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Where Is A Good Point To Pick Up STI?
Perspective | 01 October 2013
By: Daniel Loh
Articles (40) Profile

The US market has indeed performed quite poorly after the QE no tapering incident. The market is cruel. Just when everybody thought that the market might be up after Fed chairman Ben Bernanke announced not to taper QE, the market dropped after the announcement. So far, the Dow Jones Industrial Average has dropped about 450 points from the top and so many problems seem to crop up recently.

Will October suffer a stock market panic? With the US government shutdown dateline on 1 October and the debt ceiling dateline on 17 October, it seems the market is heading for a rough ride.

S&P Capital IQ reported that the last time there was a government shutdown was on 13 December 1995 to 10 January 1996, and the S&P 500 dropped 3.7 percent over that period, only to snap back up 10.6 percent by mid-February.

So With The Backdrop Of Problems, What Is Our View Of The Market?

In August, we asked all to accumulate some stocks when the Straits Times Index (STI) was at 3,000 and when the FBM Kuala Lumpur Composite Index was at 1,700. We thought that anything below those levels were a bonus. Looking back we have been quite accurate with our forecasts. This was our last article published stating our forecast then: http://www.sharesinv.com/articles/2013/08/26/sti-support-fed/.

Despite all the problems in the US, we do not think that the STI will be heading towards 3,000 again. In fact, we think that within these few months, the STI will try to attempt to break 3,300.

We feel that STI has a support at 3,150. There is a chance of the STI rebounding from 3,150 should it reach that level.

5 Trading Advices:

1) Should the STI reach 3,150, you may want to pick up some stocks.

2) If stocks rebound from there, do accumulate stocks along the way.

3) If stocks continue to drop, do consider to go in with larger position size when it is in the 3,000 to 3,100 region.

4) Sell stocks near 3,300 if you are a short-term or mid-term trader.

5) Focus on the STI component stocks or energy sector stocks or mid cap stocks that have good earnings should the STI reach 3,150 .

 

Chart On The Straits Times Index

Fundamentally, we do think that any problems in the US Congress should be solved. The Republicans would not allow the US economy to collapse or the government to face a shutdown. They know the consequences of a backlash by the public should they allow it to happen. And they would never want to risk the next election when President Obama steps down three years later.

So any volatility or consolidation that happens in the market is a good buying opportunity to us! Do make use of such an opportunity in October to buy the stocks should the market drops. Do not dump them if there is a panic. Remember the lesson with the last US government shutdown that happened in 1995. The market rallied 10.6 percent in the following month after the shutdown. History just might repeat itself.

And the US economy is recovering and showing signs of bursting now. Based on our research, we do expect this Friday’s job report to be very good. The non-farm payroll report should be better than what the estimates are.

Daniel Loh’s Upcoming Seminar:  “Do you wish to know the 2 Stocks Daniel Loh is watching after spotting Oceansky recently?” is now open for registration.
For more information, please call or sms 93676623.

 

DANIEL LOH is an investment coach that specializes in equities and derivatives trading. He regularly appears on TV financial programmes like “Morning Express”, "Good Morning Singapore" and "Hello Singapore". He is interviewed bi-weekly on radio station FM95.8.

Please click here for more information about this author.


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