China market and Greece

Despite political involvement, central banking cutting the lending interest rate and lowering reserve ratio, China market just continue to plunge.  If I look at the SSE and A50 charting, it shows "fear". 

China is a non-mature market.  They are more retail investors/traders than the institution investors/traders.  That is the problem.  The greed of this retail investors/traders pushed the market up by 160% in 14 months time.  These two numbers were absolutely not acceptable.  Look at the China economic numbers, example of their GDP.  They just couldn't fix in on one and the other. 

Balancing all these plus what the charting is telling, SSE and A50 probably need a 30% correction.  Trade what I see.  Look for signal when it come close to this level.

Greece is a sideline player inside the Euro zone.  However, this player can become the key player inside the main show. 

The people of Greece vote and select their own government.  They expect this government to do something for them.  Greece borrowed money from IMF........  To receive the fund, Greece government needs to compromise some of their country policies.  If we look deeper, in fact certain percentage of this fund is just like left pocket in, right pocket out to origin.  Nevertheless, if Greece does not receive this fund from the creditor, what happen is bank, pensions fund........as what we are seeing right now. 

Greece PM Alexis Tsipias declared a referendum on 5-Jul to decide whether to accept or reject the creditor proposal debt settlement plan.  Tons of EU members and others described PM Alex Tsipias move as "gamble".

Let us look at Iceland.  Years back Iceland encountered similar problem.  The Iceland government wrote off their external debts through a call for referendum.  This external debts then featured as public debt instruments and sold it to British and Dutch banks and the respective public who were tempted by the high interest rate. 

Is Greece trying to apply what Iceland did?  Greece's main creditor is German bank.  The bigger concern over here is - if Greece will to leave the Euro zone upon debt default, others may follow as and when they are unable to repay their debt.  By then, people may lost confident on EU and the EURO may become historical.

Let's see how things go over this Sunday.  On guard and monitor the situation. 

China market - as long as nothing goes wrong, this is a positive correction

As what I keep saying - Shanghai market, first half bull charge had completed.  What next is it is going to be volatile, and it needs a proper correction.  We saw that over the past few days.  And today it has the heaviest fall of -7.4%   Till date, SSE has corrected -20%.

What about China A50 Future?  So far, it has dropped 21.2%.  So what's next?  Minimum correction of 20% is what I am looking at.  As long as nothing goes wrong, this is a positive correction.  Prepare for the second half bull charge.  How long this second half will last?  Depend on steep the slope is.  Whether is a gentle 30 degree slope of 75 degree slope.  The steeper is it the faster it end.  Refer to the below 2 chart.

Having said that, watch out what is happening on Greece as well.   

Interest rate

Remember the statement I used to describe US Fed chairman Janet Yellen against interest rate?  If no, here it is "US Fed chairman Janet Yellen knows the consequence of raising interest rate." 

She knows that.  Yellen saw how market reacted when Fed stopped QE1 and QE2.  But this time when QE3 ended, things were fine.  Why?  Because someone took over the baton.  Japan, Europe....... started printing money when US QE3 ended.  So why is there a hurry for the US to raise their interest rate since everyone is printing money.  Having said that, rate increase is a matter of time.  The challenge is how to minimize the impact.

Early May, Janet Yellen warned that the US stock valuation were too high.  Few weeks later, she insisted the economic remains on track and the rate rise this year is on the cards.  What was she trying to do?  Yes, the "impact". 

Today we have IMF, warning the U.S. Federal Reserve should delay the rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation. 

Fund manager, analysis......and so called experts had been predicting the raise of interest will kick off in somewhere second half 2014 to this year Q1, Q2 and now they said should be in Q3, Q4.......... Is predicting so important? 

Today market is mend for trade.  If you still thinking of invest buy and hold for 3 to 5 years.........well think twice.  I won't do that.  I know the day of rate rise will come.  But the actual timing I won't know, nobody knows.  So I trade what I see. 

The day will comes and I know the consequence.  I am watching what Fed has done before the announcement of rate increase take place.  And how the market respond before physical announcement / actual rate rise.  Just like gold and USD.  They were like 2 persons sitting at each end of the see-saw.  Gold weaken, USD strengthen.  Gold strength, USD weaken.  Knows the rules and join the game.  Enjoy the shows, enjoy ride and very important knowing when to get out.    

Second half Shanghai market

As usual, before I look at Shanghai market, I will analyst the China A50 Future.  Now, let's look at what happened to A50.  Yesterday, the whole day range for A50 was 1270 points.  Volatile is word that I will described about the A50 or Shanghai market.

As I said the first half bull charge has completed.  Second half market tends to be volatile and this is where your skill comes in.  For SSE to go through a longer bull run like Nikkei, it needs a proper correction.  If it don't, look at what can happen - below chart (the 2 arrows that I drew).  Look at how steep the angle was.  Remember this - how it went up, how it will comes down.

A lot of experts said that SSE can go higher.  Of course, you can take the ride but make sure you don't get trap.  History showed that numerous retail investors got trap in the second half market.  Trade what you see.  When market tells you to sell, you better sell.  No "GREED".   And also make sure you don't buy at high. 

STI fall below psychology level

STI fall below 200MA and its 2014 YEC.  The fund managers and psychology level.  Past one year whenever it fall below 200MA, buyers came in.  Are we going to see that again? Trade what I see.  I will be watching to see any signal at level.  I will be watching this Friday US non-farm payroll and Greece deadline coincides.  China market has not go into a correction yet.  Same goes to the US market.  It was still struggling between its range. 

Quarterly review

This has not change - whenever US market reached a new height, selling pressure comes in.  The recent new height which DOW took place was on 2-Mar.  After that, it struggled between the range of 17600 to 18200.  This month we saw a much lower non-farm number whether is comparing to the previous month/year or forecast.  We saw improvement on US economic is not as what analysts forecasted/expected. 

The struggling allowed the ASIA market to do a catch up game.  As you can see Shanghai, Hang Seng, STI .... broke their 6~7 years high.  Shanghai index has reached 4300.  It has gone up 2x as compare with their old 2000 point psychology level.  In other word, wave 2 or so called first half bull charged has completed.  It is time for the Shanghai index to go into a correction.  In fact, world indices needs a correction. 

Shanghai and Hong Kong connection definitely benefit Hang Seng too.  As we saw how the fund moved from one side to the other.  Recent rumour about Shanghai and Singapore connection pushed the price of SGX from 6.7 to 8.6  However, when the news broke out on 15-Apr that connection has yet to confirm, SGX dropped from 8.66 to 8.25  I believe they are going to have a good coming quarterly report. 

Interest rate will definitely go up, is a matter of time.  US was not raising their interest rate because other countries/region like Europe, Japan.....are printing money.

My researched on this year world indices movement has no change.  Stick to what I wrote on 27-Dec'14 - http://achua138.blogspot.sg/2014/12/y2015-is-going-to-be-volatile.html  I am waiting to see world major indices to come in line.  Then they continue to charge up with more retail investors joining the game. 
 

Today Hang Seng up 3.8%

Just as what I mentioned somewhere end last year, once SSE reached the 75% to 100% psychology level, the fund will starts to move from one end to the other.  Here you are, today Hang Seng went up 3.8% and it come close to its first gate resistant 26390.  Second gate is 28400.  Final gate of course is Y2007 peak 31958.  Short term trader, trade with care.  Can be volatile.