Dow and S&P market analysis for 29/10/2009

Dow daily chart with moving average, MACD & McClellan Oscillator



S&P daily chart with moving average, MACD & McClellan Oscillator


See the channel that both the Dow and S&P made from the March 09 lows till now. Moved in a perfect upwards channel since then.

The Dow and S&P hit the base of the channel which is also where the 50 day moving average is now at. At the same time, the McClellan Oscillator is at an all time low of -300. This indicates that there is no more bearishness in the market. We might be getting a bounce over the next few days.

I believe that this bear rally that began on March 09 should hit 1,125 on the S&P and 10,345 on the Dow before beginning to turn back down.

Long Term Analysis of The Dow

Initially I wanted to retype what Conrad spoke about last Friday during the Trader gathering, but I did an analysis myself and found some rather surprising results. So I’ll be writing a report based on what I found instead.

As pattern traders, I will let the pattern on the charts speak for themselves; I have changed my candlesticks to lines so that we can see the pattern on the charts clearly.

Dow in the period leading up to The Great Crash of October 1929



Dow in the period leading up to the current Credit Crisis October 2007 (note the similiarity of the charts between the 2 time periods)



After the Great Crash of October 1929, the market lost 48%. Then the Dow proceeded to recover almost 50% after finding a bottom in November 1929.



Dow lost 54% from October 2007 to the March 2009 lows in the current Credit Crisis. As of Thursday 15th October 2009, we have recovered around 45% of the loss since the Credit Crisis began. (note the similiarity of the charts between the 2 time periods)



After the Great Crash of 1929 and the subsequent huge rally that caught millions of people including the father of Value Investing Benjamin Graham himself, the market went down another 90%. It practically went to hell.



Let me reiterate that economic cycles are not caused by any one individual or country. It is the movement and rotation of generations of different thinking and actions as a whole that causes these economic cycles. So there’s no way anyone country or countries can do anything to prevent them. We can only delay the inevitable but what will happen will still happen eventually. And due to the ‘preventive’ measures taken by governments, now we see that market downtrends are taking longer to play out.

Then I got itch fingers and drew a fibo for both charts and this is what I found.

Dow after 1929



Dow now.



That was exactly 80 years from today. For those who do not believe that the Dow will move to such a low level can take heart to know that in the writings of the Father of Value Investing Benjamin Graham, he also did not believe that the Dow could go down to such a low level of 42 in 1932. He almost got wiped out if not for the relatively large cash reserves that value investors always maintain in their portfolios. As for the siginifcance of this event being exactly 80 years from now, you can read the 4th Turning by Strauss and Howe.

I believe you can come to a conclusion for the report yourself.

Dow market analysis for 22/10/2009

Dow 5mins Intraday chart



The last hour tank by the US market last night signals that the market will be going through a period of weakness. Possible support levels are at 9900, 9825 and then 9625. If it tank beyond that, the current rally would be over and we might be going downhill for a while. This would be correction rather than a bear market. I have strong evidence to show that we might be rallying to 10,360 on the Dow before this sentiment will change.

Daily Chart of the Dow



My short term analysis is for the Dow to rally and hit 10,360 before any market tank to occur. My long term analysis is that the Dow will tank back to the March lows.

Wealth Summit Asia 2009

Had a wonderful time last weekend with Lillian Too and Jim Rogers. Celebrated Jim Roger's birthday with him and took a few photos. I will upload some more photos at a later date.

October 15, 2009 Trader’s Gathering

Conrad’s speech

October is good for the beginning of rallies. Refer to Conrad’s post http://www.conradalvinlim.com/?p=1788

Had not been able to pull any fibo for the indexes since Mar 09 because the rally had not had any 40% pullbacks.

1987 is the only real V shaped recession we ever had.

Natural gas is mainly used for manufacturing and production. Be careful if manufacturing and production stays low while natural gas spikes.

Sector rotation – as governments around the world seemed to be starting to increase interest rates, we might have a rotation of the sector investing model within this short period of time before the next big tank.

Conrad’s advice on position sizing – do not commit more than 50% of your account to trading. This is the time to be conservative.

Interesting videos – the crisis of credit visualized by Jonathan Janis
The weak economy and the dollar by Steve Forbes
Marc Faber’s 3 part interview on youtube

The Christmas gathering is on the 18th of Dec 09 from 6.30pm to 1am. Things to bring are $2 for the scalping challenge and laptops and extra monitors for scalping.

October 16, 2009 Trader’s Gathering

Speech by Richard Martin

Deflation is more devastating than inflation

The average American is now making less money than in the 60s in real terms – American’s standard of living had been on the decline since the 60s.

USA is losing its position in the world but they will not give it up without a fight. They will not allow their hegemony to diminish unnoticed.

The turning point of American power globally is on Aug 15, 1971 when President Nixon ended the gold parity with the USD.

Proof of American arrogance:
Iraq war – went to war without the support of the United Nations & without any proof of WMD
Tariffs on Chinese made tires without consulting WTO or other relevant international parties – introduced the tariffs due to lobbying from US businessmen and without any regard to international relations; this is usually how wars are started.

Singapore is at the forefront of the next economic resurgence in Asia and has established a financial niche for itself - Richard Martin himself had relocated here from the US to be at the forefront of the economic revival.

The Dow should lose 90% of its value from the peak of 14,000.

Interesting facts about the Dow

1901: Hit 100 for the first time
1941: Touched 100 for the last time Took 40 years to do this

1966: Hit 1000 for the first time
1982: Left 1000 for the last time Took 16 years to do this

Believes that none of us will see the Dow hit 14,000 again in our lifetimes.

Best track record of interest rates prediction over the last 25 years:
Lacy Hunt www.hoisingtonmgt.com

NOTES FROM WEALTHSUMMIT ASIA 09 AT SUNTEC CITY

4 PILLARS OF WEALTH (CRUCIAL TO WEALTH CREATION)

1) ECONOMIC CYCLES
2) ART OF FINANCE – GETTING MONEY FROM BANKS
3) COMPOUNDING
4) ART OF NEGOTIATION (DEAL MAKING)

CLOSING THE DEAL (DEAL MAKING)

1) BELIEF – ATTRACTS ATTENTION; PEOPLE WHO HAS MOST BELIEFS ATTRACTS MOST ATTENTION
2) RAPPORT – LUBRICATES INTEREST
3) AUTHORITY – REMOVE FEAR OF DISTRUST; KNOW WHAT YOU ARE TALKING ABOUT
4) DESIRE – CREATES BUYER ACTION; WHETHER THE PERSON WANTS THE PRODUCT

PEOPLE’S BIGGEST FEAR WHEN BUYING A PRODUCT IS THAT THEY WOULD MAKE A MISTAKE – GOT TO ESTABLISH MYSELF AS CUSTOMER’S RESOURCE

RAPPORT – WHEN PROSPECT KNOWS THAT YOU UNDERSTAND THEM (BEFORE YOU CAN CLOSE THE DOOR, YOU HAVE TO OPEN IT FIRST)


IMPORTANT WEBSITES
SHAREJUNCTION
AMAZON
EBAY
OPPORTUNITY AVE

THE MOST IMPORTANT PART OF ANY BUSINESS IS THE DATABASE.

Dow and S&P market analysis

The market is sure on a run now and I’ve changed from bearish to bullish now. As long as the indexes stay above the 50 day MA, the market would remain bullish. (since mid July) However I still believe that we are not out of the woods yet. The recession should be a ‘W’ recession and so we would be experience another big tank soon. According to a few indicators, the ‘soon’ seems to be sometime in Apr 2010.

I will put up more charts when I have more time tomorrow. In the meantime, trade safe and sleep well.