Market analysis, insights and trading ideas on various markets and products!

Spencer Li

Why I am Planning to Liquidate my Full Portfolio of Singapore Stocks

straits times index sti 140517

 

It has been a while since my last update on the Singapore markets (as well as my SG portfolio holdings), largely because the market doesn’t move much, so I only check on them once in a while.

Interestingly, I noticed that the STI has had an impressive run, coming off a low of 25xx to break past the 3000 level in the past few months. However, is this move sustainable?

Full Portfolio of Singapore Stocks

Taking a closer look at this weekly chart which shows the historical prices over the last 20 years or so, one thing which stands out is that the market has been in a 7 YEAR sideways stagnation.

If we look back at the whole history of the index, this is somewhat unprecedented.

Which could explain why popularity in this market (as well as trading volumes) has been waning. In short, it does seem like a dying market.

Not to mention that during this same time period, the US stock markets have been steadily creeping up.

If we look at the most recent red shaded circle, that is where the current price is, and it seems to be running into massive headwinds. This means that the potential upside could be quite limited.

If we observe the large sideways range that prices have been moving in, the price is now at the top of the range. And we know that the best strategy in a range is to “buy low, sell high”, which means that the odds do not favour much more upside, unless there is some new strong positive price catalyst.

However, a cursory glance at recent news headlines seems to be painting a rather gloomy picture, with muted growth forecasts and ominous employment statistics. This tell me that downside catalysts are more likely that upside ones. In other words, there is more chance of a negative shock rather than a positive shock for prices.

In light of all these factors, I am planning to cash out most or all of my profits, and wait for more favourable odds to redeploy my capital. As a trader and investor, timing is always key.

Good luck, and trade wisely! 😀

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Spencer Li

Long-term refinancing operations (LTROs) – Long-term time bombs?

Long-term refinancing operations (LTROs) involve the central bank lending money at a very low interest rates to eurozone banks, which has led to the term “free money.”

The injection of this cheap money means that banks can use it to buy higher-yielding assets and make profits, or to lend more money to businesses and consumers – which could help the real economy return to growth as well as potentially yielding returns.

Banks can use assets such as sovereign bonds as collateral for the loans – although they can no longer use Greece’s bonds as collateral after the country was downgraded to a default rating by Standard & Poor’s. This has helped to boost some of the more troubled sovereign bonds, in peripheral countries such as Spain and Italy, as their yields have fallen because they are being used as collateral for the operations.

This can help out the entire country. Spanish and Italian banks, the biggest buyers in the last operation, used their holdings of their own sovereign bonds as collateral for the LTROs. This helped reduce sovereign bond yields, which were threatening to stay at unsustainable levels that would make debt repayments impossible.

In previous auctions, the money usually had to be paid back within three months, six months or 1 year. The ECB’s launch of three-year LTROs in December meant that this time scale was extended, which helped cause a much greater takeup than usual.

– references: CNBC


The question is, what happens after 3 years?

Unless the Euro zone countries can miraculously turn their economies around in 3 years, the problem has just been delayed by 3 years. If the banks choose not to loan out the cash, they can simply use the money to increase their returns via investments, which does not benefit the economy at all. Also, where does the ECB get this cash from? It will need to pay back the cash one day, or risk the devaluation of the Euro, similar to what the US is facing now. The collateral used are the sovereign bonds (which no one wants to buy in the first place), and should the countries decide to default, the ECB will be left with a lot of useless junk on their hands.

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Spencer Li

Simple chart-reading can tell you all you need to know

Leonardo Da Vinci once said that simplicity is the ultimate sophistication. Let’s take a moment to ponder that. This applies to research analysis as well. When you hear people talking about some sophisticated trading system or some flashy indicators or some complex wave projections, think again. It is more likely to be smoke and mirrors. All these tell you nothing new if you know how to read the bare charts. It’s as simple as that. Simple, and yet sophisticated. Looking back at my last few stock picks, I found that it is possible to read and understand what is happening on the charts. This makes it possible to pinpoint the low risk entry points, as seen in some of my previous posts.

https://synapsetrading.com/dbs-are-the-banks-leading-the-decline/
https://synapsetrading.com/noble-group-evening-star-signals-turn-to-the-downside/

Compare that with indicators. If you see a green arrow, do you know why it is a buy? Maybe it worked the past 3 times, but will it work this time? Maybe. Or maybe not. You won’t know. In fact, you won’t have any idea why there is a green arrow. You won’t know what is happening in the market. You won’t know what the smart money is doing. That is why chart-reading is an important skill everyone should master. Banks, funds and proprietary trading firms use it as their main tool. Maybe you should consider it too.

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Spencer Li

Market Seasonality and Patterns – When is the Best Month to Buy?

One aspect of market analysis is statistical analysis, which is using statistics to find correlations and patterns, where opportunities of skewed probabilities may lurk, giving you an edge over the market in the long run. For investors, this lets you know the best month to start building your portfolio, or to rebalance/adjust your portfolio allocation.

Market Seasonality and Patterns - When is the Best Month to Buy?

Market Seasonality and Patterns – When is the Best Month to Buy?

Seasonality is a characteristic of a time series in which the data experiences regular and predictable changes which recur every calendar year. Any predictable change or pattern in a time series that recurs or repeats over a one-year period can be said to be seasonal.

This is different from cyclical effects, as seasonal cycles are contained within one calendar year, while cyclical effects (such as boosted sales due to low unemployment rates) can span time periods shorter or longer than one calendar year.

For the Singapore stock market, I have done a seasonality study, showing which months are more bullish and bearish. Contrary to popular belief, October is actually a rather bullish month. Every month has its unique characteristics, which skews the probability. As a trader,anything that tilts the probability in our favour is considered an edge.

Here are the results of my research:

Singapore stock market

Some key points to note: the best months for being LONG are April, November and December, while the best months for being SHORT are June, August and September.

There are many other patterns (some less obvious) which could have a significant impact on the stock market. Although your trading decisions should not be based solely on these, they can act as a powerful confirming indicator, or help you adjust your position-aggressiveness.

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