Taiwan market needs a "Change Hand / 洗盘"

Remember on 2-Mar, I mentioned that Taiwan index will test 8800 YMA ?

We saw that on last Thursday.  It broke 8800 but closed below 8800.  Finally on Friday, it closed above 8800.  Yesterday, second day closed above 8800 but then this was something we need to take note off - market ended with a black hanging man at 8800 YMA and the major 8860 resistant level.

In order for Taiwan market to move further north, it needs a successful so called "change hand" to take place.  Chinese, we called it 洗盘。What does that mean and how does it work?  Let me give an example of a bus loaded with passengers reached interchange.  What we expect/hope to see is this - passengers alight and boarding.  And for the bus company to be profitable, they need enough boarding  passengers to cover the alighting passengers. 

So YMA is the interchange.  The earlier big boys are alighting.  And for Taiwan market to move further north, they need another batch of big boys to step in to take over this baton.  If it don't, I believe everyone knows, what will happen.  Watch and enjoy how the game play.   

ECB cut interest rate, expand QE

Once again, the "ba ku teh" story.  Not salty, add salt, not spicy, put more chilli powder and pepper, not enough water, add more water.......this is what exactly happening now, adding ingredient after water, water after ingredient.   

Yesterday, ECB showed hand.  They cut its main interest rate from 0.05% to 0% and cut its bank deposit rate, from minus 0.3% to minus 0.4%.  The bank will also expand its quantitative easing programme from €60bn to €80bn a month.  And the bond-buying programme will continue at least until the end of March 2017.

During Draghi speech, euro dollar fell, stock and future market spike.  An hour later, they went the other way round.  Example of DAX which gained around 3% became negative 3%  We saw analysts came out to say.......oh because of this because of that......... 

Let's take a look at past history.  The last time Japan reduced their rate, market responded negatively.  The last three times that China reduced their interest rate, market responded negatively as well.  It seem like market (investors and traders) is sick of all the interest rate game. 
 
What about QE?  Whether was US, Europe or Japan, as long as QE, their respective market took new height/high.  What about this time round?  Like the past, positive and take new height?  Or market is becoming sick of all this game?

What we saw yesterday, the spike and then turned around, euro dollars fell and then U-turned up, those were just how the big boys moved the market around.  Big boys wanted to buy and they need seller, wasn't it?  When you know another set of money is coming into the market what will you do?  Buy or sell?  If everyone buy, where the seller come from?

Next question, how long the possible rally may last?  Will the respective market take new height?  Not forgetting our big brother, 15 and 16-Mar FOMC.  I don't think Janet Yellen is going to say US is going to raise another 0.5% interest rate on end Mar or so......nevertheless I still want to be on guard, in...case..... And of course, the other one, 20-Mar oil producers in and outside the OPEC exporting countries plan to meet in Moscow to discuss an output freeze. 

Most important, monitor the big boys closely.  The coaster ride will continue.  Anytime, anything can happen.  Know what you are doing. Do not listen to other.  Enter a trade with good reason.  Define your cut loss and of course knowing when to take profit.  A lot of investors know how to buy but do not know how and when to sell.  Profitable trade become.......buy at $10, sell at $3.  So not forgetting this - knowing when to sell is more important than knowing when to buy.   

ECB, FOMC and Oil Producers meeting in Moscow

Markets fill with "GREED".  Everyone is looking forward, the politician will save the markets. 

Couples of important meeting over the next 2 weeks.
1) Tomorrow 10-Mar, ECB meeting.  Expect more stimulus and lower interest rate...
2) 15 & 16-Mar - FOMC. Expecting FED will not raise interest rate.......
3) 20-Mar - Oil producers in and outside the OPEC exporting countries plan to meet in Moscow to discuss an output freeze.

The big boys already stand by.  The outcome from ECB, FOMC and the oil producers meeting n Moscow will affect the markets direction.  Anything can happen, please trade with care.  Know what you are doing.  Define your cut loss.  When market goes against you, make sure you act without hesitate. Never challenge the market.  Trade what you see and not what you think.  And enjoy the show / ride. 

One of the TA tactics

Recently, numbers of mine friends, neighbours......asked me these - can I buy.....this stock, that stock at......, should I sell .........at ............   Well I trade what I see.  Whether I long or short, I have a specific reason of entering a trade.  I don't follow the crowd. I don't listen to others. 

Let me share with everyone how I catch the recent turned.  Since Taiwan had been leading the market movement over the past few months, I shall use them as an example.  And same as usual before I look the actual index, I always study their Future movement.  Therefore, the chart that I am going to show you is "Tawan Index Future".

1. The market started coming down in early November.  The downside trend was - down, consolidated, down again, then rebounded and finally third wave down all the way to point number 2.

2. A white long candle which we have not seen for months.  Market opened - a scary and panic gap down.  But end of the day market closed high with volume.  This was what I called a typical buyer commitment.  Who were the buyers?  You and me?  No way.  It was the big boys who came in. 

3. Few day later, we saw another long white candle.  And again with volume.  Buyers - you and me?  No!.  Once again the big boys.

4.  Next day, market gap up and closed high.  Unfortunately, next 3 days, market end lower.  The trick was here.  Yes, all the 3 days opened with panic gap down, but when you take a closer look at the candles,  they were all white spin top candles.  It told me that someone was supporting the market. 

5. Came back from CNY.  Taiwan closed 10 days for CNY.  Remember what happened to that 10 days.  Market opened with a panic gap down.  But end of the day what happened?  Market closed positive 3 point.  Who were buyers?  Retail?  Ask ourselves, how many of them dare to buy at that moment / on that day?

I hope my sharing benefit everyone.  Next time when you encounter the similar situation, you know what to do.

Whenever you feel/think that the market 完蛋了, the hope and greed return.

So far how's the rebound?  Did you make money from the recent rebound? 

Let's pull out some charts to look at how the rebound went on different regions and markets.

Taiwan was the strong market amongst all.  Natural disaster, Taiwan earthquake.  They closed 10 days for Chinese New Year.  US and Europe markets tumbled during that 10 days.  Back from CNY, first day market opened - wide gap down but end of the day it closed 3 point positive.  Moving forward, Taiwan market crossed 50MA, 100MA and YEC.  High chance that the Taiwan market will test YMA which is around 8800 point. 

Shanghai market, rebounded like a tortoise.  Crawling up slowly, small step one after the other.  However on 25-Feb, with only 3 days, it wiped out all the steps, back to the base camp and formed a double bottom.

STI, a different set of rebound pattern.  Trading sideway for almost 3 weeks before it rebounded 50% of its bae camp.

Europe market like DAX and CAC, it rebounded, then came down again broke down, formed a typical lower high lower low and now it rebounded again and about to test the first lower high resistant.

US market DOW, rebounded then came down to form a double bottom.  Last Thursday it broke up.  Already 4 days stayed above the resistant level. 

Recap, analyse and prepare:-
When market started to plunge on Y2016 opening, we saw the so called experts, analysts.....telling investors not to worry..........  However when markets continued to trade further south on second and third weeks, all these analysts and experts started to tell people sell, sell.....and there was where I saw the sign of market was about to rebound. 

Some bullish experts went missing when market continued to pour down.  However, last week I started to see couples of them came back and their called was don't worry buy on dip.  Today, we have a mix group of analysts and experts called.  So who should or you want to listen to? 

Recently I have someone asking me, recently they bought OCBC at $7.40 because of ....... and they planned to keep the stock for 2 to 3 years.  By then the price go up .......  They asked for my opinion.  And also asked me did I buy?  Well......... experts had given them the advice.......what else can I say?  People just want to hear something that they like to hear, so I wished them good luck. 

As I have been always said this - don't listen to others, do your own analysis and homework.  There is no such thing as easy money.

Today market unlike 2009 crisis which came fast and fierce.  I mentioned this since early 2015 today market is like 温水煮青蛙 (I even gave example of boiling a "ba ku teh" soup).  The market will tear you piece by piece.  Ask yourself, since 2015 how many times you seen this - whenever you feel/think that the market 完蛋了, the hope and greed return.

Low interest rate.  Countries like the Europe, Japan.....are printing money.  So where do all these funds go?  Yes, the investing market.  The funds move from one product to the other product, one region to the other region. 

I also keep saying this - today market is mend for trade and you trade what you see and not what you think.  Big picture, the Europe and ASIA markets are inside the bear territory.  What I am seeing now is a rebound.  As you can see, there are many different ways/patterns of rebound.  Basically a rebound plus consolidation can take 2 to 3 months or even longer.  I am watching the US market.  She has not fall inside the bear territory yet.  When she does, there is where the second game begin.

Beside that I am watching how the analysts and so called experts.......retail investors/traders call/react to the market.  Big boys are going to use the whatever economic numbers, politician involvement like the interest rate, QE, policy........to move the market around.  So trade what you see and not what you think.  Never think that you are smarter than the market.