On Friday, I posted this chart on FBM-KLCI. I have pointed out after the market peaked in 2008, we have a drop-off; followed by a technical rebound; followed by another sharper drop-off; and then a bear rally; and finally the market just careened off over the edge. I have specifically highlighted the technical rebound (as 'A') and the bear rally (as 'B').
As at 3.45pm, our FBM-KLCI has rebounded back to about 1484. This is the technical rebound that we have anticipated. Those brave souls who bought today or yesterday and those less fortunate ones who are stuck with large position, should use this rebound to lighten their load or to take their profit (whatever their circumstances).
Technical rebound is quite common even after a market top, which I think it is. Who are these buyers? I count among them the earlier sellers who exited the market in June or July. I also count among them the latecomers who have been waiting for a sharp correction in order to get into the market. Once these group of investors have been exhausted, the market drop could continue. Another rebound would happen because of another group of like-minded investors would take up the batten and the market would rally again. Until finally, there would be no more buyers and then the market would fall on its own volition.
So you should be very careful and use the opportunity to reduce your position as the rebound progresses. Do not get carry away and start running with the bulls. This is not a bull. This is a bear just awaken from its hibernation.
6 comments:
hi alex, i have following your blog, so your bet is to offload all your position irrespective of the share fundamental?
thanks, this is the 1st time I came visiting but find your posts are very much top notch. :)
Alex, this r some of my thought, I think this fall is just a matter of hiccup. Let me explain this, during the 98 crisis, the market took a real plunge ie. About a year, market recover till 2001, 911 happen, mkt took a dive but recover later on. In 2003, SARS happen, mkt corrected but recover briefly till in 2005, tsunami hit the market. Market did recover grounds after that till in 2008, the suprime crisis struck, mkt dive for almost 18 months before mkt recover in march 2009 till now. From my conclusion, this correction will be short and fast. World leaders cannot let this to happen again, they have to solve it but hook or by crook. I shall say, beware of 2018, not now. What say you, Alex !
Hi sangkancil
It is hard to be definite. However, if the market really entered into a bear market, that would be a correct move. However, I am dealing with probability, not a sure thing. So, under these circumstances, you would have to weigh the risk that you are prepared to take. If I am wrong, you would be selling your stocks at pretty low prices. If I am right, you could see even lower prices ahead.
At times like this, I like to put myself back in time to say March 2008. What was I feeling then? Was I cocksure? Or, was I just worried? I was never too sure of myself, but I was very worried.
Hi Peter
Your scenario is possible. If I do my math correctly, you are going for a 10-year for financial crisis.
Hi Zackrie MC
I believe the European financial turmoil is very hard to resolve. Every time you read about some schemes or funds to rescue these problematic countries, a new problem would surface a few days or weeks down the road. The endgame is a complete restructuring of Greece, Portugal and Ireland. Italy & Spain may also have to be rescued or bailed out. In the end, the stronger countries- Germany & France- may end up in the poor house.
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