New Year 2017 – Bull or Bear Market? Learn 2 Winning Strategies for Stocks

Posted on January 10, 2017 Written by

ein55-newsletter-no-047-image-bull-or-bear-2017

New Year 2017 will be an exciting year for global stock market with Donald Trump as the new US president, recovery of emerging markets and crude oil market, rising interest rate and a bullish US economy. Let’s learn how to position in stock market with 2 winning strategies: 1) Buy Low Sell High, 2) Buy High Sell Higher.

US contributes to 40% of global stock value, therefore it should be a key focus to understand the stock market outlook in year 2017.  US economy has been consistently bullish, supporting the stock market.  US unemployment rate has declined by half from 10% to 4.7% in Dec 2016.  Based on the historical unemployment rates of US since year 1950 (see chart below), we could observe that US economy is entering the last phase of bull run as the unemployment rate is falling below 5%, moving towards the critical 4% value, reflecting the peak of US economy.

Lower unemployment rate implies more new jobs are created, therefore more spending power, which helps the business to grow with higher sales, eventually reflecting as higher stock prices due to stronger fundamental in financial statements.  US stock market has been bullish in the past few years, following the trend of US economy, likely will continue in the New Year 2017.

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US S&P500 stock index has achieved new historical high on 6 Jan 2017 with 2276 points.  Based on Dr Tee (Ein55) Optimism Strategy, US stock market is close to danger zone with 74% Optimism in long term (see chart below), implying the probability of bear market risk is 74% while the upside potential is limited, only 26%.

There have been mixed feelings in the stock market. Some people have stopped investing, worrying about the peak of US stock market but unknowingly the stock prices become higher and higher with time, they may regret of missing the train, hoping to have the last ride.

There are actually many mechanisms to make money in stocks.  Here are 2 winning strategies for the New Year 2017, to be aligned with one’s unique personality:

1) Buy Low Sell High

This strategy is suitable for long term investors who hope to invest safely, buying good fundamental stock at low price, selling high in future or holding for long term.  Since US and global stock market are approaching higher optimism level, the chances of global financial crisis is high, any unexpected global event in near future could trigger the bear market.

An investor will need to be very patient, ignoring the temptation of the bullish market, taking profit while others are greedy (Optimism >75%), standby enough capital to prepare to buy low when Optimism of global stock market is below 25% again.  Control of emotions is critical to buy low when others are fearful one day.

 

2) Buy High Sell Higher

Not everyone is an investor, having the patience to wait.  Some people are more suitable for short term trading, which they could follow momentum trading to buy high and sell higher in near future.  A stock price could be at high price but the trend is bullish, therefore the price is sustainable for short term, having the potential to go up even higher with time.

This strategy is more suitable for short term trading in the last phase of bull market, following the trends of stock prices, supported by news, speculations, business, economy, etc.  When the trend has stopped, the traders have to stop as well or applying reversed trend in trading.  Control of emotions are very critical as daily news could affect the traders’ psychology.  The ability to take profit or cut loss is important as the elements of probability are stronger here.

There are other variations of the strategies, eg. an investor could buy low for strong fundamental stocks, sell high for short to medium terms.  This way, an investor could also enjoy the last phase of the bull run in stock market with integration of trading strategies.

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Filed Under: Macroeconomy, Market Outlook, Stock Market Tagged: , , ,

Stock & ETF Investing Opportunity in BRICS – Emerging Countries

Posted on May 1, 2016 Written by

Ein55 Newsletter No 026 - image - BRICS

Due to global economy slowdown in the last few years, stock markets in the emerging countries have suffered significant corrections, resulting in Level-3 (country/region) crisis.  The leaders of emerging countries are BRICS (Brazil, Russia, India, China & South Africa), stock prices are now at very attractive prices.  When the global economy starts to recover and accelerate, these emerging stock markets will benefit as well.  One could use ETF to trade or invest global stock indices.

Due to economy and political instability, Brazil stock market now is at 18% Optimism, after 57% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Brazil

Russia has suffered from falling in global oil price, economy is severely affected. Russia stock market now is at 16% Optimism, after 65% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Russia

India is relatively stronger compared to other BRICS, stock market now is at 34% Optimism with only 13% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - India

China is world No 2 economy, although Optimism is similar to India at 34%, stock prices have heavily corrected by 43% after the last round of speculative bull run, falling down from peak of 5200 points (see chart below).

Ein55 Newsletter No 026 - image - China

South Africa is relatively smaller in economy size, Optimism now is at ideal 25% Optimism with only 20% correction in stock market (see chart below).

Ein55 Newsletter No 026 - image - South Africa

The level-3 crisis and opportunity mentioned above requires longer investing strategy because global economy recovery is a gradual and longer term. Political economy is also crucial for the recovery of stock markets.  BRICS have to compete with US which is now at moderate high Optimism of 68% (see chart below) with more bullish economy, challenging the next historical peak in stock prices.

Ein55 Newsletter No 026 - image - US

If there is still a last global rally in stocks, BRICS may recover strongly with US stock market may rise to new historical high.  Other smaller emerging countries stock markets (eg. Southeast Asia) and many individual stocks may follow BRICS as well. However, after the next bull run, there could be another perfect storm waiting ahead, level 4 global financial crisis may severely injured all the global stock markets, both US and emerging counties. The ability to know when to sell to take profit will be crucial.

 

 

Filed Under: Macroeconomy, Market Optimism, Market Outlook, Stock Market Tagged: , , , ,

Global Stock Market Crash?

Posted on August 25, 2015 Written by

Ein55 Newsletter No 017 - image - Market Crash

Global stock markets of 4 major economy: US, China, Japan and Germany have achieved 75% optimism. Therefore, it is not a surprise to see major correction in the past 1 month. We should follow Optimism from Level 1 (individual stock) to Level 2 (sector) to Level 3 (country/region) to Level 4 (world).

Although Singapore STI and Hong Kong HSI have been only 50+% optimism in the past few years, they are smaller market, we need to follow a bigger market to evaluate our probability of success with Optimism. High optimism = high risk, 75% World Optimism means the chances of falling down is 75% while there are only 25% chance to go up. Don’t over-trade or over-invest, keep at least 75% cash as world Optimism has reached 75% optimism. If we follow the rule of money management, taking profit with higher optimism, the risk could be minimized.

For those who want to grab on the opportunity of falling giants of global stock markets, adding Technical Analysis (TA) will be helpful because the falling knife could be severe, your personality may not be suitable to buy low with downtrend. Regardless it is a major correction (mid-term) or Level-4 (world) crisis at longer term, we should consistent to buy low (either long term, mid term or short term) and sell high later. If we could diversify over 10 different giants (through Fundamental Analysis, FA), even if the giants fall down, the chances of recovery is very high especially if the price correction is mainly due to the human greeds and fears (Personal Analysis, PA), not the FA (economy or company business performance).

TA = FA + PA

 (Share price is a reflection of business performance and traders emotions)

We shall continue to apply this FTP (FA + TA + PA) analysis around the Optimism Strategy to profit from the global stock market in a safe way. There is no need to guess the direction of the market, low enough, we could enter; high enough, we will exit. The low and high shall follow our personality for short term trading, mid term trading or long term investing. New Level-3 giants are falling down (eg. Malaysia, both stock and currency markets), grab on the opportunity to time yourself with consideration of Level 1-4 Optimism.

 

 

 

Filed Under: Macroeconomy, Market Optimism, Market Outlook, Stock Market Tagged: ,

Q3/2015 Global Stock Market Correction: Mid-Term Opportunities to Buy Low Sell High

Posted on July 16, 2015 Written by

Chart of Global Stock - 2015-07-07

On 8 Jul 2015, I shared a newsletter when many readers were troubled by the global stock market correction (which turned out to be a mid-term low point if you compare with later second chart).  Figure above shows that in the past 1 month with charts till 7 Jul 2015, global stock market encounter series of negative news, from Greece crisis, bullish turned bearish China market, to speculation of possible US interest hike, etc.  As a result, most traders get worried, following herd mentality to exit or dare not enter the stock market again, especially observing more than 30% correction in China SSEC index.

After 1 week later, now (as of 15 Jul 2015) the global market has regained the confidence after Greece crisis has a new political solution, China stock market is strongly supported by the government. The figure below shows a strong rebound in global stock market. The last fearful point on 8 Jul 2015 happened to be a low valley.

Chart of Global Stock - 2015-07-14

 

“Normal” retail traders would wait for friends around them to make money first, after share price is up more than 10%, only then having the confidence to enter the stock market at relatively high price.  This is happening in China stock market now, those who got burnt with earlier 30% fall, some start to try their luck again with rising price.

Similarly, when market turned bearish, most people are losing money, despite significant discount given, majority of the traders would prefer to wait.  They have to pay for premium in price to exchange for confirmation in trends to overcome their fearful emotion.  The mentality of buy high sell higher depends on the support of market speculation which may not be sustainable. Any major global news could potentially erase the speculated gains overnight.  Since we cannot accurately predict the future, we need to always buy low sell high to put ourselves at low risk, regardless you are a short term trader or a long term investor, only difference is just the timeframe of interest: buy low sell high for 1 month or buy low sell high for 5 years.

In a bullish stock market, as long as the optimism level is not too high, every correction due to bad news is an opportunity for safe entry for mid-term trading.  Investing Master, Jim Rogers’ open secret of success is “Buy Low Sell High”, but how low is considered low? The world’s richest investor, Warren Buffett, has a famous saying of “Be greedy when others are fearful”, but how fearful is considered too fearful?  The Ein55 Optimism Investing Strategy developed by Dr Tee will provide the answers.

 

Filed Under: Market Outlook, Stock Market, Uncategorized Tagged: , ,

Risks are Opportunities in the Year of Sheep 2015: China Market Rally and Crude Oil Crisis

Posted on January 15, 2015 Written by

Happy New Year to all readers.  Here are some new updates on current market outlook (supplements to eBook on Global Market Outlook 2015) when we welcome the Year of Sheep 2015.

1) China Market Rally

As shared in several workshops and publications since 1 year ago, 2000 points was a golden entry point for China SSEC Index (through A50 ETF) as it was at 25% Optimism, a rare opportunity for a major country index to be corrected.  Indeed, in the past few months, after the Shanghai and Hong Kong stock markets are connected, it provides a reason for the traders and investors to push up the undervalued SSEC Index to 3330, appreciation by 65%!

Although SSEC or A50 still has more than 50% growing potential (before reaching 75% Optimism), a safer  strategy now could be looking for individual undervalued stocks with low optimism (<25%) which are still lagging but having more potential to rise.

2) Oil & Gas Correction

Brent crude oil price has been dropping in the past few months, from US$115/barrel to the lowest of US$47/barrel recently.  Global commodity price index has been below 25% Optimism when crude oil was still above US$100, the unstable high oil price at over 75% Optimism was triggered by a complex interactions of:

2.1) Recovery of US:

The US dollar is strengthened after QE3 is fully tapered since Oct 2014, following by anticipation of US interest rate hike in 2015. USD and commodity (eg. gold, oil, etc) usually move in opposite direction.  With US unemployment rate drops to 5.6% in Dec 2014, the US recovery will continue in the next few years, oil will be under pressure.

2.2) Political Economy

There could be political considerations for oil producer vs oil consumer countries, OPEC and non-OPEC countries, conventional vs shale oil technology.  The demand vs supply principle of economy is disturbed, resulting in high volatility in oil prices.  The crude oil price is halved, the impact is as if a new form of global QE (Quantitative Easing) to stimulate the economy because the energy cost is lowered, there is more saving for spending or investing in near future, at the expense of oil producers who have accumulated significant reserves of wealth during the super bull run of oil from 1999 to 2014.

2.3) Trader Psychology

Profit taking or cut loss when prices drop from high point, resulting in falling-knife trend, few traders dare to catch to support the price.  With more hedging and shorting sentiments, the oil price will be under correction, following the old foot step of gold prices a few years ago.

A crisis is usually an opportunity, a blessing in disguise. Oil price has resulted corrections in many stocks in Oil & Gas, some are below 25% or even 0% Optimism, which usually only observed during Global Financial Crisis, not in the middle of a bull market. Commodity has a much longer market cycle (eg. 20-30 years), may not be aligned with economy cycle. Each investment market (stocks, properties, forex, bonds, etc) has different investment clock, % Optimism strategy could be applied to buy low sell high.  For long term Brent crude oil, 0% Optimism is at US$44/barrel, over-correction by the market will provide an excellent opportunity to both traders and investors but a proper strategy must be adopted, especially to overcome the market emotional swing due to short term volatility.  The timing of crude oil recovery then will be the timing for oil & gas related stocks.

The sector correction will be rotated from time to time among various industries due to imperfect market, following the Optimism level, higher one will have higher risk, lower one will have higher potential.  The oil correction will help the shipping sector (eg. NOL, SIA, etc) at low optimism to grow, higher outlook for profitability with lower energy cost.  The rally in China market will help the Singapore S-chips to recover gradually, especially after the China economy is improved further. The last example was severe Singapore REITS correction in year 2013 after 50% rally, now in recovery phase but will have limited upside due to increasing mortgage rate (anticipation of US interest hike) and gloomy outlook of Singapore property market.  Earlier example was storm in penny stocks, correcting many stocks, resulting in low trading volume due to negative sentiments.  Based on the survival of the fittest, each correction will make the “giants” or strong-fundamental stocks become stronger after recovery from the valley of lower price.  We want to look for giants who are falling down, helping them to recover at the right time, then the giants will reward us when becoming strong.

For those who are interested in the details of market outlook 2015 or Ein55 styles with Optimism Strategies, you may drop by to attend the next free workshops conducted by Dr Tee.  All the best to all in trading and investing for year 2015!

Filed Under: Commodity Market, Macroeconomy, Market Cycle Investing, Market Optimism, Market Outlook, Stock Market Tagged: ,

Preludes to Peak of Stock Market: QE3 Tapering & Fed Interest Rate Hike

Posted on March 25, 2014 Written by

Ein55 Newsletter No 006 - image - QE & Interest Rate HikeThe current bullish global stock market since Mar 2009 has been 5 years as of now (Mar 2014), comparable with the maximum 5 years duration of bull market in the last market cycle (Dow Jones Index from valley of Oct 2002 till Oct 2007).  It is likely for the current market cycle to be much longer than the previous ones because there are major corrections along the way, limiting the increase in % market optimism, therefore lower risk in reversal into a mega bear market.

In the last Global Financial Crisis in 2009, the world #1 economy, US, adopted extraordinary measures of Quantitative Easing (QE1, QE2, QE3) and near-zero interest rate by the Fed.  As a result, the US and global markets were artificially recovered, forming the phase1 of bull market in the initial first 2 years.  However, the double-edge sword of QEs made the global market pay for the advance credits during the QE tapering process, resulting in a few rounds of market corrections, together with other regional financial crisis.  At the same time, the global economy (US, Europe, Asia) recovers gradually, in a more natural way to support the global stock market.

At this junction, before the peak of stock market or economy may be reached, QE3 must be tapered and completely stopped, so that a more natural market cycle can be formed.  Either introduction of QE during a bearish market or tapering of QE during a bullish market, gives confidence to the global investors. The Fed has done a good job to pre-alert the global investors with a few rounds of fire drills last year on the possible timeline of QE3 tapering.  The market reacted fearfully initially, then it becomes a norm, most investors are able to “predict” $10 billion per month of QE3 tapering after each FOMC meeting by the Fed.  Meanwhile, the US economy recovery was accelerated, approaching the psychological checkpoint of 6.5% unemployment rate while the inflation rate is still well below the critical 2.5%.

With the initial success in QE3 tapering, now the Fed hopes to apply the same strategy to alert the global market on timing of interest rate hike (investors like a predictable market).  After a few rounds of pre-conditioning in near future, global investors are likely to accept the fact that interest rate has to go up from the valley.  Besides, the Fed hopes to buy more time for change in bullish market sentiment, modifying the earlier criteria of 6.5% US unemployment rate and 2.5% inflation rate, to a larger group of economic indicators, to ensure a more sustainable and stronger sign of economy growth.

After QE3 is fully stopped (estimated in year 2014 if there is no surprise to the market), the Fed is expected to increase the interest rate in about 6 months later.  The Fed interest rate will chase after the 10-year US Treasury Bond yield, likely will take about 3-5 years (average of about 1%/year, depending on economic conditions) to catch up and even exceed the critical rate of 4%, when the peak of economy may start to form.

If the global stock markets continue to grow in a bumpy way with market corrections from time to time, the condition for market fever with >75% optimism may not be ready, then it is possible to have a super long (over 7-10 years) but gradual growth bull market.  It is critical for investors to position themselves with visibility of at least next 3 years, applying the preferred market strategy.

Filed Under: Macroeconomy, Market Optimism, Market Outlook Tagged: ,

Stumbling Year of Horse – A Blessing in Disguise

Posted on February 3, 2014 Written by

Newletter-003 - HorseOver 20% of the world populations are celebrating lunar new year of Horse 2014 but the “Wooden Horse” stumbled on the first trading day of global stock market, against the best wishes of traders to have a leading horse up the hill of bull market.  This poor opening could be a disappointment to most stock traders and investors.  However, for those who attended my earlier Global Market Outlook Workshops, they will understand that this is actually a blessing in disguise.

With the accelerated recovery of world economy, most regional stock markets have good performances in stock market in year 2013, except Singapore market (STI) continues to sleep, having virtually no change in position.  The main mid-term risk of global investment market is US stock market which has climbed up the hill of bull market (reaching about 60% Optimism, a leading stock market) without a good rest of 10% or more correction, even after the announcement of the first QE3 tapering.  US stock market requires a correction, so that the global stock market has the energy to go up further in phases of bull market.  The recent second announcement of QE3 tapering (reducing QE from $75B to $65B) and slow recovery of emerging market (eg. China), giving a good excuse for some global stock traders to take the profit and wait for the next buying opportunity, leading to the overdue correction.

Even the stagnant Singapore stock market is affected, STI falls below 3000 points (ending 2990 points on 3 Feb 2014) for the first time since Nov 2012.  This is also the 6th time in the last 4 years for STI to go above and then below the 3000 points of psychological barrier during a mid-term cycle (usually a few months of duration).  On 20 May 2013, STI was at mid-term high of 3454 points, there were traders who hoped to buy high and sell higher, especially for property related stocks.  Since then, STI has been corrected by about 13% and REITS sector index is down by about 20%.  Many people prefer to wait and see during this period, staying sideline, not taking any new action.

Some workshop participants asked me in the past few months whether it is a good time to enter the stock market.  The question I asked in return was: “Do you feel scared?”.  In fact, most people don’t feel fearful nor greedy in the past 1 year, aligning well with the sideway trend of STI.  If you are not scared, then it is not a reasonably good time to enter the stock market.  If not only you are fearful but over 75% stock traders or investors are pessimistic, then it could be a golden opportunity to enter the market.  Although STI and many regional stock markets are near to 50% Optimism, upside is about the same as downside, but there are still individual stocks, sectors and even regions which are trading near to or below 25% Optimism with 3 times upside more than downside.

NOL today (3 Feb 2014) is exactly at $1.00/share, meeting my earlier recommendation to buy, this is the second time it has reached $1 since the global financial crisis in 2009, last dip was Nov 2011.  Although NOL has poor FA, its poorer price has compensated for the weakness.  Similar recommendation was to buy China SSEC Index related ETF when the index is at or below 2000 points, which happened for the 3rd time about 2 weeks ago.  There are also other fundamentally-strong stocks which are trading at low Optimism level.  One who follows this simple strategy of buy-very-low sell-very-high, may not see these stocks to go uptrend immediately after buying at such low price.  Instead, likely they have to endure a relatively short period of winter time before the spring time may come.  STI or related blue chips, are considered reasonable good buy when STI is trading below the 50% average line (3000 points) of the index channel of 2700 – 3300 points, lower is better, depending on one’s patience and market opportunity.

Buy at very low will enable us to maximize the profit in longer term but one has to control the emotion of fearful market.  Following the trend is a common trading method used by traders but one has to be the top 10% best traders or at least the lucky ones to enter during the initial phase of the uptrend, else the future upside will be limited when the uptrend is confirmed, eg. when STI is above 3300 points, susceptible to the next market correction.  A stock trader or investor has to make the decision whether the ultimate goal is just to win (regardless of % gain) or to maximize the profit (may not immediate, having holding power of over 1 year), then aligning the trading or investing strategy accordingly.

Filed Under: Stock Market Tagged: , ,