The Hindenburg Omen
I will be quoting and doing some cut and paste from various websites. Alternatively, you can read from wikipedia.
Intro
The Hindenburg Omen is a signal that attempts to predict a forthcoming stock market crash. It is named after the Hindenburg disaster, the crash of the German Zeppelin of the same name in May 1937. The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market - specifically the NYSE (New York Stock Exchange) - such that the probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high.
Rationale
The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows - but not both. When both new highs and new lows are large, it indicates the stock market is undergoing a period of extreme divergence. Such divergence is not usually conductive to future rising prices. A healthy market requires some degree of internal uniformity, whether the direction of that uniformity is up or down.
Criteria
1. That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
2. That the smaller of these numbers is greater than 75. (this is not a rule but a function of the 2.2% of the total issues)
3. That the NYSE 10 Week moving average is rising.
4. That the McClellan Oscillator is negative on that same day.
5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen. A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.
"For those who are interested in understanding the development of this Indicator, I suggest you Google using Hindenburg Omen and then select the following article, which is the second one down on the list: “Safe Haven - The Past Performance of the Hindenburg Omen Stock Market Crash Signals 1985 -2005”."
What's so great about the Hindenburg?
Consider this......
“The probability of an S&P 500 move greater than 5% to the downside after a confirmed Hindenburg Omen within the next 41 days after its occurrence is 77%, the probability of a panic sellout is 41% and the probability of a real big stock market crash is 25%.The occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down. On the other hand there has never been a significant stock market decline in history that was not preceded by a confirmed Hindenburg Omen.”
Personal Experience
Well, I'm only 21 years old, so I have not gone through many crashes or sharp corrections. So far, I have seen 2 Hindenburg omen signals and 2 major corrections.
1. The start of the sub-prime problem where Bear Sterns announced that they are closing down two hedge fund. The confirmed signal came on 22nd June 2007 and the correction period was from 13 July to 13 Aug. DJI was down about 10%; STI and HSI were down 18% and 13% respectively.
2. When my team came together, we were dead bearish about everything. But we were bearish too early. Instead of tackling the market during late October, we went in too early and were burnt easily. The cluster of Hindenburn Omen signals triggered during the 15 Oct to 19Oct. The correction lasted for three months though. From Nov to 21th Jan 2007, where Big Ben announced an emergency rate cut and it sort of ended the correction. The market trended sideway afterwards.
Well if you take the peak of HSI to the bottom of HSI on 21 Jan (not to take into the account that HSI was down to 21000 in March), HSI was down 10000 points or approximately 30%. STI was down from 3800 to 2900 as well.
Conclusion
According to my own research, we have three Hindenburg Omen so far. They occurred on 6th, 16th and 17th of June. So, if you believe in me, sell everything that you are holding right now or at least hedge some of your position by buying some put options.
The signs are there. You have a weak oil (at least it drops), strong goldman report and yet the market sells into rally.
Side Commentary
In addition to last week's criticism about "experts", look at this.
"Speaking of Lehman, you wonder why analysts drive me crazy? How about Guy Moszkowski at Merrill Lynch? The banking analyst downgraded Lehman when it was about $24 on Wednesday and upgraded it when it was about $33 in the beginning of June. So what happens? It is closing today at $27 and change; that call was the short-term bottom. " Quote From Bob Pisani on cnbc.com.
If you have not covered your Lehman, just hold on to it. We have an Hindenburg omen confirmed =D. You can actually get Lehman at $26 on monday. Nonetheless, I think I have read the Lehman situation correctly.
Broke $35 support -> plunged like a dog -> exit of executives (end of cycle) -> short covering -> SWEET~.
Oil was not acting according to plan. In retrospect, I should have considered more about the scenario where dollar would fall slighty and oil would face the resistance of $140 again. If you short on monday which I told you to, you will probably get a heart attack for a while (lol) but feeling alright with oil standing below $134. Cover the position and hold on your money while we prepare to short this market soon.
I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up.
Jesse Livermore
Wednesday, June 18, 2008
Thursday, June 12, 2008
Roller Coaster Ride
Reply to comments
Indeed what you said was very true. If everyone, including the Fed, starts to clamp down on inflation with collective rate raise and some anti-inflationary measures, oil and many other commodities should be heading downwards. But just that week alone, where oil shoots $16, it is just a bull market behaviour.
Good news is treated as really good news. In fact, bad news is also treated as good news. Just look at the period from Sept 07 to Oct 07. It is similar to the Hong Kong Market when the rumours of the 1st rate cut spread, HSI shoots despite all the credit problems, moderate performance by the US markets, huge writedowns and so on. So in a way, Trichet's comments were just an excuse for the bulls. The chain of events thus took place in everyone's mind. Also in addition to this, oil was slowly sliding down and not falling dramatically. If it was a topping signal like what John Kilduff said, then I think oil should be plunging down heavily. The behaviour tells me that it is searching for some catalyst to shoot up again. That catalyst came in the form of Trichet's comments of a possible 1st rate rise since last July.
According to the current situation, the main issue is still the dollar and of course Fed's rate decision. In my opinion, everything else will only be attributed to short term price fluctuations. I agree that the dollar will strengthen slightly (will explain below). But I don't think Fed will raise rate during the June meeting. Maybe July, I'm not sure. It is more likely that they will want to adopt a wait-and-see approach. (A good video by Kudlow, a cnbc contributor, on Fed's rate and inflation)
As you have mentioned, this week is a very interesting week for oil. We have the dollar's best weekly performance against the Euro in three years and output increase from Saudi. Very negative for oil prices? The only positive news for oil prices is the strike in Nigeria. All things being said, oil is down 2% or $3 for the week and still holding above $130.
I hope I have given a good reply to addressed your views sufficiently. Thank you for your interest and I would really appreciate your comments on other posts in the future.
P.S: I believe you are some analysts or at least related to the finance sector right? You do know that my mid-week post #8 only refers to those irresponsible experts. =)
Lehman Brothers, Bear stern's brother?
In the end, my worry for Lehman price movement was justified. Lehman was up 13% on friday, closing at $25.81. Hopefully you have covered at least half of your holdings at $22. Lehman is announcing earnings on monday, unclear over whether it's before bell or after.
Lehman is on a two black crow on the weekly chart but two white soldier on the daily chart. I like Lehman on monday alone. Short covering despite horrible earnings report. Remember last quarter earnings? Lots of bad earnings from heavily shorted stocks and they were all up for the day. If you are holding on to the other half of Lehman, cover them at $26 if you can get the price, making the price of cover at average of $24. A nice 20% gain overall. Poor handling of Lehman during the week as I could have covered all at $22. If you are still ALL of Lehman shorts, it's very tricky though. I would suggest holding Lehman for the week.
The Dollar
1. This is the daily chart for dollar. We are about 74.6 for the dollar index. As you can see, we have a window or a gap from 74.5 to 75.5. The dollar crosses slightly into the gap and I'm slightly confused on its movement. All gaps must be closed - remember this! But dollar ended friday with a black shooting star. Sorry for the small graph, I can't find any better. Monday movement is very important for dollar. If it opens higher, I believe we can see some dollar strengthening till the index of 75.5 because I assume it will close up the gap.
2. The weekly chart is simple and easy in my opinion. Nice gain for the week. Hardly anything stopping sign. Based on this, I am inclined to the upside for dollar. Dollar should be testing the level of 75 and honestly if it breaks 75, I'm quite confident it will test 75.5 based on the daily chart (the gap).
3. In conclusion, dollar has more to the upside if monday opens and moves well. Target of 75.5.
So... do we short oil?
In a way, yes. We should short oil for the week.
A lot of tough talk of inflation lately. Possible stronger dollar for the week. Shorting oil next week sounds good. After all it is very volatile and that's what traders want. I see at least a downside of $4 towards $130 - the whole number theory again. It has occurred at $100 and $110 before so do exercise some caution. Highly unlikely that it will fall below $130 because as projected, dollar gains will be capped to the index of 75.5. Just in case it does fall below $130, I think it will look for $126.
Overseas Visitors.
I have noticed a number of visitors coming to my blog recently therefore I shall touch on some overseas markets as well.
A friend of mine, nicknamed the "Mailman" (he always delivers), informed me of an interesting situation - the vietnam dong.
Vietnam Dong
If you have time, read the follow article.
1. Vietnam Inflation
2. What will happen a or b
For those who do not have the time (I hope you fork out some please), here is a summary of the views expressed.
1. Inflation is at 25% last month (WHAT!)
2. The trade deficit more than tripled in the first five months of the year to $14.42 billion from $4.25 billion in the same period a year earlier
3. Stock market is down nearly 60% this year
4. The dong is allowed to trade within 1 percent on either side of a daily fixing rate
5. Vietnam was being hailed as the next Asian miracle, a success story to match the rise of the Asian tigers of the 1990s and more recently the stunning growth of China and India.
All these lead to one thing - Devaluation of Dong. The downward pressure is too huge and dong is at an artificially high value because the government pegs it to the dollar. Of course, the government can continue to buy up dong and keep at this unreal valuation.
The peg has to break and dong is bound to devalue sharply. Two scenarios are possible: Either there is a slow but substatial devaluation in the coming months or there is a sustatined value preceding a bust. The situation is similar to the same as Thai Baht in 1997. I would not like to see history repeats itself, but somehow shorting dong is almost considered a very safe investment. I wonder if Soros will speed up the process like he did before with bank of England. Actually I'm also wondering if there is any means of shorting the dong.
Let's say we can't short Vietnam Dong. What else can we do?
You can wait for it to plunge and buy back some Dong because IMF or other similar institutions might step in. This will traslate into gains when converting back from Dong to your base currency. For example, the dong falls to 20000 Dong to the Singapore dollar. You buy in and than it revalues to 15000 Dong to the Singapore dollar, an invested amount of $1000 will return of 33%. Remove this if you want
Or... ...
Singapore Property
Short Singapore Property Stocks. I am not sure if the banks have large amount of assets in Vietnam but I am pretty sure property stocks like Capitaland, Citydev and Keppel Land have heavily invested in vietnam and have assets valued in vietnam dong. Prepare to see a huge writedown in their balance sheets as they declare assets in Singapore or US Dollars.
This is a long term shorting play. You can hold real long put warrants or use SBL and short them for months.
P.S: I would like to thank Tony and his effort to bring his friends to this blog. Hopefully you guys can benefit from this blog.
Latest Update
Found an article where Goldman Sachs downgrade the whole of property sector in Singapore on 10 June 2008.
A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul.
Jesse Livermore
Hi,
The approach of the ECB seems clear - inflation is its primary target. however, we have seen significant weakness in the Fed when it comes to its resolve on dealing with inflation. The Housing market and the related subprime crisis has not blown over as yet. Raising rates may not be the approach it wants to adopt as yet.
I would like to thank you for making such an insightful post on my website. It really did set me thinking. Here are my views on the points you raised.
The approach of the ECB seems clear - inflation is its primary target. however, we have seen significant weakness in the Fed when it comes to its resolve on dealing with inflation. The Housing market and the related subprime crisis has not blown over as yet. Raising rates may not be the approach it wants to adopt as yet.
Indeed what you said was very true. If everyone, including the Fed, starts to clamp down on inflation with collective rate raise and some anti-inflationary measures, oil and many other commodities should be heading downwards. But just that week alone, where oil shoots $16, it is just a bull market behaviour.
Good news is treated as really good news. In fact, bad news is also treated as good news. Just look at the period from Sept 07 to Oct 07. It is similar to the Hong Kong Market when the rumours of the 1st rate cut spread, HSI shoots despite all the credit problems, moderate performance by the US markets, huge writedowns and so on. So in a way, Trichet's comments were just an excuse for the bulls. The chain of events thus took place in everyone's mind. Also in addition to this, oil was slowly sliding down and not falling dramatically. If it was a topping signal like what John Kilduff said, then I think oil should be plunging down heavily. The behaviour tells me that it is searching for some catalyst to shoot up again. That catalyst came in the form of Trichet's comments of a possible 1st rate rise since last July.
According to the current situation, the main issue is still the dollar and of course Fed's rate decision. In my opinion, everything else will only be attributed to short term price fluctuations. I agree that the dollar will strengthen slightly (will explain below). But I don't think Fed will raise rate during the June meeting. Maybe July, I'm not sure. It is more likely that they will want to adopt a wait-and-see approach. (A good video by Kudlow, a cnbc contributor, on Fed's rate and inflation)
As you have mentioned, this week is a very interesting week for oil. We have the dollar's best weekly performance against the Euro in three years and output increase from Saudi. Very negative for oil prices? The only positive news for oil prices is the strike in Nigeria. All things being said, oil is down 2% or $3 for the week and still holding above $130.
I hope I have given a good reply to addressed your views sufficiently. Thank you for your interest and I would really appreciate your comments on other posts in the future.
P.S: I believe you are some analysts or at least related to the finance sector right? You do know that my mid-week post #8 only refers to those irresponsible experts. =)
Lehman Brothers, Bear stern's brother?
In the end, my worry for Lehman price movement was justified. Lehman was up 13% on friday, closing at $25.81. Hopefully you have covered at least half of your holdings at $22. Lehman is announcing earnings on monday, unclear over whether it's before bell or after.
Lehman is on a two black crow on the weekly chart but two white soldier on the daily chart. I like Lehman on monday alone. Short covering despite horrible earnings report. Remember last quarter earnings? Lots of bad earnings from heavily shorted stocks and they were all up for the day. If you are holding on to the other half of Lehman, cover them at $26 if you can get the price, making the price of cover at average of $24. A nice 20% gain overall. Poor handling of Lehman during the week as I could have covered all at $22. If you are still ALL of Lehman shorts, it's very tricky though. I would suggest holding Lehman for the week.
The Dollar
1. This is the daily chart for dollar. We are about 74.6 for the dollar index. As you can see, we have a window or a gap from 74.5 to 75.5. The dollar crosses slightly into the gap and I'm slightly confused on its movement. All gaps must be closed - remember this! But dollar ended friday with a black shooting star. Sorry for the small graph, I can't find any better. Monday movement is very important for dollar. If it opens higher, I believe we can see some dollar strengthening till the index of 75.5 because I assume it will close up the gap.
2. The weekly chart is simple and easy in my opinion. Nice gain for the week. Hardly anything stopping sign. Based on this, I am inclined to the upside for dollar. Dollar should be testing the level of 75 and honestly if it breaks 75, I'm quite confident it will test 75.5 based on the daily chart (the gap).3. In conclusion, dollar has more to the upside if monday opens and moves well. Target of 75.5.
So... do we short oil?
In a way, yes. We should short oil for the week.
A lot of tough talk of inflation lately. Possible stronger dollar for the week. Shorting oil next week sounds good. After all it is very volatile and that's what traders want. I see at least a downside of $4 towards $130 - the whole number theory again. It has occurred at $100 and $110 before so do exercise some caution. Highly unlikely that it will fall below $130 because as projected, dollar gains will be capped to the index of 75.5. Just in case it does fall below $130, I think it will look for $126.Overseas Visitors.
I have noticed a number of visitors coming to my blog recently therefore I shall touch on some overseas markets as well.
A friend of mine, nicknamed the "Mailman" (he always delivers), informed me of an interesting situation - the vietnam dong.
Vietnam Dong
If you have time, read the follow article.
1. Vietnam Inflation
2. What will happen a or b
For those who do not have the time (I hope you fork out some please), here is a summary of the views expressed.
1. Inflation is at 25% last month (WHAT!)
2. The trade deficit more than tripled in the first five months of the year to $14.42 billion from $4.25 billion in the same period a year earlier
3. Stock market is down nearly 60% this year
4. The dong is allowed to trade within 1 percent on either side of a daily fixing rate
5. Vietnam was being hailed as the next Asian miracle, a success story to match the rise of the Asian tigers of the 1990s and more recently the stunning growth of China and India.
All these lead to one thing - Devaluation of Dong. The downward pressure is too huge and dong is at an artificially high value because the government pegs it to the dollar. Of course, the government can continue to buy up dong and keep at this unreal valuation.
The peg has to break and dong is bound to devalue sharply. Two scenarios are possible: Either there is a slow but substatial devaluation in the coming months or there is a sustatined value preceding a bust. The situation is similar to the same as Thai Baht in 1997. I would not like to see history repeats itself, but somehow shorting dong is almost considered a very safe investment. I wonder if Soros will speed up the process like he did before with bank of England. Actually I'm also wondering if there is any means of shorting the dong.
Let's say we can't short Vietnam Dong. What else can we do?
You can wait for it to plunge and buy back some Dong because IMF or other similar institutions might step in. This will traslate into gains when converting back from Dong to your base currency. For example, the dong falls to 20000 Dong to the Singapore dollar. You buy in and than it revalues to 15000 Dong to the Singapore dollar, an invested amount of $1000 will return of 33%. Remove this if you want
Or... ...
Singapore Property
Short Singapore Property Stocks. I am not sure if the banks have large amount of assets in Vietnam but I am pretty sure property stocks like Capitaland, Citydev and Keppel Land have heavily invested in vietnam and have assets valued in vietnam dong. Prepare to see a huge writedown in their balance sheets as they declare assets in Singapore or US Dollars.
This is a long term shorting play. You can hold real long put warrants or use SBL and short them for months.
P.S: I would like to thank Tony and his effort to bring his friends to this blog. Hopefully you guys can benefit from this blog.
Latest Update
Found an article where Goldman Sachs downgrade the whole of property sector in Singapore on 10 June 2008.
A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul.
Jesse Livermore
Wednesday, June 11, 2008
Mid Week Pit Stop #8
I will touch on two things - a simple trading/investing taboo and a simple trading theory.
The "so called" experts
1. Most Singaporeans are brand orientated. They want big local names like analysts from DBS or fund managers from blah blah blah company. Somehow the company name adds extra weightage onto those "experts" words. On some trading website, I saw people saying that they had made a bad trade because they failed to read analyst report beforehand. I find that entirely bullshit. Now you must be thinking what makes my words so strong. Of course, I have found some allies.
2. The great Warren Buffett, my best friend lol. Read his article here on his wager with the wall street experts.
3. "ALL TIPS ARE DANGEROUS- TAKE NO TIPS!" Jesse Livermore
4. Another example that I got from CNBC.com
"Should we laugh or cry? Merrill Lynch financial analyst Guy Moszkowski has just downgraded Lehman Brothers [LEH 23.75
-3.75 (-13.64%) 
] , ONE DAY after affirming his BUY rating and ONE WEEK after raising the stock to BUY.
5. For those with trading accounts. Tell me how many sell calls (telling people to sell a stock) are there in comparision with buy calls (telling people to buy a stock) right now. Worse still, trace back all the way to October 2007 and tell me how many freaking stupid buy calls at STI 3800 (straits times index, basically a measure of the overall market trend). It's alright to make some mistakes but look carefully again and tell me how many reports are there that rectify their previous mistakes. =)
6. Dated back in October 2007, an analyst from a well known brokerage firm (hint: top retail firm) said that STI will be going toward 4200. Just some fact that my friend told me before.
7. Last but not least, why should you listen to me? LOL, I'm no expert in the sense that I don't carry any tags with me. Of course even most of my friends don't listen to me when I try to explain or teach them certain things. There are only a handful that trust my brain. I speak from a neutral point of view.
Simple Yet Effective
I think I have mentioned this before but never really brought it out and discussed openly. This theory is the "whole number" theory. Not my theory, just a simple fact and a bit of psychological thinking.
Stocks have a tendency to face some price resistance when they reach a nice whole number. It is a psychological thing. Most people like to use whole numbers to place their orders. For eg. they will want to sell a stock at $30 and not at $30.20. It is a common thing so you actually see lots of volume queuing up at the whole number level.
It is probably easier to explain using real life numbers. For example, Semb Corp. was on a super nice uptrend towards $5. However, once it hit $5, no one seemed to be buying anymore and lots of selling came in and Semb Corp is trading at $4.5 right now. There are most reasons why it does not break through $5 but we don't care at this point of time. I just want to illustrate that at $5, all those reasons start to kick in and we have Semb Corp trading below $5.
Another recent example, Wilmar International. It was also on a nice uptrend but because of recent selling, Wilmar was at a pivotal price of $5. Here we see $5 as a support. It was trading at a high of $5.5 before. If you see the chart, you will notice something else at $5.5 but we ignore it for now. On Tuesday, Wilmar closed at $4.97 below the psychological $5. You can be quite assured that Wilmar still go down somemore because the support of $5 can't hold anymore. Wilmar kept falling on subsequent days.
We move on to US market and touch on Lehman, the hype of the market right now. I mention shorting Lehman over the weekend because it broke the $35 level. Note that whole number doesn't always have to be a nice number that ends with 0. $35 was a number that I get from my charts. The price was about $32 something. However on monday, Lehman opened at $30 and started to move below $30. I could tell that it would open below $30 by looking at pre-market trading so I keyed in my orders before the market opened. Seeing that the $30 can't hold anymore, I know that it will plunge downwards in a very ugly manner. It is important to look again at Lehman as it reaches $30 because $30 is a nice psychological barrier. Day after day, lehman keeps falling and is standing at close to $23.75.
Other examples that are for you to think about is Oil at $100 and Gold at $1000.
Btw, I have a big news to announce. We have a HINDENBURG OMEN last friday. UH-OH.
Latest Updates
Cover Lehman at $20. Maybe during the day it will fall below $20 but I highly doubt that Lehman will close below $20. I expect to see some short covering. Short interest is close to 14%. Short from $30 to $20 is a nice 33% in a week's time. Honestly I don't really think that Lehman is the next Bear Sterns. Just think about it, the reason for Lehman to plunge somemore today (thursday 9pm Singapore time) is the exiting of CFO and COO. Sounds like the end of a story.
Ok, really very sorry for this. I am quite concerned about the short interest right now. Honestly I wish to wait till friday before pulling out of Lehman. Lehman is about $22 at 9.39pm singapore time right now. Maybe you wish to cover half of your holdings right now at this price.
We have an interesting comment. Very nice things to ponder over. I will give some serious thoughts and reply on weekend's post. Cheers.
The "so called" experts
1. Most Singaporeans are brand orientated. They want big local names like analysts from DBS or fund managers from blah blah blah company. Somehow the company name adds extra weightage onto those "experts" words. On some trading website, I saw people saying that they had made a bad trade because they failed to read analyst report beforehand. I find that entirely bullshit. Now you must be thinking what makes my words so strong. Of course, I have found some allies.
2. The great Warren Buffett, my best friend lol. Read his article here on his wager with the wall street experts.
3. "ALL TIPS ARE DANGEROUS- TAKE NO TIPS!" Jesse Livermore
4. Another example that I got from CNBC.com
"Should we laugh or cry? Merrill Lynch financial analyst Guy Moszkowski has just downgraded Lehman Brothers [LEH 23.75
-3.75 (-13.64%) ] , ONE DAY after affirming his BUY rating and ONE WEEK after raising the stock to BUY. Huh?
Here's what he just said in a note to clients:
"Removing Buy a week later and 10 percent lower is not easy but scale of Q2 loss and capital-raise indicate lower ROE [Return on Equity] potential and lower confidence, esp. given LEH's remaining exposures."
On June 4, with Lehman at $31 and change, Moszkowski raised his recommendation on Lehman to Buy, saying "Share correction overdone in our view."
I think this analyst is gone by now. Wonder how he keeps his job.5. For those with trading accounts. Tell me how many sell calls (telling people to sell a stock) are there in comparision with buy calls (telling people to buy a stock) right now. Worse still, trace back all the way to October 2007 and tell me how many freaking stupid buy calls at STI 3800 (straits times index, basically a measure of the overall market trend). It's alright to make some mistakes but look carefully again and tell me how many reports are there that rectify their previous mistakes. =)
6. Dated back in October 2007, an analyst from a well known brokerage firm (hint: top retail firm) said that STI will be going toward 4200. Just some fact that my friend told me before.
7. Last but not least, why should you listen to me? LOL, I'm no expert in the sense that I don't carry any tags with me. Of course even most of my friends don't listen to me when I try to explain or teach them certain things. There are only a handful that trust my brain. I speak from a neutral point of view.
Simple Yet Effective
I think I have mentioned this before but never really brought it out and discussed openly. This theory is the "whole number" theory. Not my theory, just a simple fact and a bit of psychological thinking.
Stocks have a tendency to face some price resistance when they reach a nice whole number. It is a psychological thing. Most people like to use whole numbers to place their orders. For eg. they will want to sell a stock at $30 and not at $30.20. It is a common thing so you actually see lots of volume queuing up at the whole number level.
It is probably easier to explain using real life numbers. For example, Semb Corp. was on a super nice uptrend towards $5. However, once it hit $5, no one seemed to be buying anymore and lots of selling came in and Semb Corp is trading at $4.5 right now. There are most reasons why it does not break through $5 but we don't care at this point of time. I just want to illustrate that at $5, all those reasons start to kick in and we have Semb Corp trading below $5.
Another recent example, Wilmar International. It was also on a nice uptrend but because of recent selling, Wilmar was at a pivotal price of $5. Here we see $5 as a support. It was trading at a high of $5.5 before. If you see the chart, you will notice something else at $5.5 but we ignore it for now. On Tuesday, Wilmar closed at $4.97 below the psychological $5. You can be quite assured that Wilmar still go down somemore because the support of $5 can't hold anymore. Wilmar kept falling on subsequent days.
We move on to US market and touch on Lehman, the hype of the market right now. I mention shorting Lehman over the weekend because it broke the $35 level. Note that whole number doesn't always have to be a nice number that ends with 0. $35 was a number that I get from my charts. The price was about $32 something. However on monday, Lehman opened at $30 and started to move below $30. I could tell that it would open below $30 by looking at pre-market trading so I keyed in my orders before the market opened. Seeing that the $30 can't hold anymore, I know that it will plunge downwards in a very ugly manner. It is important to look again at Lehman as it reaches $30 because $30 is a nice psychological barrier. Day after day, lehman keeps falling and is standing at close to $23.75.
Other examples that are for you to think about is Oil at $100 and Gold at $1000.
Btw, I have a big news to announce. We have a HINDENBURG OMEN last friday. UH-OH.
Latest Updates
Cover Lehman at $20. Maybe during the day it will fall below $20 but I highly doubt that Lehman will close below $20. I expect to see some short covering. Short interest is close to 14%. Short from $30 to $20 is a nice 33% in a week's time. Honestly I don't really think that Lehman is the next Bear Sterns. Just think about it, the reason for Lehman to plunge somemore today (thursday 9pm Singapore time) is the exiting of CFO and COO. Sounds like the end of a story.
Ok, really very sorry for this. I am quite concerned about the short interest right now. Honestly I wish to wait till friday before pulling out of Lehman. Lehman is about $22 at 9.39pm singapore time right now. Maybe you wish to cover half of your holdings right now at this price.
We have an interesting comment. Very nice things to ponder over. I will give some serious thoughts and reply on weekend's post. Cheers.
"I know from experience that nobody can give me a tip or series of tips that will make money for me than my own judgement."
Jesse livermoreSaturday, June 7, 2008
Team Jin VS Team Kilduff
Commentary of the game (the week)
Welcome back everybody to the 2nd Half of the prestigious "Oil Championship Finals" between Team Jin and Team Kilduff. I am Jin Sidekick, your commentator for the game. As of half time, Team Kilduff is leading 1-0 with its brilliant "oil topping, pronounced top" strategy that he has charted out.
The teams are now ready to kick off the 2nd Half and somehow Team Jin looks restless. I believe they need some changes but the manager, "Jin Plunger", has NO SUBS on his bench to call upon. Looks like we are going to have a boring 2nd Half.
Team Kilduff is happy to keep possession in their half, with no intention to attack anymore. Players from Team Jin are getting frustrated. Time is running out and we are down to the last 10 min of stoppage time.
Skipper cum lone striker "Jin King" is sick of how the game is being played right now. He lunges a late sliding tackle at the star striker "J. Kilduff" from behind.
Beep. Yellow Card! I think the referee is being lenient there. However "J. Kilduff" is pretty unhappy. He wants a red card to be shown. The referee waves him off and signals for the match to resume.
"J. Kilduff" is red hot now. He demands the ball and starts dribbling from the midfield line. With dazzling footwork, he has dribbled past "Monday" , the defensive midfielder of Team Jin, easily. Shakes off "Tuesday", a slow and useless central defender, with a simple side step. With his change of pace, he manages to get past "Wednesday" and is now facing the goalkeeper, "Thursday" in a 1 on 1 situation.
Manager "John K" has his fist up in the air. He knows that the game will be over if "J.Kilduff" scores now and his "Oil Topping" strategy will make him famous.
The goalkeeper has rushed out and spread himself wide. "J. Kilduff" is full of composure and is very familiar with this situation. He brings the ball to his right and unleashes a banana kick that swerves past "Thursday" easily. The ball looks destined for the back of the net.
IT HITS THE TOP BAR AND BOUNCES JUST OUTSIDE OF THE LINE! The linesman waves a no goal sign to the referee. Team Kilduff is stunned. "Thursday" scrambles back to get the ball. A lifeline is thrown to Team Jin and we have 5 more minutes of stoppage time to go.
"Thursday" kicks the ball into Zone Z. What he is doing?
Oh, Team Jin is making a substituition. Looks who's here? Legendary midfielder "ECB" is here. He was supposedly held back by flight delay. The crowd roars and ECB receives a standing ovation upon entering the field. ECB passes a note to Skipper Jin King.
Camera zooms in and we can see something written on it. "We may get a Rate Raise next month". Jin King hints his teammates about the team instruction with some hand signals. Team Jin looks fired up. Momentum has shifted to them. What a 5min of ball game we are going to have.
Throw in is taken and immediately "ECB" snatches the ball away. He delivers a high floating 50 yard cross to Jin King who is now clear of the defense line. Team Kilduff points to the linesman for offside but the FLAG STAYS DOWN!
IT'S A GOAL!!! Jin King makes no mistake and the game is tied.
We are into injury time now and the fourth official shows 3 min of injury time. Team Jin knows that they have to end this game now and not go into injury time for Team Kilduff to regroup. Team Jin are piling up the pressure and earn a corner in the 93min. This looks like the last possession of normal time. But we have an argument right now between "Israel" and "Iran" to see who takes the corner. The spectators (speculators) like it very much. "Morgan Stanley", the playmaker, pushes them aside and takes the corner. It is a well taken corner and the ball flies towards Jin King who looms large at the six yard box.
IT'S IN!!! TEAM JIN HAS DONE IT. Team Kilduff is appealing for a handball but the referee ignores them. Looking at the replay, Jin King uses his hand but the referee can't see it. It's the Hand Of God. Team Jin has won the "Oil Cup".
Back To Reality
I was trying to be funny this week but I think I have scored a resounding victory with my firm stand on oil. I added an update on mid week post when I realised that ECB was announcing their rate policy later in the day on thursday. I was expecting ECB to raise rates because of inflation but they didn't. However, they hinted that they might do so next month. That's it. A hint is enough and I know dollar will plunge and oil will shoot.
My stand is not completely supported unless oil breaks previous high of $135. Oil was just below $130 on thursday and come friday, Morgan Stanley and tension between Iran and Israel complete the full turnaround of oil. We are facing an oil price of $138 right now.
Btw, here's a Kilduff's article which he published on Wednesday. I wonder what else will he be saying next week. I will not criticize him if he apologises like T. Boone Pickens who actually says that oil will go down to $80 something and he is shorting oil. He changes his stand later and is bullish on oil right now.
SPC was down to $6.5 on friday. Shorting on monday opening at $6.9 will yield you about 7%. With oil this high, I wonder if SPC will go up or down. The earnings was down previously because of too high oil prices.
Looking Ahead
Well, if you refer to past posts, I have been saying that we are in this sort of channel between 12k and 13k. I don't wish to be exact so I just take the whole number. This time round we are going to re-test the lower support level of 12k. So you can tell that we still have some more downside to go.
So if you are looking to trade the market, I suggest shorting Lehman.
Reasons being:
1. Weakest in the field. Well the experts say so, it is almost impossible for me to find out so I just take it as it is.
2. Unfixed earnings announcement date. Apparently, lehman may pre-announce their earnings. I like this kind of surprise factor. Just send some panic to the crowd.
3. It closes below $35. Basically I feel that lehman has a strong support of $35 before but it broke it last week. So I think you should short lehman with a stop loss at $35. Short until Dow hits the support of 11.8k to 12k. Honestly I think Lehman is heading to test its previous low of about $25. But it is a heavily shorted stock so you must have your stop loss.
4. Overall downtrend for the market.
I don't like anything from Singapore. Not even SPC. Watch out for Oil, I got this feeling that maybe oil will zoom past $140 easily and we have a market bottom. Dollar will still continue its way down. I foresee a big plunge on monday. =D
Extreme dislocations in markets inevitably occur - Gary Brinson
Welcome back everybody to the 2nd Half of the prestigious "Oil Championship Finals" between Team Jin and Team Kilduff. I am Jin Sidekick, your commentator for the game. As of half time, Team Kilduff is leading 1-0 with its brilliant "oil topping, pronounced top" strategy that he has charted out.
The teams are now ready to kick off the 2nd Half and somehow Team Jin looks restless. I believe they need some changes but the manager, "Jin Plunger", has NO SUBS on his bench to call upon. Looks like we are going to have a boring 2nd Half.
Team Kilduff is happy to keep possession in their half, with no intention to attack anymore. Players from Team Jin are getting frustrated. Time is running out and we are down to the last 10 min of stoppage time.
Skipper cum lone striker "Jin King" is sick of how the game is being played right now. He lunges a late sliding tackle at the star striker "J. Kilduff" from behind.
Beep. Yellow Card! I think the referee is being lenient there. However "J. Kilduff" is pretty unhappy. He wants a red card to be shown. The referee waves him off and signals for the match to resume.
"J. Kilduff" is red hot now. He demands the ball and starts dribbling from the midfield line. With dazzling footwork, he has dribbled past "Monday" , the defensive midfielder of Team Jin, easily. Shakes off "Tuesday", a slow and useless central defender, with a simple side step. With his change of pace, he manages to get past "Wednesday" and is now facing the goalkeeper, "Thursday" in a 1 on 1 situation.
Manager "John K" has his fist up in the air. He knows that the game will be over if "J.Kilduff" scores now and his "Oil Topping" strategy will make him famous.
The goalkeeper has rushed out and spread himself wide. "J. Kilduff" is full of composure and is very familiar with this situation. He brings the ball to his right and unleashes a banana kick that swerves past "Thursday" easily. The ball looks destined for the back of the net.
IT HITS THE TOP BAR AND BOUNCES JUST OUTSIDE OF THE LINE! The linesman waves a no goal sign to the referee. Team Kilduff is stunned. "Thursday" scrambles back to get the ball. A lifeline is thrown to Team Jin and we have 5 more minutes of stoppage time to go.
"Thursday" kicks the ball into Zone Z. What he is doing?
Oh, Team Jin is making a substituition. Looks who's here? Legendary midfielder "ECB" is here. He was supposedly held back by flight delay. The crowd roars and ECB receives a standing ovation upon entering the field. ECB passes a note to Skipper Jin King.
Camera zooms in and we can see something written on it. "We may get a Rate Raise next month". Jin King hints his teammates about the team instruction with some hand signals. Team Jin looks fired up. Momentum has shifted to them. What a 5min of ball game we are going to have.
Throw in is taken and immediately "ECB" snatches the ball away. He delivers a high floating 50 yard cross to Jin King who is now clear of the defense line. Team Kilduff points to the linesman for offside but the FLAG STAYS DOWN!
IT'S A GOAL!!! Jin King makes no mistake and the game is tied.
We are into injury time now and the fourth official shows 3 min of injury time. Team Jin knows that they have to end this game now and not go into injury time for Team Kilduff to regroup. Team Jin are piling up the pressure and earn a corner in the 93min. This looks like the last possession of normal time. But we have an argument right now between "Israel" and "Iran" to see who takes the corner. The spectators (speculators) like it very much. "Morgan Stanley", the playmaker, pushes them aside and takes the corner. It is a well taken corner and the ball flies towards Jin King who looms large at the six yard box.
IT'S IN!!! TEAM JIN HAS DONE IT. Team Kilduff is appealing for a handball but the referee ignores them. Looking at the replay, Jin King uses his hand but the referee can't see it. It's the Hand Of God. Team Jin has won the "Oil Cup".
Back To Reality
I was trying to be funny this week but I think I have scored a resounding victory with my firm stand on oil. I added an update on mid week post when I realised that ECB was announcing their rate policy later in the day on thursday. I was expecting ECB to raise rates because of inflation but they didn't. However, they hinted that they might do so next month. That's it. A hint is enough and I know dollar will plunge and oil will shoot.
My stand is not completely supported unless oil breaks previous high of $135. Oil was just below $130 on thursday and come friday, Morgan Stanley and tension between Iran and Israel complete the full turnaround of oil. We are facing an oil price of $138 right now.
Btw, here's a Kilduff's article which he published on Wednesday. I wonder what else will he be saying next week. I will not criticize him if he apologises like T. Boone Pickens who actually says that oil will go down to $80 something and he is shorting oil. He changes his stand later and is bullish on oil right now.
SPC was down to $6.5 on friday. Shorting on monday opening at $6.9 will yield you about 7%. With oil this high, I wonder if SPC will go up or down. The earnings was down previously because of too high oil prices.
Looking Ahead
Well, if you refer to past posts, I have been saying that we are in this sort of channel between 12k and 13k. I don't wish to be exact so I just take the whole number. This time round we are going to re-test the lower support level of 12k. So you can tell that we still have some more downside to go.
So if you are looking to trade the market, I suggest shorting Lehman.
Reasons being:
1. Weakest in the field. Well the experts say so, it is almost impossible for me to find out so I just take it as it is.
2. Unfixed earnings announcement date. Apparently, lehman may pre-announce their earnings. I like this kind of surprise factor. Just send some panic to the crowd.
3. It closes below $35. Basically I feel that lehman has a strong support of $35 before but it broke it last week. So I think you should short lehman with a stop loss at $35. Short until Dow hits the support of 11.8k to 12k. Honestly I think Lehman is heading to test its previous low of about $25. But it is a heavily shorted stock so you must have your stop loss.
4. Overall downtrend for the market.
I don't like anything from Singapore. Not even SPC. Watch out for Oil, I got this feeling that maybe oil will zoom past $140 easily and we have a market bottom. Dollar will still continue its way down. I foresee a big plunge on monday. =D
Extreme dislocations in markets inevitably occur - Gary Brinson
Wednesday, June 4, 2008
Mid Week Pit Stop #7
Why do you need to invest?
1. Money and more money. Sounds rather dumb to mention this obvious answer but it is the main problem that most people are facing with isn't it? Money is never enough. You have your car loans, housing loans, milk powder, food (INFLATION) and ultimately you have to live in a country with a very high standard of living accompanied by low wages. I believe everyone understands this reason for investing so I shall not explain more.
2. Time = Money. Basically you need money to produce time. It is a simple logic actually. You want to retire young, why? So that you can enjoy life after all. You do not want to work for money all life, instead you want money to work for you. I remember someone saying this to me from a book called "Rich Dad Poor Dad". The book cover and title puts me off so I never bother reading that book. Apparently it teaches you how to make money work for you. Maybe its a good book, who knows? However, I think otherwise.
3. A better future. Actually this is closely related if not the same as first reason, but I feel that I have to mention this. After all investing in companies is something like betting that these companies will grow in the future. In this case, you invest to give yourself a better future to look forward to. What will you do in the future? Start a business? Maybe. Sleep around? LOL. Or start a family? Definitely. It is exactly why you want to start learning now and do your planning. Of course if you want to sleep around, it's your life, but remember you may have plenty of families to look after. As a parent, you will definitely want your child to have a good life because you know that life is tough. You don't want your child to go through what you have gone through. You know that now, so don't procrastinate anymore.
I believe most people work or do stuffs for the above three reasons. Investing is just one of the ways to achieve all those above. Of course trading is slightly different. To me, trading is about beating the game which has millions, if not billions, of people playing. Other than that, I trade for a fourth reason which only a few people will know.
Nice and short, I will like to end off with this article. Try to read, it is very true.
EURO Time
Similar for SIA cup, I have decided to throw in another piece of analysis for stuffs outside stocks. This time is about the long awaited Euro. Honestly speaking, I wish England to be in the Euro because they will be the top few favourites and provide value for other teams in Singapore betting pools.
I firmly believe Italy will win the Euro. It's not because I am a fan of Italy or because I have won some money with Italy at the World Cup. If you are being rational and not betting with your emotions, you will also agree that Italy stands a good chance to win Euro at VALUE.
The odds for Italy to win Euro is about 1:8 online. But 1:6 at Singapore pools. Lousy odds.
1. Italy has depth and balance in squad. I like good defensive team. Italy will probably do the same as France back at France 98 and Euro 00. The main thing is value for money. At 1:8, there is no better value team out there other than Italy.
2. Germany is good. Well-deserved favourites but not value for money. Less depth in squad than Italy but they have an easy group. But Germany lost to Italy at home during previous world cup.
3. Portugal also has easy squad and this year could well be Ronaldo's year. I don't really like him but you can't question his ability. However, Portugal has no striker. I doubt they can win just by depending on Ronaldo.
4. Spain looks so well on paper everyday but no tough players in midfield, will probably face difficulties after group stage against france or italy. However if they get to the final, I think they will win, of course they have to win france or italy first.
5. France has weak attack. I think they are just missing a "Zidane" in there.
6. Holland can't score for nuts. So many talents but they just can't score.
7. Czech is still no longer the good old czech.
I am pretty lazy to talk about the rest because I don't think they stand a chance. Basically it comes down to only a few teams - Italy, Germany and Portugal. Italy > Germany. Portugal is unknown factor because it's Ronaldo's year, just like Kobe Bryant in NBA. It's Kobe's year. But I have to drop Portugal in the end because they have no strikers.
Another reason why I like Italy is because they always have something to fight for. World Cup was for the scandal and the death of someone (old coach? I forgot). This Euro is going to be for Cannavaro.
"Chiellini reportedly broke down in tears after discovering that the Azzurri captain had been ruled out of the tournament as a result of their training ground collision, but Cannavaro insists that he harbours no hard feelings whatsoever."
Cannavaro says, ""I comforted him. He was broken. I told him that it wasn't his fault. We lost a player - it's not worth losing a second."
I like this type of team bonding.
For Golden Boot, go with proven scorer Klose. If you like some wild card, buy Mario Gomez at 1:19. I think he is awesome provided he starts beside Klose instead of Podolski. Basically Germany will score a lot and advance far in the competition.
Latest Update
I think ECB will raise rates, dollar plunge, oil shoots =D
1. Money and more money. Sounds rather dumb to mention this obvious answer but it is the main problem that most people are facing with isn't it? Money is never enough. You have your car loans, housing loans, milk powder, food (INFLATION) and ultimately you have to live in a country with a very high standard of living accompanied by low wages. I believe everyone understands this reason for investing so I shall not explain more.
2. Time = Money. Basically you need money to produce time. It is a simple logic actually. You want to retire young, why? So that you can enjoy life after all. You do not want to work for money all life, instead you want money to work for you. I remember someone saying this to me from a book called "Rich Dad Poor Dad". The book cover and title puts me off so I never bother reading that book. Apparently it teaches you how to make money work for you. Maybe its a good book, who knows? However, I think otherwise.
3. A better future. Actually this is closely related if not the same as first reason, but I feel that I have to mention this. After all investing in companies is something like betting that these companies will grow in the future. In this case, you invest to give yourself a better future to look forward to. What will you do in the future? Start a business? Maybe. Sleep around? LOL. Or start a family? Definitely. It is exactly why you want to start learning now and do your planning. Of course if you want to sleep around, it's your life, but remember you may have plenty of families to look after. As a parent, you will definitely want your child to have a good life because you know that life is tough. You don't want your child to go through what you have gone through. You know that now, so don't procrastinate anymore.
I believe most people work or do stuffs for the above three reasons. Investing is just one of the ways to achieve all those above. Of course trading is slightly different. To me, trading is about beating the game which has millions, if not billions, of people playing. Other than that, I trade for a fourth reason which only a few people will know.
Nice and short, I will like to end off with this article. Try to read, it is very true.
EURO Time
Similar for SIA cup, I have decided to throw in another piece of analysis for stuffs outside stocks. This time is about the long awaited Euro. Honestly speaking, I wish England to be in the Euro because they will be the top few favourites and provide value for other teams in Singapore betting pools.
I firmly believe Italy will win the Euro. It's not because I am a fan of Italy or because I have won some money with Italy at the World Cup. If you are being rational and not betting with your emotions, you will also agree that Italy stands a good chance to win Euro at VALUE.
The odds for Italy to win Euro is about 1:8 online. But 1:6 at Singapore pools. Lousy odds.
1. Italy has depth and balance in squad. I like good defensive team. Italy will probably do the same as France back at France 98 and Euro 00. The main thing is value for money. At 1:8, there is no better value team out there other than Italy.
2. Germany is good. Well-deserved favourites but not value for money. Less depth in squad than Italy but they have an easy group. But Germany lost to Italy at home during previous world cup.
3. Portugal also has easy squad and this year could well be Ronaldo's year. I don't really like him but you can't question his ability. However, Portugal has no striker. I doubt they can win just by depending on Ronaldo.
4. Spain looks so well on paper everyday but no tough players in midfield, will probably face difficulties after group stage against france or italy. However if they get to the final, I think they will win, of course they have to win france or italy first.
5. France has weak attack. I think they are just missing a "Zidane" in there.
6. Holland can't score for nuts. So many talents but they just can't score.
7. Czech is still no longer the good old czech.
I am pretty lazy to talk about the rest because I don't think they stand a chance. Basically it comes down to only a few teams - Italy, Germany and Portugal. Italy > Germany. Portugal is unknown factor because it's Ronaldo's year, just like Kobe Bryant in NBA. It's Kobe's year. But I have to drop Portugal in the end because they have no strikers.
Another reason why I like Italy is because they always have something to fight for. World Cup was for the scandal and the death of someone (old coach? I forgot). This Euro is going to be for Cannavaro.
"Chiellini reportedly broke down in tears after discovering that the Azzurri captain had been ruled out of the tournament as a result of their training ground collision, but Cannavaro insists that he harbours no hard feelings whatsoever."
Cannavaro says, ""I comforted him. He was broken. I told him that it wasn't his fault. We lost a player - it's not worth losing a second."
I like this type of team bonding.
For Golden Boot, go with proven scorer Klose. If you like some wild card, buy Mario Gomez at 1:19. I think he is awesome provided he starts beside Klose instead of Podolski. Basically Germany will score a lot and advance far in the competition.
Latest Update
I think ECB will raise rates, dollar plunge, oil shoots =D
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