Tue 06 June 2010
The world must be coming to an end according to the bears
Harry Dent, McHugh, Elliot Wave, Dow Theory, you name it, you got it, not forgetting Barton Biggs, all these technical gurus are universally bearish and not just bearish, downright suicidally bearish. Elliott Wave probably tops the lot by saying the coming crash will be worse than the burst of the South Sea Bubble that for the next 100 years, you will be telling your grand kids not to touch stocks. Yet Nasdaq has just been down 10 consecutive days, the longest stretch ever in its history. What is wrong with the world?
I tell you what is wrong, internet and 24x7 business TV, allowing news to travel instantly. So when I read about the Elliot Wave disastrous prediction, within 2 minutes, I found the article in the New York Times on google. I would not have been able to do this in the last cycle before the GFC. The internet has made news so accessible but also enables us to react to bad and good news instantly.
The GFC became the GFC even though the economic contraction was never anywhere near the proportion of the Great Depression. Yet the market sentiment as measured by the RSI was much worse than the Depression years, in fact the worst in history for January and February 2009. We now have economic recovery. The US GDP has grown for 3 quarters, yet Nasdaq gave us the longest stretch of down days in its entire history by last Friday. We had a 70% plus increase in US equities indices since April 2009 until the recent correction, a surge in proportion nobody would have predicted in early 2009. Yes, the Internet, CNBC, Bloomberg TV, are all to blame or credit for this volatility. No doubt you will be seeing even more of this and you are likely to see more when US market opens tonight.
Unlike all the technical bears, I believe Nasdaq will have a 30% upside before year end. Short covering will start the market going soon. China with its US$2.4 trillion of Forex reserves, soon going to US$3 trillion, must be getting anxious to buy up the world.
Tue 29 June 2010
A new bull market in equities may well have just started, but not the same for gold
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Image source Bloomberg Finance
On June 9, I said as below: It would appear that the US $ gold price is poised for a big fall ahead with the first test at US$1,195 and if this does not hold, US$950 will be the next support.That could also signal that equity markets are poised for a sharp uplift. I would avoid gold stocks for now.
The sharp fall in the US dollar gold price overnight is ominous to say the least. At US$1,240 now, the price has pulled right back to the top of the steeply rising pennant as indicated in the monthly chart on June 9 in my Sino Focus article. Unless gold finishes above US$1,240 by 30 June, meaning by tomorrow, the pennant pattern will be set in concrete and gold will be poised to fall to at least US$950. The good news is, equities will rise significantly in the next few months. To further support this view on equities, have a look at the moving averages momentum indicators.
In the attached Dow monthly chart, note that the 10 month moving average crossed over the 30 month moving average and basically maintained the cross over from 1982 to July 2001 with the exception of between June 88 and January 89, a long bull market indeed. Then the tech wreck bear market of 2001 to 2003 set in when the 10 month MA fell below the 30 month MA between July 2001 and December 2003. The subsequent bull market between December 2003 and August 2008 ended when the 10 month MA again fell below the 30 month in August 2008, then came the GFC bear market. The 10 month MA has just crossed over the 30 month MA on the upside since May 2010 and so far has maintained the cross over into June. This may well be the start of another bull market that may go on for some months.
Wed 9 June 2010
Gold in steep upward sloping pennant does not bode well for gold bulls
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Image source Bloomberg Finance
It would appear that the US $ gold price is poised for a big fall ahead with the first test at US$1,195 and if this does not hold, US$950 will be the next support.That could also signal that equity markets are poised for a sharp uplift. I would avoid gold stocks for now.
Tue 8 June 2010
Market is going up and down like a yo yo, so where to from here?
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Image source Bloomberg Finance
You cannot ask for a more confusing market in the past few weeks. One day up next day down and then up again. So where are we going?.
The attached monthly charts of the Dow, Nasdaq, and S&P 500 indicate that after the sharp upward correction from the 2008-09 bear market, all 3 indices have now pulled back to the top of the long term trend channel that they firstly broke down from and then broke back above. I believe the market has now reached a very important support level and will bounce back up from where we closed last night very sharply. .
One thing you need to bear in mind is that market will go up in an escalator and come down in the elevator. This pattern will not change just because the bears want it to. When the elevator ride is finished, meaning the bear market is finished, you seldom get another elevator ride down again so soon. This will only happen some years later. No, otherwise that will be too easy for the short sellers. However, the short sellers have had it so easy in the bear market just finished, they cannot help but to keep calling for doomsday again and again. It is more wishful thinking than a projection.
Thu 27 May 2010
Dow below 10,000 just the right level to trigger off bargain hunting
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Image source Bloomberg Finance
The attached Dow weekly chart shows that as at closing last night, the Dow is back on strong cross junctional support. The Relative Strength Index of all 3 US indices (not shown here) also shows that all 3 indices are oversold and as oversold as any period during and just before the GFC in 2008. I would expect the global equity markets to rally for some weeks from here.
Mon 3 May 2010
Nasdaq has broken all important monthly resistance levels
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Image source Bloomberg Finance
In my previous comment, I pointed out that it would not be long before the Nasdaq sector catches fire with M&A activities. News of HP bidding US$1 bil for Palm is just one of the classic examples of US tech companies starting to spend their US$300 bil cash horde. HP incidentally has over US$13 bil in cash. HP has now set the cat amongst the pigeons of major mobile phone vendors and mobile developers.
Imagine what Microsoft will be doing with Windows Mobile or rather worrying about what to do with it; and what RIM will be doing with the Blackberry, or what Google will do with its Android mobile operating system? Then what about Apple with its iPhone with Apple sitting on US$16 bil in cash. If you look closely, you will see that soon they will all be using audio and video content to compete, yes, using mobile IPTV to compete with each other. IPTV will be the next big thing for the telecommunication sector. How convenient it is that Google also owns YouTube? IPTV in your lounge room on your big flat screen TVs and on your handsets. Remember in 2000 AOL bid for Time Warner? Time Warner had the content and AOL had the distribution on the net. Unfortunately, AOL was too early with narrowband internet at that time being the norm. Now with broadband internet, content can finally be delivered in TV quality to your lounge room on your flat screen TV.
GoConnect (GCN) has been delivering IPTV for 10 years using its patented GoTrek IPTV technology without the need to worry about internet speed. With the soon to be launched GoConnect IPTV music channel, GoConnect has come full circle from where it started in 2000. While it was too early for AOL in 2000, it is just the right time now for GoConnect's IPTV.
Wed 24 March 2010
VIX breaking down brings in substantial bull market run
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Image source Bloomberg Finance
Note the attached VIX index chart. Note in particular the bottom support line of the trend channel drawn from October 2007, the month when the Dow and S&P 500 hit all time high before the GFC. The VIX index has now clearly broken down below this support line of the trend channel, indicating that investor risk premium has fallen and will fall much further. This will support a significant bull run on the US equity market in the immediate months ahead.
As mentioned before, with the Nasdaq sector having substantial cash holdings, and Nasdaq being the only one of the three indices still at half its all time high, Nasdaq stocks are expected to significantly outperform the rest of the market. We believe Nasdaq sector companies will not be happy to sit on their estimated US$300 billion cash earning 0.5% p.a. in interest. The cash will be returned to the equity market via stock buyback, and M&A activities. These activities will be the catalyst to buoy stock valuation. We believe the next tech/internet stock boom is within sight and the IPTV sector will draw much attention.
Wed 10 March 2010
Nasdaq weekly broke yet another resistance/Tech boom on IPTV
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Image source Bloomberg Finance
In a bull market, resistance levels tend to fall one after another and we are seeing exactly that happening with the Nasdaq index. Momentum is also pointing upward with the 10 week moving average crossed the 200 week moving average in the first week of January 2010. Note that after the breakout at week ended 4 Dec 2009, of the resistance line drawn from the all time high at week ended 10 March 2000, Nasdaq already completed the technical pullback at week ended 5 Feb 2010. Since then there has been no looking back. Last night, yet another resistance level was broken.
We can see a quick 20% improvement from here to 2830 short term before any consolidation but once this line is crossed, we expect some steep upside. Stock up on technology, and internet stocks before the next tech boom unfolds.
We believe the next tech boom will have a limited number of sector focuses, one major one will be on IPTV, IPTV not on your PC, but in the lounge room on your flat screen LCD TV. If you don't believe us, then guess which is the number 1 brand in LCD TV in the US today, LG? No, Samsung? No, Sony? No. The name is Vizio which embraced IPTV ahead of everyone else, and increased their unit sale in 2009 by more than 90%, remarkably in a negative GDP year! Check out this news in early 2009 from Vizio: http://www.betanews.com/article/Vizio-adds-IPTV-connectivity-to-its-HDTV-line/1231446297
And now, Sony is catching up: http://blogs.smh.com.au/digital-life/gadgetsonthego/2010/02/23/sonyunveilsau.html
Tue 9 March 2010
Next tech boom coming --
Nasdaq monthly chart says it all
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Image source Bloomberg Finance
Nasdaq has finally broken upside from the resistance line drawn from its all time monthly high in February 2000. This happened last Wednesday when it went past 2280 and now 3 days later, at 2332, it has clearly broken upside. Nasdaq will now proceed to challenge its previous monthly high of 4696, some 101% above the current close.
Our note on 24 February 2010 below predicted this and expected the weekly breakout to occur at 2345. However, the longer term monthly chart has now given us the earlier signal. The Dow and S & P 500 broke upside in November 2009 from the resistance lines drawn from their all time high of October 2007. Nasdaq has now also broken upside, late but nevertheless a sweet breakout. Nasdaq stocks: technology, internet stocks, can be expected to outperform the general market from here. With so much cash in the Nasdaq sector stocks, leading to more M&A activities, stock buybacks, etc, one can expect technology and internet stock valuation to rise significantly in coming months.
Wed 24 February 2010
Nasdaq weekly spot on to test upside resistance
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Image source Bloomberg Finance
The above Nasdaq chart shows that at 2317 on 8/1/10, Nasdaq returned to the pre-crash resistance and had no choice but to correct down. Now that the correction has occurred, Nasdaq is back on support and is poised to assault the resistance line again at about 2345 near term. Hence I am looking for a 6% upside from here or 132 points gain to reach resistance again short term and hopefully breaking it. I believe Nasdaq, which is still 56.9% down from its all time high of 5132 on the monthly close on 31/3/2000, has the most upside potential, compared to the Dow of 27.6% discount on its all time high of 14198 on 31/10 /07 and S&P 500 of 30.6% discount on its all time high of 1576 on 31/10 07.
While the general economy is recovering from the GFC of 2008/2009, the Nasdaq sector had its GFC back in early 2000 with the tech wreck and now this is the most cashed up sector of the economy. I expect significant amount of M&A activities in the months ahead which will fire up this sector, giving us potentially the second tech boom to take advantage of. Call that the second tech boom or the Web 2.0 boom or whatever, this sector has billions dollars of corporate cash to be deployed and to inflate stock valuation. Check this article out:
"When we tally up all the cash, there is over $260 billion available from these few tech companies that could be deployed for mergers, acquisitions, or the good old dividends. Again, that is before tallying up credit lines, factoring, debt sales, and other financing methods"
Fri 5 February 2010
Dow, S&P and, Nasdaq indices to break upside soon
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Image source Bloomberg Finance
All 3 indices have been trending in downward sloping pennant formation with the 4th wave just completed last night. I would expect the 5th wave to commence tonight and it will be an up wave which ultimately breaks upside to test the previous highs.
Tue 5 January 2010
Equity indices breaking upside in past 24 hours
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Image source Bloomberg Finance
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The above charts, the US Dow, S&P500, Nasdaq, and the ASX All Ords, all show that 2010 has started with an upside breakout of the sideway trading patterns of all 4 indices in the second half of 2009 particularly since September. Nasdaq, as you can see, has led the US market and has resumed the advance after a reasonable pullback. We can look to the next few months with confidence.