<12 now. We are likely better off not wishing for a <8 PE because that will probably mean the Pessimistic or Nightmare scenario by The Economist (see attached image) has been evoked. Allocate your resources accordingly. Oh & and one more thing, I have the full deck of The Economist Intelligence Unit's report 'Coronavirus Outbreak - Economic & Business Implications' dated 3 Feb where the above attached image is taken from. Clients who wants to want to take a look, pls drop me a line! Live Long & Trade Well. Thank you & rdgs Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com www.facebook.com/whatsyourTA #plsreaddisclaimer #spx9feb20 #ssecomp9feb20 #sti9feb20 #dollarstrength9feb20 #feedbackloop #coronavirus #codeorange9feb20 Charts: tradingview / nextview Image: The Economist'