Monday, August 17, 2015

Market Outlook as at August 17, 2015

I wrote earlier about our FBMKLCI breaking the neckline of the Head-and-Shoulders formation at 1680. Since then, our market has been dropping steadily, if not sharply. Last Friday, it broke the strong horizontal support at 1600.


Chart 1: FBMKLCI's monthly chart as at Aug 17, 2015_10.00am (Source: ShareInvestor.com)

Looking at the long-term monthly chart, we can see that FBMKLCI is in an upward channel. The middle line has acted both as a support and a resistance as the index snaked its way within the channel. The index is now testing this middle line at around 1570. While the index may stage a rebound from here, I believe the rebound will be a weak one in the light of our chaotic political situation.


Chart 2: FBMKLCI's monthly chart as at Aug 17, 2015_10.00am (Source: ShareInvestor.com)

Another market that has been knocked down is our Ringgit. We can't use the defense that we're not alone in losing ground to the USD. We also losing ground to weaker currencies within the region. Just look at our Ringgit breaking its uptrend against the VND as well as losing a strong support against the IDR. For the Ringgit, there is no place to hide any more!


Chart 3: MYR-IDR's monthly chart as at Aug 17, 2015 (Source: XE.com)


Chart 4: MYR-VND's monthly chart as at Aug 17, 2015 (Source: XE.com)

Our political "masters" are too busy fighting for their own survival to worry about our Ringgit, our stock market, our economy & the people. While much has been said about the need for our leaders to put the interest of the nation and the people ahead of their own personal interest, I have seen enough to convince me that this is unlikely to happen any time soon. As such, we must be prepared for a continued decline in our Ringgit and the stock market.

3 comments:

Unknown said...

I am investing in few companies since last year and currently it is in paper loss (from paper gain)....
Do you think it is wise for minority investors (i'm not traders nor speculators) like me to cut loss seeing the chaotic market outlook but i have confidence on the future prospects of the Company I'm investing in?

Alex Lu said...

Hi Kim Soon

The market will recover back after the fall. If you wish to hold your existing stocks for next 3 or 5 years, you can choose to hold on. The advantages of selling now are:
1) You may be able to buyback the same stock at lower prices
2) You may be able to switch your portfolio to better stocks later
3) You may need the money later and won't be selling at lower prices then
4) If you are not heavily invested in the market, you have a clear mind to invest when the time is right

The first 2 advantages can only be realized if you reinvest after the share prices have declined. If you can't do that - as it's not easy to buy at the market low with all the fear and panic of the crowd - then you can just ignore the market fall. The worst thing to do is to ignore the market fall,only to sell at the market bottom because you are overcome by doom & gloom.

The next question to ask: Is it too late to sell now? It depends on the stocks (Why sell UEMS or Parkson at these low prices?) and the buyers' bids. On August 13, the bid prices were pretty decent and that would have been a good day to sell. That's why I posted this piece: http://nexttrade.blogspot.com/2015/08/market-outlook-as-at-august-13-2015.html

Finally, I like to say that it is not easy to decide to sell. It is a more difficult emotional process than when you decide to buy. You would probably be selling with pain because of losses or missed opportunity for higher gain. On the other hand, when you buy a stock, you are doing so with hope. If you can acknowledge that dichotomy, you would be a better investor the next round.

Good luck!!

lai said...

well said Alex! i view selling as the cheapest form of insurance just like when i needed a condom.😉