The Pattern Trader

THE LIFE OF A PROFESSIONAL TRADER. HIS MOTIVES, INSPIRATION AND VISION.

Upcoming Workshops

Upcoming Previews

PATTERN TRADER TUTORIAL PREVIEWS

Next WAT Previews in Singapore will be on:

Thursday, 11 March, 2010 @ 19:00

Saturday, 13 March, 2010 @ 12:00

Topic of Discussion:
What do Pros know and do that amateurs and novices don’t?

• What do Wall Street traders know that give them their advantage in the market?
• How and what do they trade that makes them so rich?
• Why do they seem to know where the bottoms and tops are?
• Why don’t novices know the “right” way to trade?

If these are the kind of questions that you always ask yourself, then it is about time you did something about it. Come and find out that the Pros do and what they know and why you are always going to get beaten by them.

Venue:
Adam Khoo Learning Technologies Group Pte Ltd
10 Hoe Chiang Rd #01-01 Keppel Towers Singapore 089315
Tel: (65) 6274-0105 Fax: (65) 62742105

Reserve your seat for the next session now!
Drop an email to:
wandy@akltg.com

*LIMITED SEATS, SO BOOK EARLY!!

Click here for more information on the
Revised Pattern Trader Tutorial (WAT2010).

Click here for the 31 March 2010, Batch 38 Schedule

Even More Viewing Education

Economy recovering? Housing bottomed? Not really if you watch the following videos … there is still much so worry about.

The first video for this post is a fact-by-numbers housing report which doesn’t look at all like green shoots, let alone withering lallang …

This is the future of the Dollar …

And this amazing story is about interest rates on credit cards … 59.90% !!??!!

This is something Singapore needs to look at before out students get the wrong idea about spending habits …

And while the banks rape us for interest, they still refuse to lend … even the small banks have become Shylocks …

So while the banks don’t lend, small businesses can’t hire … and if they don’t hire, unemployment stays high … if employment is hard to come by, Americans stay broke … if Americans stay broke, the banks won’t lend money out to risky borrowers … a vicious circle.

And it was the banks that started this whole mess in the first place by lending to less-than-desirable borrowers that started the Sub Prime Mortgage Crisis. (Insert ironic jingle here.)

Here’s a little tidbit from my good friend RM;

Our machinations have hidden an actual, ongoing depression.  More than $2 trillion in direct spent support by the government – borrowed beyond tax receipts in the last 18 months, constitutes 14% of annualized GDP.  On an annual basis this is about 10%, and a 10% top-to-bottom contraction in GDP is the economist’s definition of Depression.

Lastly, don’t forget to read this very creative link: “I’m Sure Glad The Recession Has Ended“. You might find the format rather familiar! ) (No, I didn’t copy him … just look at the dates of his postings to see who the original stylist is.)

March is traditionally a modestly bullish month and April is the best month of any year. We shall see how this “jobless” recovering economy will hold out during and after May.

Happy Hunting!

February 2010 In Review – March Preview

This is going to be a short post because February was quite uneventful in spite of the Chinese New Year celebrations. February was also my last chance to get as much rest and family time before the mad season began – which always happens the week after Chinese New Year. From this day forward, I can count the number of free weekends on half a hand all the way to November.

But I ain’t complaining … yet.

For the third year running, INVEST Magazine has chosen to feature an article from me. With this article, they’ve also requested that I write another piece for the next issue too. Looks like I might become a regular feature.

Amidst all the other usual activities, on the 20 and 21 March weekend, the ATIC Asia Trader & Investor Convention will be held at the Kuala Lumpur Convention Centre, Kuala Lumpur City Centre.

My spot will be on Sunday 21 March at 4:45pm in the NextVIEW room.

And that’s all I want to highlight for now … it’s just too messy to talk about everything else that March is about to throw at me.

But I ain’t complaining … yet.

MARKET PREVIEW FOR MARCH 2010

For the first time after three consecutive years, February has closed positively. And now we watch that extremely crucial December-low level of 10,235.63 and pray like mad that DOW doesn’t break below that by the end of March.

The DOW looks to have completed a Pennant and that Doji might just prompt some sort of break-out next week. 10,400 will become the next level of contention with a soft resistance at 10,440. On weekly candles, DOW wears a Hanging Man which implies a week of consolidation to come. Monthly candles give DOW a Bullish Harami (Inside Bar) – a break above the high of February could indicate some upside for March.

This leaves the DOW and S&P below their respective 50DSMAs leaving only the NASDAQ above all its major MAs. This fight against the 50DSMA is going to be a key battle in the coming week. If the market is to gain higher ground in the weeks to come, it will have to hold above the 20DSMA first.

March has a tradition of opening with a modestly bullish week. The second week of March tends to be the most bullish of the month while the third week goes into some major corrections and finishes badly in the closing week.

March is the longest trading month of the 2010 calendar with 23 trading session and no holidays. March Expiration is the first Triple Witching Friday of the year and is highly unpredictable.

The 14th of March (Sunday) will see Daylight Savings resume and will bring the clocks of Singapore and the U.S. closer by an hour. Local traders will welcome the favored 9:30pm (SG) opening bell in the U.S. starting on the Ides of March.

Remembering that we had a bearish January Barometer, investors will be watching the close of March for the quarter-ending December Low indicator. In recent years, March has failed to close with the usual end-of-quarter window dressing rally. Since 2005, the only time the last week of March was bullish was, ironically, the worse year in recent stock market history – 2008.

Following on the past week’s volatility and the end of earning season, normalcy should resume. Greece will continue to be a drag, Nonfarm Payrolls on Friday will be keenly watched, the dollar will continue to be a fear indicator, Wednesday’s Beige Book report will be highly anticipated and the market will continue its roller-coaster ride, albeit with less volatility.

SUMMARY

For now, I am going to take a deep breath and suck it all in and brace myself for the next 10 months. With everything else that’s going on, it’s going to be busy, it’s going to be rough and it’s going to be one helluva roller coaster … and that’s just the market I’m talking about.

And after all that, I’ll complain.

Happy Hunting!

You Want More Charts?

Following up on the original “You Want Charts?” posting on January 19, 2010, here’s an update with new charts and more shocking stats.

So it’s no longer just the men who are losing jobs. In past recessions, it was glaringly noted that women tended to retain their jobs better than men and also found jobs better than men. This time, the economy is making victims regardless of gender.

The weak economy is also not racist …

In a dated statistic, it would seems that this “Jobless Recovery” may have some credibility as the economic data improves …

… and unemployment stalls its meteoric rise …

… and the Leading Economic Index looking like something that would turn a rock climber on.

Still, the worrying signs are still there to ponder. Housing Starts are still down while vacancies soar …

… exports drop while other countries (did I say China?) take over …

… and we haven’t even touched on Commercial Real Estates yet.

The Plunge Protection Team is still packing a lot of punch with loads of back-up in store.

And as they pump more money into the system, companies like AIG pump it out to those that don’t need it the money …

… and the banks continue to stifle growth.

The obvious conclusion we can take from all this is that the market will continue to show strength, albeit an artificially inflated one, while the economy continues to groan and bleed.

The long-term problems are so deep and heavy that we cannot even start to imagine what the future is going to look like, short of depressing and troubled. Will history repeat itself in this day and age and will this massive imbalance in global economics lead to where all historical imbalances have led to … war?

With the on-going worries amongst the PIGS, Dubai and the U.S., the power of money and economic strength has obviously shifted to Asia. Monetary policy alone will not be enough to bring that power back to the west. This could just be the turning point in the planet’s history where yet again, power shifts. It’s been a long time since Asia held the world in the palm of its hand – the last guy to do it was Kublai Khan, 700 years ago.

Thinking that it may not be a bad idea, I’m tempted to write a new book titled;

“How the West was Weaned“.

Click here to post your treasured comments. Thank you!

Saturday 13 February 2010 – AMC

Did I say something about inconsistency?  In spite of a choppy and rather bearish week, we did finish the week with a modest gain. But it is going to get interesting from next week. In preceding Tiger years, the bulls have had it bad. I am going with the analysis that I did at the start of the year which is that it is going to be a volatile and range bound year. So far, the market has been right on track. We’re still down for the year and right on track for a fourth down February since 2007 and the third Down-Jan-Down-Feb since 2008.

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,099.14 -45.05 (-0.44%) Volume: 296,514,677 (+52.47%) Range: 9,983.82 – 10,137.39 (153.57 points)

Friday was actually a rally day … but it was on the wrong side of the border. That Hanging Man is an interesting proposition and gels with the other technicals. DOW sits right under the downside FAN’s 61.8% resistance on a lower high after a lower low. Should that Hanging Man stall the rally, we’re going down again. Where to?

Originally Posted by Conrad on Monday 01 February 2010 Seeing how February is likely to finish down, it won’t take much for DOW to get down … to 9.730, the scene of my last COP and a vital confluence level for 5 years between 2000 and 2004. More recently, in August and November 2009, this became a key support level. Thus, this is going to become a critical psychological level with technicians calling 9,750 and 9,650 as critical technical levels. Now that DOW has successfully closed below the 100DSMA in consecutive sessions, the 200DSMA is coming up fast and it is not hard to imagine how the 200DSMA may become the catalyst for this breakdown.

February may be positive for now but we still have 9 days to go including a traditionally bearish expiration week and a February Expiration Friday that has been down 7 out of the last 10 years.

The 200DSMA still looms and the 100/20 crossover is imminent like a bad dream that won’t go away.

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,183.53 +6.12 (+0.28%)
Volume: 696,578,768 (+16.22%)
Range: 2,151.99 – 2,184.57

S&P 500 INDEX (SPX: CBOE)
1,075.51 -2.96 (-0.27%)
Volume: 3,793,567,200 (+2.80%)
Range: 1,062.97 – 1,077.81

Originally Posted by Conrad on Friday 12 February 2010 Advancers outpaced Decliners by an average 3.15 to 1 on lower than average volumes (-4.76%) on Thursday (avg +1.13%). Oops … those lower volume values aren’t very encouraging. The internals weren’t that bad but I would have preferred a better showing from the TRIN. It is interesting to note that although overall volumes were lower than average, the volumes on the benchmark were higher compared to the previous days.

Advancers outpaced Decliners by an average 1.28 to 1 on higher volumes (+0.59%) on Friday (avg -0.14%).

So the day, it would seem, was more bullish than it was bearish. We did get a pre-holiday rally, albeit a very divergent one. The VIX dropped to a six-day low and settled under 23 points. If the bears don’t grab the initiative on next week’s shortened week, this will mean that the market is well and truly confused. Given that volumes are the typical pre-holiday weak levels, it remains to be seen if the bulls are really out of it. The internals don’t really spell a true picture as it was all over the place, especially in the closing hour. One thing remains clear though – the TRIN was bearish all through the day in spite of all the buying to bring the market up.

SUMMARY

I’m glad that week is over. I can’t stand those weeks that are difficult to read because it leaves you with little idea of what to do should things don’t work out when your opinions go out the window. And talk about volatility! I’ll be happy when February is over. 

Tuesday is a long way away so I’m sticking my neck way out there and calling a down first day of the Metal Tiger. This is the one week in February that’s easy to call as it has a habit of being consistently bearish. Since I didn’t get any signs that the bulls were committed in the past week, I’m giving up hope and shorting everything … NOT! … but I will be bearish and be selling more than buying.

___________________________________________

To all my readers …

Have a Perfect,

Prosperous and Profitable

Year of the Metal Tiger

and may all your trades be great ones!!

And to all the Lovers,

Have a Wonderful

Valentine’s Day!!

From Conrad

Market Update: 8 February 2010 BMO

All it took was one massive down day to bear-down the whole week. What happened on Friday was freaky – we’ll be looking very closely at what happened on Friday after 1400 hours …

I would have preferred to have tanked instead of letting the PPT get back in the game.

Market Internals for Friday 5 February 2010 – 17:30

Leading Sectors: Financials (+1.22%), Tech (+1.10%), Telecom (+0.50%), Materials (+1.74%).
Leading Industries : Gold miners- GDX +5.4%, SPDRS metals/mining- XME +2.9%, Semis- SMH +2.5%, IGW +2.3%, nat gas- UNG +1.7%, iShares REITS & real estate- ICF +1.9%, IYR +1.9%, Basic materials- XLB +1.9%, IYM +1.25%, iShares US broker/dealers- IAI +1.8%.

Lagging Sectors: Health Care (-0.22%), Consumer Staples (-0.08%), Consumer Discretionary (-0.47%), Industrials (-0.56%), Energy (-0.12%),
Lagging Industries: RBOB gas- UGA -2.2%, Heating oil- UHN -2.2%, Commods- GSG -2.0%, Base metals- DBB -1.7%, Global shippers- SEA -1.5%, Crude/WTI oil- USO -1.7%, During OIL -1.7%, DBC -1.3%, India- INP -1.3%, iShares S Korea- EWY -1.2%.

NYSE :
Higher than avg volume @ 1562 vs closing avg of 1220
Decliners outpacing Advancers (adv/dec): 1326/1740
New highs outpacing new lows (hi/lo): 26/25

NASDAQ :
Higher than avg volume @ 2818 vs 2133
Advancers outpacing Decliners (adv/dec): 1433/1214
New lows outpacing new highs (hi/lo): 16/49

Other Market Moving Factors:
• Late day short-covering rally coincides with pullback in the dollar from 6-month highs
• January payrolls fall unexpectedly, but unemployment rate moves lower

COMMENTARY

I take that back … never underestimate the power of the dark side … er … I mean the PPT … waitaminit, they one in the same! 

___________________________________________

TECHNICAL UPDATE – MONDAY 08 FEBRUARY, 2010 – BMO

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,012.23 +10.05 (+0.10%)
Volume: 308,320,075 (+1.34%)
Range: 9,835.09 – 10,031.96 (196.87 points)

The DOW and almost everything else in the U.S. market finished with impressive Hammers, implying an end to the downtrend and a strong possibility of a reversal on Monday. The DOW barely kept its head above 10,000 to give some hope to the purist technician. But it remains rooted below the 100DSMA for a second straight day.

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,141.12 +15.69 (+0.74%)
Volume: 823,186,454 (+1.14%)
Range: 2,100.17 – 2,142.27

S&P 500 INDEX (SPX: CBOE)
1,066.19 +3.08 (+0.29%)
Volume: 5,400,868,400 (+5.21%)
Range: 1,044.50 – 1,067.13

I wrote that about the previous Friday’s (29 Jan) action. Last week, the Decliners swung into action at 1400 hours and drastically changed the numbers. Volumes picked up and prices tanked.

Last Friday, 5 February, it pretty much looked like a mirror. The Advancers swung into action by 1400 hours and changed the numbers while all the internals pointed to a bullish commitment by 1500 hours. The intraday recovery was an impressive 172 point rally.

The VIX dropped, total volumes (black) picked up, up volumes (blue) spiked and down (green) volumes stalled …

… the Tick and Trin reversed without any doubt … Just check out the swing on the internals in the last hour of trading …

Decliners outpaced Advancers by an average 1.07 to 1 on higher volumes (+30.63%) on Friday (avg +0.38%).

I just cannot be convinced that the market actually returned on its own merit. There is still something very wrong with this picture and I can’t put a finger on it. If you simply add up the hour-on-hour volumes, there is no way the last two hours of up volumes could outweigh the day’s down volumes between 0930 and 1400 hours.

In time, I guess we’ll find out.

COMMODITIES & BONDS – Summary for Monday 01 to Friday 05 February, 2010
Natural Gas Outperforms Commodity Complex; Precious Metals Worst Performers, While Ags Outperformed

Commodities were mixed this week, with metals turning out to be the worst performers and agriculture the best performers. Crude fell 2.3% on the week, while natural gas managed to gain 7.5%, while most other commodities were suffering. Silver was the worst performer with a loss of 8.1% on the week. Gold fell 2.8%. Copper futures posted a sizable loss of -6.4%, while the Baltic Dry Index fell 5.7%. The US Dollar Index was one of the largest contributors to weakness as it put in its highs for the week on Friday, after pushing into positive territory on Wednesday.

Looking more closely at energy, February crude oil futures extended last week’s loss of 1.8% by losing another 2.3% this week to close at $71.19 per barrel. Crude traded in positive territory for the first half of the week, hitting highs overnight on Wednesday and then showing a muted reaction to Wednesday’s inventory data (build of 2317K vs. consensus of a build of 400K). However, crude began to fall sharply ahead of the open of floor trading on Thursday, losing over $3 and pushing crude back to the unchanged line. In trading on Friday, losses extended and crude actually fell sharply for over $3 again, hitting a low not seen since Dec. 15, 2009. To end the week, crude closes just above its low for the week.

Natural gas was choppy all week but managed to stay in positive territory, despite late-week strength in the dollar. Inventory data (draw 115 bcf vs. consensus of a draw of 121 bcf) pushed natural gas to its lowest levels of the week on Thursday of around $5.273. However, natural gas bounced off that low to put in session highs on Friday around $5.60, closing just under those levels on the week.

Precious metals were pretty flat for the first half of the week, with only one volatile trading session, which occurred on Thursday when gold and silver fell sharply and into negative territory. Both precious metals extended losses on Friday and put in fresh lows for the week (Gold $1044.50, silver 14.65).

In industrial metals, March copper lost 6.4% the week to $2.86, while aluminum prices lost 1.7% to $2055.25/ton, now well under its recently hit 15-month high of $2370.50/ton hit on December 6.

Ag commodities outperformed the overall commodity complex, excluding natural gas futures. Wheat and soybeans were flat this week, while corn futures fell 1.4% primarily on strength in the dollar. The ag market is currently waiting to see how the South American soybean harvest ends up because it will have a large affect on corn and soybeans futures. For now, the next notable catalyst driving the ag market is the next USDA supply/demand report released on Feb. 9.

The dry bulk shipping sector, the Baltic Dry Index (the cost of renting ships) fell 11.1% to 3204, as indicated by the benchmark Baltic Dry Index (BDI).

Treasuries finished the week on a high note with the market getting back the past couple weeks in fairly dramatic fashion as stocks crashed, concern over the European situation and general uncertainty in increasingly volatile markets. The day’s payrolls report was still given much currency, but the sovereign debt risk issues weighing on the continent continue to suck out riskier business as the flight-to-quality trade rules. The possibility that some jitters will be soothed along with likely corrective action could add drag come Monday (as well as the end of a potentially tumultuous weekend).

The week ahead has a light calendar with the bonds big events being the $40B 3-yrs Tuesday, $25B 10-yrs Wednesday and $16B 30-yrs Thursday. There will also be the mid-week circus of Bernanke’s testimony on unwinding all the bailout schemes without blowing up the markets. Could be interesting, but the players should choose their words very carefully and Bernanke likely to do some fancy dancing to avoid being painted in to a policy or concrete plan corner. The curve was worked flatter in the late session with the 2-10-yr yield spread running 279.5.

The dollar was backed off its best levels late but the index is holding near July levels, the yen near its year’s best on the euro which was just whacked down generally, holding near its worst level since May on the buck.

Treasury Yields :

• 2 Year Note 0.76% -0.04
• 5 Year Note 2.23% -0.07
• 10 Year Note 3.56% -0.04
• 30 Year Bond 4.52% -0.02
2/30 Spread : 376bps (+2) … 2/10 Spread : 280bps (unch)

Two straight days of massive running into bonds as the dollar-equity carry trade becomes more apparent.

Gold (CMX ) April 10 ($US per Troy oz.) : 1,053.50 ( -9.50 )
Light Crude (NYM ) March 10 ($US per bbl.) : 71.19 ( -2.94 )

Earnings Highlights for week Monday 08 to Friday 12 February 2010
Monday:
BWP, CVS, ERTS, ESLR, FWRD, LNC, and TWTC.
Tuesday:
BIIB, BJS, KO, CTSH, CVH, TAP, NYX, WMG, NTGR, and DIS.
Wednesday:
MT, CCE, DF, DISCA, ELN, ICE, LVLT, S, WYN, ALL, BSX, PL, PRU, and SWIR.
Thursday:
ALU, EXPE, FLIR, JASO, MAR, PEP, PM, STRA, VIA.B, ACL, AB, BJRI, NILE, BWLD, CEPH, CAKE, CMG, CSTR, MFE, and PNRA.
Friday:
ALE, HCP, PAS, and UPL.

Events for week Monday 08 to Friday 12 February 2010
Monday:
None
Tuesday:
10:00 am Wholesale Inventories
Wednesday:
08:30 am Trade Balance
10:30 am Crude Inventories
14:00 am Treasury Budget
Thursday:
08:30 am Initial Claims
08:30 am ContinuingClaims
08:30 am Retail Sales Jan
08:30 am Retail Sales ex-auto
10:00 am Business Inventories
10:30 am Natural Gas Inventories
Friday:
09:55 am Mich Sentiment

Conferences and Shareholder/Analyst Meetings of Interest
for week Monday 08 to Friday 12 February 2010
Monday:
- WAG, HUM, UAM, WLP at UBS Global Healthcare Services Conference
- $24 bln 3-month and $27 bln 6-month Treasury Bills Auctions
- LINC, FFIV, PENN, RAX at Deutsche Bank Securities Small and Mid Cap Conference
Tuesday:
- ODSY, MHS, AET, SUNH at UBS Global Healthcare Services Conference
- RHT, SAP, ADBE, ENTR at Thomas Weisel Technology & Telecom Conference
- $40 bln 3-yr Treasury Notes Auction
Wednesday:
- AMTD, BAC, COF, WFC at Credit Suisse Financial Services Conference
- AMSC, FLO, FMC, POWI at Deutsche Bank Securities Small and Mid Cap Conference
- Fed’s Tarullo
Thursday:
- ZION Analyst Meeting
- AMP, LNC, MET, NYX at Credit Suisse Financial Services Conference
- $16 bln 30-yr Treasury Bond Auction
Friday:
- AXAS at NAPE Expo 2010

NOTE: Monday 15 February 2010 is President’s Day. The markets will be closed.
__________________________

SUMMARY
This week is going to be tough to call as the second week of February is always never consistent. It should be a fairly bullish week considering we have the eve of a three-day weekend on Friday and two of the most historically bullish February days within the week.

Technicals and the psychological 10,000 should also provide some upside impetus as the market takes a breather from too much tanking over the last three weeks. Upside should be limited to 10,300 while 10,000 should continue to provide some form of support.

However, if I get it wrong, we’re getting down to those 9,730 and 9,620 levels in a hurry and if we do, this will be a catalyst for worst things to come.

Credit – Then And Now

Back in 1992, having Gold Cards from AMEX, MC and VISA was a big deal. This was because you REALLY had to qualify for it by having an obscene income that was validated by your income tax statement. The qualifying factor for Gold was an income above S$48.000 annually in a time when average pay was $2,500.

When you pulled out those cards to pay for something, it told people that you had arrived. It was a badge of wealth. You would get looks of envy, jealousy and respect. In those days, membership had its privileges and they were proud to sign for it.

In those days, the only person frowning at your card was the sales person who had to execute the transaction with a franking machine and a whole lot more extra work because they preferred the easier transaction; cash.

The gold card – everybody wanted it, few could have it.

Fast forward >>> 2010.

Today, those who don’t have credit cards carry cash. This is a time when having such liberties is a big deal. This is because you REALLY have it and can pay for anything and still have a handsome balance in your bank. The qualifying factor for Cash is to physically have it and have it in abundance.

When you pull out cash to pay for something today, it tells people that you have arrived. It is a sign of REAL wealth. You will get looks of surprise, envy, jealousy and respect. Today, membership is a liability and it gets embarrassing and stressful to have to sign for anything.

Today, the only person frowning at your cash is the sales person who has to count the change with a brain which is a serious challenge because they prefer the easier transaction; credit cards.

Cold hard cash – everybody wants it, few really have enough of it.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

20 years ago, loans were a heaven-sent for people who needed it for basic things like homes, business and education. Rates were affordable as loans were designed to help the ordinary middle class family to achieve progress in their lives.

Banks did not like dealing in loans as they were a liability and took a lot of work to qualify a borrower. They took risks to lend out this money but default rates were low relative to today’s rate of defaults. Not that many people became bankrupts as a result of bad debts as few could qualify for those loans and you could only get one loan at a time from any one bank.

Back then, it was shameful to let anyone know you had to take a loan.

Fast forward >>> 2010.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

In 1988, people saved like mad to buy a VCR, a Sony Walkman and the Motorola Tai-Kor-Tai.

Month on month, little by little, the savings grew and soon, that person was wearing a badge of wealth by flaunting those precious, hard-earned discretionary products.

Fast forward >>> 2010.

Today, people rush out to buy state-of-the-art Blue-Ray players and laptops, iPods and smart phones which costs more than half of their monthly income, if not all of it.

Month by month, bit by bit, the credit card debt grows and soon, that person is wearing a frown of stress from increasing interest payments by flaunting those extravagant and sometimes, unnecessary spoils.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Back in the 80s, buying a car was really difficult. Car loans were hard to get. You needed 30% of the entire sale as a down payment and loans were to be repaid as quickly as possible. Finance companies would happily repossess your car if you failed to meet your payments.

Roads then were kept free of traffic jams with the use of deterrent systems such as car pooling, CBD charges and high road tax charges. Cars were also made less affordable with the introduction of COEs by car size. Only those who really needed a car and could afford maintaining one would buy one. And they could sell it quite easily for a good second-hand price to a ready market.

Fast forward >>> 2010.

Today, buying a car is really easy. Car loans are easy to get. You don’t need the 30% down payment anymore and loans can be stretched out over 10 years. Finance companies hate to repossess your car because they can’t sell it high enough to recoup their losses, if they are able to sell it at all.

Roads today are heavy with traffic as cars become more affordable and the ERP is a big money machine while barely keeping traffic volume in check. Anyone can own a car or two cars without being able to afford maintaining it.  And these owners who can’t afford to top up their loans, won’t be able to sell off the liability when they can’t afford it. And the market is not interested in second-hand cars when new ones are so affordable.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

In the 70s and 80s, housing loans were for people who genuinely needed a place to stay and own. They could afford the down payment and had to qualify for the loan with a respectable annual income. Their income dictated the size of the home loan and thus, the size of the home they lived in. Government loan rates were made affordable so that everyone could own a home.

Fast forward >>> 2010.

Today, housing loans are for people who want to own more than they can afford. They only need to afford the down payment because they don’t need to pay up the rest of the loan by the time they flip the property for a quick gain. Their income is not an issue relative to the size and number of loans and thus, the size and number of the properties they flip. The government now qualifies buyers and shoves the over-qualified buyers to private banks to get their loans. (See second story.)

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

In the 80s and 90s, trading and investing was only for the wealthy who could afford it and were part of an exclusive community. Anyone else wanting a piece of that action paid a hefty price for the privilege.

You needed to have cash to invest. There was no other way. No money, no talk – this was something straight out of the stock market then.

There has only been one constant throughout time and the only way that people lived their lives without debt and interests. It is also the only way the future debt-free people will live.

CASH IS KING! CASH IS CLASS!

• If you don’t have it, start earning it before thinking about luxuries and fun.
• If you don’t have it, start making it before spending what you don’t have.
• If you don’t have it, save up what you can instead of borrowing.
• If you don’t have it, don’t sign cheques that your body can’t cash.
• If you don’t have it, don’t hope to get it quickly – it will go just as quickly.
• If you don’t have it, you don’t have problems yet. Wait till you have it then you can complain.
• If you don’t have it, be humble and live within your means. You’ll be happier.

The only reason you won’t agree to the above statements is because you already have financial problems and stress as a result of one or more of the Then-And-Now stories mentioned above.

There is a solution but it won’t be an easy task; stop spending, cut down and swallow your pride. The only reason you can’t do these things is probably because of your pride.

But there are a few of you unfortunate ones who have legitimate financial burdens as a result of health, parental maintenance or inherited debt. To you I say;

Chin up. There is a lot to be thankful for because financial problems are only temporary. There will be troubles in life that money can’t save you from. And when you are in that position, you can only be brave and put your chin up anyway.

So, chin up, smile and turn that adversity into an advantage.

January 2010 In Review – February Preview

Apart from starting a new batch in January, there isn’t much else to review for the month of January. About the only thing worth talking about is how the market went from bull to bear in a matter of a week and changed the entire complexion of what was supposed to be a great start to the year. Another ominous start to the year was the tragic 12 January 7.0 Magnitude earthquake in Haiti that took 170,000 lives. Pray for their souls.

One of the things I did in January was to attend Joey Yap’s one day seminar at Raffles City with my wife. If you’re into Fengshui, then you might want to know that Dragons are expected to have a great year but we have to mind our health. Joey had nothing but bad news for Snakes and Tigers but saved the worse for Rats – the Rats have it real bad for the year of the Metal Tiger. The same thing was confirmed by Fengshui Master and friend, Andrew Tan during our Christmas Gathering in December.

Also related to the year of the Tiger is the probability of war and conflict. Through the ages, some of the fiercest conflicts occurred in Tiger years. What are the chances that it will happen again?

Apart from all that, January has been a non-event and I like it that way.

Now we go into February and the Year of the Metal Tiger.

As far as the market goes, January started up but quickly became a downer and closed with a Bearish January Barometer, indicating a choppy and volatile year ahead. Considering the prevailing conditions, I’m not surprised. I just finished writing a piece for Invest Magazine where I sounded out my thoughts about the coming year and amongst the things I mentioned were the current economic situation in the U.S.;

• unemployment has not bottomed out and it doesn’t seem to want to stop plummeting,
• the ever continuing problem with foreclosures,
• increasing mall vacancies and the growing stockpile of existing homes,
• high commodity prices as a result of cheap money
• a national debt that is growing at parabolic and exponential rate

The global economic health is also far from the recovery picture that was being painted just two months ago by many economists and analysts;

• the ever growing concerns over China’s monetary policies,
• the debt drag on Greece with Spain, Portugal and Italy,
• America’s continued persistence with cheap money and the repercussions of its effect on global asset bubbles,
• Dubai’s long term debt and its effect on the Arab community
• the failure amongst the bankers and policy makers in Davos to reach any conclusion about coordinated global regulation.

Grab your copy when it hits the news stands to find out how to balance your portfolio if the market turns choppy and volatile.

February is going to be a short month with only 19 trading days in the U.S. and even less in Singapore because of the long break for Chinese New Year. In recent years, February has been more bearish than bullish … we haven’t had a positive February since 2006. It should start the week on a bullish note, albeit modestly.

February is known as “the weakest link” in the best six months on the DOW and S&P500 between end October and mid May. The most bearish part of the month is the last two weeks of this short month. As previously mentioned, there are only 19 trading days in February with Monday 15 February being President’s Day when the markets will be closed. February Expiration Friday has been down on the DOW 7 out of the last 10 years.

Now that the January Barometer has been confirmed as bearish, we will have to keep a close watch on that December low of 10,235.63 over the next two months. Failure to break above that level by the end of Q1 will send the bears out in full force for the rest of the year assuming the hidden hand of the PPT doesn’t repeat their performance of 2009.

Before I sign off, here are several pictures of a memorable dinner I had with some of my traders on 8 January 2010.

And after finding some time to do this, I’ve finally managed to upload my Japan Holiday pictures. Here are some of my favorites.

Yup, we had a good time. And talk about being blessed … if you didn’t know, Mt Fuji is a shy mountain and to get a super clear day like the one we got is so rare. One hour after that picture as we emerged from lunch, the mountain went into hiding again and never emerged even when we left Japan four days later.

Looking at my kids today and reflecting on everything that has happened since they were born, I am indeed a happy puppy and a very contented father who could ask for little more.

Life is too short and worries are too many. I prefer to look at the great things that life has to offer, be thankful for what life has already granted and not dwell on the negatives at all. I guess that’s the attitude that got me to where I stand today.

As we go into a brand new Chinese New Year, I’d like to wish all my readers, traders and friends;

A Very Prosperous and
Most Happy Lunar New Year
And may all your dreams materialize
That you may enjoy life for what it truly is -
AWESOME!

Market Update

Just looking at those charts should make you nervous. If you weren’t in the market yesterday, you missed out on what it is really like to be in a nervy market where doubt and confusion rules and nothing makes sense. One thing was clear though … it was not a good day nor a good sign for the bulls.

The market went into the trading day very nervous about China’s concerns over inflation and tightening credit, the BOJ’s non-event on rates (unchanged at 0.1%), America’s silent but growing concerns with ever increasing commercial real estate defaults, another poor return on housing numbers and the CBO’s (Congressional Budget Office) estimates, including for the fiscal 2010 deficit.

In spite of the divergence between NASDAQ and NYSE, the market had one agenda and the closing price is evidence of that agenda. For two straight days, the market was unable to keep its gains, losing everything in the last hour. This is a familiar pattern to which, in the past, there was only one outcome … and it doesn’t favor the bulls at all.

Advancers outpaced Deciners by an average 1.16 to 1 on lower volumes (-1.30%) on Tuesday (avg -0.26%).

How do you summarize such divergent internals? Let’s see if this makes sense … In spite of having a little more advancers than decliners, the market still lost a little bit on a day when volumes down quite a bit.

Thus, this market can rally all it wants because it only takes a few bears to bring down all those bulls.

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,194.29 -2.57 (-0.03%)
Volume: 217,297,012 (+0.91%)
Range: 110,155.60 – 10,285.13 (129.53 points)

In spite of a triple digit day, DOW failed to keep its gains and fell into neutral in the last two hours. This is going to be a major hurdle for all three indices without the help of some really REAL good economic news. Earnings is now not going to be enough to help keep this market’s head above water hereon.

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,203.73 -7.07 (-0.32%)
Volume: 675,475,645 (-23.21%)
Range: 2,195.44 – 2,227.89

S&P 500 INDEX (SPX: CBOE)
1,092.17 -4.61 (-0.42%)
Volume: 4,205,862,400 (+8.65%)
Range: 1,089.86 – 1,103.69

Wednesday is going to be big on earnings and news with three DOW components (BA, CAT and UTX) on the line along with some of the biggest names in their respective industries. Add to that mix the Fed’s FOMC announcement, more housing data (New Home Sales) and Obama’s State of the Union address and you have what is potentially the most volatile day for the week and possibly, the month.

With only three days left for this month including today, the DOW needs to recover  more than 236.40 points to close positive – that works out to three consecutive days of 78.80 point gains. The S&P500 has to recover 24.39 (8.13 daily) and the NASDAQ needs a massive 90.68 (30.23 daily). In terms of percentages, the benchmarks needs to average more than 2.32% gains over the next three days, starting today.

This is the day that will shade the color of January’s Barometer.

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