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  • Writer's picturewhatsyourtradingangle

Make no mistake, Mr Market has indeed showed his hand!

Updated: Jun 6, 2020

On Monday 1 Jun 2020 2.24pm, I emailed Clients my latest post titled 'Make no mistake, Mr Market has indeed showed his hand!'.

Below is the full transcript of my write up:

'Dear Clients

S&P500 Index (SPX):

Mr Market has indeed showed his hand. SPX has broken out of its 61.8% resistance zone at 2934+/- authoritatively. 

As mentioned in my 10 May 2020 post that 'I may be compelled to re-calibrate my current bias of the rally from 'relief rally' to a more lasting bullish posture'. With this breakout, what it means is that the probability of us seeing (revisiting) the March low or lower low has been greatly reduced. 

In other words, if you are an investor in the US market, you should be looking to buy on pullbacks in the next few months running into Q3.

Straits Times Index (STI) & others:

Now here’s the catch. A declining US stock market will drag the whole world down (high correlation to the downside) but a strong US may not always lift all boats up by the same percentage terms.

As you can see from the attached US vs World chart, Europe & Japan are following through with the US quite nicely BUT China, Hong Kong & SG are not sharing the same optimism with the leaders (Charts are as of Friday 29 May closing). 

Perhaps the latter three stimulus packages are just not 'big ticket' enough?

If you compare RSI for all the above 6 charts (not shown), you will see that US/Europe/Japan has broke up & maintained above 60 while China/HK/SG could not break above 60 and has in fact started to ease off from 60. 

Now, can this change? Of course. But until it does, I have to maintain a healthy dose of cautiousness in the latter 3 markets.**

In any case, since I'm expecting weakness (pullback) for the US markets running into Q3 negative Seasonality, my opinion for longer term investors is to methodically deploy your funds into the US/SG/HK/A-share markets in the next one quarter or so. 

Shorter term traders, on the other hand, should be making hay on the US front.

**5 Jun 2020 - What a difference a week makes for China/HK/SG.. That will be addressed in the next post!

Live Long & Trade Well!

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