The recent upward move in the STI have not allowed folks who are waiting and waiting and waiting to get into the game.

This sort of feels familiar to past bulls where

• the sentiments just cannot be disrupted
• good news or bad news will result in the market moving up
• a rising tide lifts all boats, pennies or blue chips
• the correction is so small that people wait for the bigger drawdown but it just keeps heading up

No one says catching the bottom was easy.

Weekly S&P500 and STI

The long term indicator we use is the cross over between the 17 week EMA and the 43 week EMA. A cut of the 17 week EMA below the 43 week EMA from above signifies an underweight and risk management position. A cut of the 17 week EMA above the 43 week EMA from below signifies an overweight position in equities.

Long term wise the S&P500 looks to be in a bull mode, resuming its uptrend from 2009. Here the 17/43 Week EMA proved a good entry point and exits. But hindsight, you get whipsawed in this small correction, you probably made some losses and commission losses. But that is the price you pay had this be a 50% draw down.

The STI have been lagging, but looks to have a long term buy indicator. 17/43 week EMA is about to have a golden cross. The MACD weekly may cross over above the zero line as well.

MACD Cross over Zero

Here we put a spot light to the MACD move above zero. I find that it is a good indicator to see whether the general trend have changed.

• As dividend investors, you are interested to be in the market for long durations
• Companies you buy at low prices, with fundamental intact will continue to buffer and support your portfolio
• Companies you bought specifically for growth (e.g. STI ETF, Cosco) or at valuations that you deems not cheap (PLife REIT, FCT, VICOM) you may want to reduce to free up capital so that you can buy lower In the case of the long term weekly STI you would have exited a 42% gain. It gets you out of big draw downs like those in 2007-2009 and 2000-2003 where you can save your psychological capital, money capital.

You only catch the big trends.

There are problems with the MACD alone.

• You will generate much buy and sell signals for your portfolio if the market moved sideways long term.
• MACD is lagging and in the cast of STI, you still missed the absolute bottom which resulted in missing 25%

There is no free lunch. You get something that takes away daily market noise and tells the long term trend, but if the trend is going nowhere what would you do?

As a investor you should have a if-else plan before hand what would you do in each situation. That’s why sometimes having your own software program to do this isn’t that bad of an idea.

Correction may be imminent. Long or short?

The US market and STI may be in time for a correction. More images to talk about below. The thing if you are using indicators to see the direction of the markets is that it takes out the distractions and the junk in every day news, and based on that there is every reason that the market will turn next week.

People will say I flip flop my views. Remember I have opinions but opinions do not make money. It is the actual moves that does.

Charting is very much on probability not a crystal ball. When the price changes, your plan grooves along with it. Price movement confirms or discredits opinions.

My opinion is that this would be a place to add more, or initiate a position. However, the MACD and 17/43 weekly EMA on the STI hasn’t even cross over. It may very well resume the draw down.

Have a plan for both situations. I am 48% invested so I would move to 60% where I can. But if the price movement shows that it would resume a big draw down, I would take some losses on the counters I believe are not that cheap.

Overbought signs

There are a few quant blogs and behavioral finance blogs that I followed. They rein me in by providing opposite perspective to my opinion. They prevent me from having a herd mentality when it is not the right time.

One of the recent ones that I like is Evil Speculator. Primarily a currencies quant subscription blog, this entry yesterday contains many sentiment indicators that just flashed WARNING.

Was it high frequency trading that cause the recent big Rydex bull and bear divergence?

Hedging volume at its lowest, but there are instances in the past that doesn’t really matter that much

For those interested in tracking my most current holdings, you can review my portfolio over here. Learn to use our Free Stock Portfolio Tracking Google Spreadsheet to track stock transactions.

Do Like and +1 if you find it useful!

This is probably the most bearish call I heard in a long time. For someone that experience to go against the market I hope he is right because he sees this rally ending soon and we may get to validate his call very soon

We are at the tail end of 2011 and we ended up flat on the S&P500 largely. We are down 17% on the STI index though.

In my last analysis (see here), I stated that S&P500 could go up or down from here, the STI and emerging markets look worse and could be decouple from the US markets.

Monthly S&P500

At Investment Moats, one of the bull and bear indicators that we use to help us determine a longer term trend is the 10 Month EMA. A cross below the 10 month EMA signifies an overweight position in equities and a cross below signifies an underweight and risk management position.

In my short time in the market I have never seen a monthly chart pivot this way. The kind of indecisiveness indicates the US market might continue its climb higher possibly back to the 2000 and 2007 highs.

In contrast (not shown here), the STI looks much more protracted then the S&P500. We might eventually end up following the US market, which means a bigger upward move to turn up.

Weekly S&P500 and STI

The long term indicator we use is the cross over between the 17 week EMA and the 43 week EMA. A cut of the 17 week EMA below the 43 week EMA from above signifies an underweight and risk management position. A cut of the 17 week EMA above the 43 week EMA from below signifies an overweight position in equities.

Crossovers of MACD from the bottom above zero on the weekly charts looks a comfortable bet of longer term market climbs. On the S&P500 weekly EMA, the cross over look imminent.

In contrast, since the cross over to the downside of the 17/43 week EMA in Jul, we have still not seen the strength to hold up as compare to the US market.

We really need some strong upward move to beat this bear run.

Daily S&P500 and STI

While people chose to focus on the inverse head and shoulders that is likely to bring us higher, a more probable pattern is the upwards channel. Based on the MACD it looks more probable the way to go is up.

We still do not see strength short term wise on the STI. First its got to break the downtrend at 2700 and stay above that.

Conclusion

The more probable outcome is for S&P500 to head higher to the new year. I have done a few flip flops these past month, but such is the nature of price movement. It will be irritating if you based your portfolio allocation on these price movements but remember we do this to save ourselves from big drawdowns, and you would rather be cautious and ride on the strong side by overweighting at the right time instead of overweighting when the market cycle is rolling off.

For those interested in tracking my most current holdings, you can review my portfolio over here. Learn to use our Free Stock Portfolio Tracking Google Spreadsheet to track stock transactions.

[from Fireside Charts]

Seems to me downside more likely.

Big move. Santa Claus rally? MACD looks favorable but lets see if we get above 1250.

In contrast nothing favorable in the STI. You might gain something good from the good sentiments of the US market which is likely to take us above 2720.

From a practical perspective, after the 2008 pattern there was another attempt for a test of the SMA(40 Week), enclosed in the red circle. Thus, there were two attempts to test resistance at the SMA(40 Week). The second test was at the same level where the double bottom was formed. This makes sense because that was a support level that turned into resistance, indicating a change in trend. However, in the second pattern this second test has not taken place yet. There are (at least) four possibilities:

(A) The second test never occurs. In this case we have two possibilities (A1) Prices reverse and rally and (A2) Prices fall towards the March 2009 lows.
(B) The second test occurs. In this case too we have two possibilities (B1) Prices rally and (B2) Prices reverse and fall towards the March 2009 lows.

These are some of the possibilities. Price action may signal which of the above four possibilities will take place, but only if properly analyzed.

[Read Full Article @ Price Action Lab Blog >>]

For the bulls to win this, they had better come up with a good upward move next 2 weeks. We can still form a bullish double bottom that way.

In contrast, the STI looks to head lower to 2500. More buying opportunities coming. Things are still looking “fair”

Some beaten down good deals

1. SingPost – been talking a bit about the new young management and shift in business direction. Their profile may be changing. Watch the next 2 quarters results to find out if the McKinsey CEO and COO can do what past predecessor failed to. Surprised me by going below $1 for a so call defensive stocks by old men and institution.
2. SIA Engineering – Not very high yield, but very clean balance sheet and enough recurring business to enable them to last through a down turn
3. Aims Amp Industrial Trust – Currently prefer this over Sabana. High yield, undergoing AEI on one property and 30% gearing. I don’t like Sabana buying seemingly sale and leased back assets and generally Aims Amp edges it due to recent sale of their lowest leasing property.
4. Singtel – Still in CD mode, and really no reason why its beaten down to 3.02. People are waiting for it at 2.84. We will see if it gets there.
5. M1 – back to 2.37. In a bull market, I would like the declining consolidating triangle formation on the price charts but 2.35 looks a very strong support and if broken might take us to 2.25. MACD indicates it is highly probable that is the direction to take.
6. PEC – For a company with a good business with a cash holding of 62 cents trading at 68 cents, this has to be some bargain there. They are still holding their order books. This may be our chance to buy the management for near free.

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

In our last long term analysis 20 days ago [analysis here >>], I mentioned we are likely to resume the uptrend due to what I observed on the price movement and the seasonal factor (November to April).

This weeks drawdown makes me question that last deduction

Weekly S&P500 and STI

The long term indicator we use is the cross over between the 17 week EMA and the 43 week EMA. A cut of the 17 week EMA below the 43 week EMA from above signifies an underweight and risk management position. A cut of the 17 week EMA above the 43 week EMA from below signifies an overweight position in equities.

We were on the verge of a 17/43 Week EMA bullish cross over but this week’s movement delays that conclusion. Next week becomes important. A successfully draw down next week will take us below 1200, which is important considering how many important breakouts, resistance and support takes place over here.

Things are still redeemable for the bulls but I don’t like the looks of the PMO looking to turn lower week wise.

In contrast, the STI looks to be in a worse shape. In the last analysis, I highlighted the caution on the Hang Seng and STI not looking favorable versus the US charts. Fundamentally, my take is that there can be a slight decoupling taking place.

US markets may do much better than the Asian markets. It will be bad for Singaporean investors investing only in the Singapore market.

The resistance area at 2920 looks strong. The STI needs a lot of energy to make a successive move up. I am not optimistic at all.

Daily S&P500 and STI

On the daily charts, the S&P 500 was forming a nice triangle formation. Typically the end of the triangle resolve towards the direction of the entry, which is up. However, the draw down invalidate the formation.

The damage isn’t huge. If this market have strength, next week will tell us a lot about the direction.

The STI looks bad. But I was wondering if a potential huge bullish inverse heads and shoulders is forming. The PMO cutting down seem to indicates that we should be doing some form of risk management.

Portfolio Movement

Currently I am 40% invested. It was 46%  a few days before but I am rather cautious after taking leave and doing my evaluation yesterday. This is a good position to be in.

1. A resumption draw down would enable us to pick good counters. Rather it will be the second chance for those that say they regretted not buying up. But will they do it this time round?
2. An uptrend next 2 weeks is good. We could be forming a great inverse head and shoulders. I will add my position then to 50-70% of my portfolio.
3. I don’t think it will go non-direction. But if it does I think my stocks should do reasonably well

Current large holdings includes KepCorp, SembCorp Industries, First REIT, Starhub, Singtel, MIIF and CMPacific. Depending on next week I may review KepCorp and SembCorp if I can collect them lower. Always looking to add to existing holdings.

For those interested in tracking my most current holdings, you can review my portfolio over here. Learn to use our Free Stock Portfolio Tracking Google Spreadsheet to track stock transactions.

Remember my last analysis that says in the past 20 years we have not seen a point where the PMO cuts the 10 month EMA and then got slingshot upwards? Well we have a massive massive week / month where the market had the biggest monthly run up since 1974.

So where do we go from here?

Monthly S&P500, Hang Seng and STI

At Investment Moats, one of the bull and bear indicators that we use to help us determine a longer term trend is the 10 Month EMA. A cross below the 10 month EMA signifies an overweight position in equities and a cross below signifies an underweight and risk management position.

This massive month have resulted in a 13.6% monthly up move. This against a 7.2% down draft last month. We are near square one. Yet the PMO shows a possible sling shot formation.

We may resume and approach 1500 before facing that same test. It is still a delicate situation because we have not cleared 1380. The bulls will have to take one step at a time.

The problem I am still cautious is that, the place where we own the most stocks, in Asia, have not moved above the purple 10 month EMA. Technically it means we are still in a bearish trend. The PMO have a definite cut for both the Hang Seng And STI.

A caveat is that we can get a very bullish case in US market but Asia could go the other way. Do not discount that.

Weekly S&P500 and STI

The other long term indicator we use is the cross over between the 17 week EMA and the 43 week EMA. A cut of the 17 week EMA below the 43 week EMA from above signifies an underweight and risk management position. A cut of the 17 week EMA above the 43 week EMA from below signifies an overweight position in equities.

The S&P500 market is nearly resuming its bull market mode. This weeks huge move took out so many resistance.

In contrast, the STI still face an overhang at 2950. The bulls need a strong week, stronger than the US market to reverse this trend.

I am still a bit skeptical. This may be a test against the 43 week EMA and 75 week EMA before turning down. The bulls will have to have a strong 2 weeks.

Bullish Seasonality from November to April

What is helping the bulls is that we just exit the traditionally bearish period of May to October. You would probably have done well this year had you stay out during this period.

Why is November to April so bullish? I have no idea. It may only be statistical mining, but Barry Ritholtz this week highlighted this startling data trend from Yale Hirsch research on the degree of seasonality for the past 50 years.

Portfolio Movement

Some of the lessons we learn

1. If you lose 50%, you need plus 100% to get you back to the same place. That is what we see in the latest down and up move. We are still back to where we were. But the technical gods will be able to take advantage of this.
2. For investors like us, who do not have all the time to monitor or execute trades, at this time being in 100% cash could be suicidal. By the time you notice that the coast is clear, we are back at square one.
3. If you are buying good companies that provides a good cash flow, focus on the valuation of the company and whether the business can continue to generate their cash flow. Nibble when you believe the price you pay is less than the valuation of the company. We cannot catch the absolute bottom but if time is on your side, constant purchase below valuation you should do ok.
4. Do not confuse the politics of the world with how the investment world reacts. I get so many comments from friends and colleague that nothing was resolved. In 2009, the market rally 100% for one of the biggest rally in stock market history and do you believe anything was resolved? The market is a huge voting machine and mass social psychology creates overbought or undervalued market conditions. Remember that it is not whether you think this contestant is beautiful to win the beauty pageant but what you think every one will vote to win the beauty pageant.

I been nibbling dividend stocks like First REIT, SIA Engineering, Mapletree Logistic Trust, China Merchant Pacific, Ascendas REIT, Vodafone (US Market) and MIIF. These dividend stocks have not really moved up massively. I didn’t get them at a very cheap price as well.

Currently, the dividend portion of my portfolio is 36% of the overall portfolio. That is still pretty low allocation.

• If the market draws down and resumes the down trend, I may cut some of the stocks that I bought irrationally (yes it happens). The first one could be my Keppel Corp bought yesterday.
• If the market draws down minimally, and it plays out that the uptrend does resume, I will build up the dividend stocks mentioned to 50-60%.
• If the market gyrates, continue to find good dividend stocks at good prices and nibble in.

I have to confess I did some buying on Friday. It may come back to haunt me. The rational decision to do this based on the strength of the market. The way the price took out the resistance without looking back coupled with the seasonal effect next 2 months pushed my decision.

Right now, I may have regretted on buying Keppel Corp, Olam and Yangzijiang. These 3 are momentum growth stocks that are consistently watched by the big boys.

I will watch these 3 closely and should I see that I can get them at a better price I will cut them first. My decision to cut Keppel Corp in September and re-entering lower have been good. But it may come back and bite me. You guys can later see if I get burn based on this or not haha.

For those interested in tracking my most current holdings, you can review my portfolio over here. Learn to use our Free Stock Portfolio Tracking Google Spreadsheet to track stock transactions.

I think Apple is providing a very conservative forecast but at the same time a lot of people are expecting them to sell more, yet many could be holding back in anticipation for the iPhone 5.

Judging by their recent record sales I would say nothing much has changed. It will be good for the purchase to be carried out at the moving average bands and risk manage if it falls too low below.