AAR & TOL 02 (Nov 08 - Jul 09)

[winston]

TOL:-

There's about US$8t sitting on the side-lines.

Last year, US$50t was wiped out.

What does this mean ? Can the US$8t on the sidelines, be enough to bring us back to where we were before ?

[OE2008]

it is necessary for anyone serious about making money from the markets to have an opinion....whether it is contrarian or in line with general consensus... the ones without an opinion but are easily swayed from one end to the next usually suffer negative results...

Well said. There are enough of conflicting TAs to drive me up the wall . Currently, the chatter is a H&S pattern is forming on major US indices, ready to drop on the right shoulder. Another group is banking on a consolidation pattern to test recent high. Signs of stalemate or range bound market

Whatever it is, best to have your own plan, be flexible and adjust.

[winston]

it is necessary for anyone serious about making money from the markets to have an opinion....whether it is contrarian or in line with general consensus... the ones without an opinion but are easily swayed from one end to the next usually suffer negative results...

There's a school of thought that goes as follows:-

1) Do not follow the crowd
2) Look for reasons why the crowd will be wrong but do not bet yet
3) Wait for those reasons to appear and then only bet against that crowd before they know what hit them
4) Close your positions when the crowd is aware of know what has hit them. Dont want to close those positions too quickly.

[kennynah]

it is necessary for anyone serious about making money from the markets to have an opinion

I don't understand this.

如果想要从股市获得胜利，必须有自己的主见。。。

i hope this above helps

[millionairemind]

it is necessary for anyone serious about making money from the markets to have an opinion....whether it is contrarian or in line with general consensus... the ones without an opinion but are easily swayed from one end to the next usually suffer negative results...

There's a school of thought that goes as follows:-

1) Do not follow the crowd
2) Look for reasons why the crowd will be wrong but do not bet yet
3) Wait for those reasons to appear and then only bet against that crowd before they know what hit them
4) Close your positions when the crowd is aware of know what has hit them. Dont want to close those positions too quickly.

Actually I feel that we SHOULD follow the crowd.. that is the reason behind TRENDS.

However, it is at market turning points that the crowds are almost, always wrong...

[winston]

So maybe step #1 to 4, is for playing the turning points.

I'm never comfortable playing with the crowds. Example Chinese Property counters. After it has doubled and tripled, the Analysts are continuing to revise Target Price upwards while everyone is coming out with Placements.

At the same time, I'm not that smart to be ahead of the crowd. So I aspire to lose the first 10% to the crowd and to also miss the last 10% to the crowd. My 80 / 20 rule.

Ha Ha ... easier said than done lah

[kennynah]

there's always the institutions which set the turning the turning points, whether the small or prolonged corrections to trends... thus, we as retail traders will likely not be able to mimic. hence, the notion that most often, we won't ever trade the lowest or highest prices.

once those major institutions begin their march on, trends will begin to form; ie. the charts will start showing clearer signs. the most astute retail traders will spot them first..thru various technical indicators. they then go along with these big players... making the trend on charts appear even more obvious, though still requiring a set of trained eyes to sieve out.

by this time, a 2nd batch of better than average retail traders will hop on the train...causing the trend to become even more obvious... and when the trend becomes so darn obvious, that even he aunties and uncles at kopitiams begin bitching about it...that constitutes the last phase of retail involvement... and this is when the smarties will start selling into strength....

above is my opinion of the 3 phases of a trend formation...

as W stated, it is not wise for us to imagine we can start the phase 1 of the trend...not unless you have multi-billions, which then makes us an institution, which we are not. but we must aspire to train ourselves to have that edge to do so as early as possible...this becomes our trading edge. undoubtedly, those with this ability, will prosper more than those who enter in phase 3... but for most of us, we count our blessings that we can be level headed enough to participate in phase 2.... hence, i too, would be happy to be involved in 80% of the entire trend movement...

[OE2008]

TOL.

Anatomy of a market crash.

There are always underlying reasons for the market to crash (at least >20%) but they are often different from one crash to another. With hindsight, this recent crash from Oct 2007 was preceded by a series of events which were reported but somehow, the mainstream media and market commentators did not give adequate weight to their significance. To be fair, some did but they were far and few in between.

Just recalling, these were some events that were telling us the stories unfolding ahead:-

- inverted yield curve in July (?) 06;
- HSBC gave advance profit warning of its losses of US$10b in its US business for FY 2006 (whilst this was an upfront disclosure, her US counterparts (UK and European also lah!) were doing all their best in covering up their balance shit and off balance shit failings;
- Credit implosion, no more cheap short term loans;
- 2 Hedge funds of Bear Stearn going bankrupt; LEH, C, MER, MU, WM, AIG, MS were already in crisis mode unknown to the average Joe. Any sharp TA expert would have seen the charts were revealing steady selling off on the financials by the smart money from July 2007, a couple of month before Oct 2007 and;
- the rest are all history.

The decline was not a cliff dive but gradual and significant over an extended period with a couple of bounces in between.

I must confess that having seen these events and not profiting from it is a great shame.

Fast forward to present, so what are the telling signs if any? Already, some risks are out there eg risks of default of commercial mortgages, credit card loans, reset of ARMs, sovereign risks of Eastern European countries are known unknowns. Is the rally from Mar 09 merely a bear market rally of a more prolonged market corrections of excesses of the past few decades?

Whilst we weigh the macro economic events unfolding, watch the charts of different asset classes to better understand what are happening since the market is always smarter.

[kennynah]

watch the charts of different asset classes

appreciate that you point out which more pertinent charts you would be watching???

[OE2008]

K,

It is just a crude and easy way for the average investor to have a broad picture of a complex subject. I would suggest running through the market summary of stockcharts. See link for one example:-

http://stockcharts.com/h-sc/ui?s=XLF&p= ... 8273667991