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Monthly Sector Report – Chinese Stocks

In a recent report, the Chinese economy is reported to have overtaken the American economy as the biggest economy in the world in terms of output and manufacturing.

You can read the full report here: China economy has staked claim to global No. 1 status

So this month’s Monthly Sector Report from the Patter Trader looks at some of the biggest names in Chinese stocks.

Get your report today! Go to http://www.patterntrader.com/product/sector-report-1411-chinese-stocks/

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November 2014 Review, December Preview

What a month!

November 2014 was the month of birthdays for my daughter, my mother and myself. It was also the month Lucy and I reached 22 years of marriage to each other. But it was also a damn busy month that left us no time for big celebrations. I celebrated my half-century of life with a quiet dinner with the wife and kids. I have never been one for big birthday parties anyway. In fact, I never used to celebrate my birthdays at all. I did wake up early that morning and had my morning swim then spent the afternoon trading oil in a very successful session … that was the high point of my birthday.

On the teaching front, November was memorable for completing my 75th Pattern Trader Tutorial in Singapore. As we were temporarily “homeless”, the Tutorial was conducted at Lifelong Learning Institute at Paya Lebar while waiting to move into our new home in January at Starhub Centre (behind Counterpoint).

On 29th November, we had our quarterly Candlestick & BreakoutPatterns Workshop (also at LLI). Pity we didn’t get any pictures but I did have one of my best performances of any SC/BO Workshops that I can remember.

Thanks Mike and Tony for those kind words. And thanks to all who came for the workshop and made it such a memorable session … in spite of the torrential downpour!

And just like that, the short and quick month of November came to an end. But not without a few last minute economic surprises.

MARKET MATTERS

The highlight for November 2014 has to be the fall in oil prices to 5 year lows to $65.99p/b on the last day of trading.

This was the result of a highly politicised move by OPEC to squeeze the other oil producing nations (bar U.S.A.) into a corner to price them out of the market.

In the meantime, the equity space continues to expand its bubble. 401 of the 500 companies (80.2%) in the S&P500 have PE Ratios above 15 as of the end of November 2014. 263 (52.6%) the S&P500 have PEs above 20. The DOW has 22 (73.3%) of its 30 components’ PEs above 15 while 85 (85%) of the NASDAQ100 companies have PEs above 15.

This is now threatening to become the second biggest stock market bubble in history, second only to the 1929 Bubble.

After coming off the Double-Dip Threat of 2011, the US markets have been on a tear gaining 88% on the S&P500 and 67% on the DOW between October 2011 and now. The DOW is now stuck right at my PHIb XXOP of 261.8% and has been unable to break above it in the last five sessions. It closed Friday’s session in an Inverted Crucifix Doji. On weekly candles, the DOW also closed out the week in a similarly bearish candle, the Inverted Dragonfly Doji. The S&P had a negative close on Friday (-5.27, -0.25%) to close in a Dark Cloud Cover. On weekly candles, the S&P closed in a Gravestone Doji.

The MACD (12, 26, 9) is already showing signs of divergence while the faster setting (8, 17, 9) is already divergent and implying a major correction in the making. Volumes have been miserable all year and November’s volumes were along the average lows for the year, with only August having lower volumes.

There are currently too many indications that tell me to be extremely cautious about being bullish going into the year-end. I am still quietly aware that we started the year with one of the most bearish January Barometers in the last 10 years. I am also wary that we haven’t had a decent correction of more than 20% since the Sub-Prime and given the economic climate over the last couple of years, that correction is way overdue.

So with oil beaten down and confused, gold on tenterhooks and equities overbought and still rising, I reckon I am going to close my books for the year and finish off 2014 by sitting out of the game in December.

October Preview

December 2014 has 21 full trading sessions, one half-day session (24th) and one trading holiday (25th). December is the second of the market’s three best consecutive months between November and January and is the last trading month of quarter four and the year.

December is famous for its Santa Claus Rally that traditionally begins three to five days before Christmas and ends three days after the New Year. However, when we don’t get a Santa Claus Rally, it usually means that the following year is going to be weak or extremely volatile.

December Trivia

Commodities

SUMMARY

One more batch to go in KL then I am on my year-end break! Its one of the few times of the year I really look forward to because it means quality family time together doing what we love to do best together – Travel & Shop!

It can’t happen fast enough but I have to stay focused on the job at hand next week and the week after before I can think of enjoying myself. Much to do with many expectations to be met.

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Capitalism Simplified

This is one of the best ways to describe the various capitalistic ways economies are run. Scroll down below to see my take on Singapore’s version …

SINGAPORE CAPITALISM
You have two cows. You were taxed on both cows when you bought them, also paid a certificate of entitlement that allows you to own the cows for 10 years, taxed every time you move the cows to another location, charged for the space the cows occupy when they graze, taxed for the land you bought on a 99 year lease to accommodate the cows, taxed 7% for the milk you sold and pay tax on the profits from the sale of the milk.

Once a year, you have to send the cows for inspection and pay to have them inspected. If they are found to be faulty or not within regulation specifications, you are fined and will have to pay more to have the fault rectified to specification. You also have to have valid insurance coverage for each cow. The insurance premiums you pay on the cows are astronomical and the policies are tied to an investment plan that doesn’t work. You also can’t use the coverage when you need it because the paperwork and red tape is so long that your entitlement certificate will expire or  you cow will die before you get your claim.

When you buy a third cow, the stamp fee for that cow is higher and you have to pay a higher deposit fee for the third loan. The good news is that the bank will let you borrow as much as you want without having to qualify for the loan. Taking a loan for your cows in Singapore is very cheap only because the savings rate is shittier and the rate of inflation is higher than any other rate in the country.

You are limited to the type of cows you buy as there are strict stipulations as to the gender, colour and breed of cows allowed in any single constituency. Within a three year period of buying your cows, you will not be allowed to sell them without heavy penalties and fines. Eventually when you are allowed to sell them, you can’t sell the cows for a profit because you can’t afford to top up the interest you incurred during the time you owned the cows. You also can’t afford the penalty fee for breaking the loan contract and the cows are starting to depreciate as the certificate of entitlement wears down.

Maybe you should have bought sheep. But you can’t because the government doesn’t know how to tax you on sheep. So if you buy sheep, Govt bans them, making them illegal to own and you’re stuck to only buying and rearing cows.

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October 2014 Review, November Preview

It has been a very testing month for me on the personal and teaching fronts while the market has been very challenging, as Octobers usually are. AKLTG went through a restructuring exercise and gave up the training centre. This means, for the rest of the year, Pattern Traders have no “home” and will be using public learning centres for the interim. That is going to be a pain in the butt at a time when I really don’t need more pain.

At the start of 2014, my Fengshui masters warned me that the end of the year will be chaotic and very rough for me – it has been. And its only getting started if you consider that Chinese New Year is still three months away.

OCTOBER 2014 IN REVIEW

After an almost three month hiatus from teaching, The Pattern Trader Tutorial returned with a burst of fresh energy with Batch 74. And what a great time we had! Amazing amounts of energy and participation. And the Coaches went one step further in their support roles and really got into the heat of things by constantly being on hand to help the newbies and really get close to them. Well done, Team!

On Friday 17, we had the last Gathering at the Alexandra Road training centre. 190 graduates attended this last session.

MARKET MATTERS

October 2014 turned out to be a wild one – losing 8% in the first half and recovering it all in the second half of the month. It has been said that if October doesn’t crash the market, then it is the month of the Bear Killer. As it now stands, October 2014 is a Bear Killer.

After breaking below their critical 200DSMAs, early in the month, the three benchmarks bounced back up into bullish territory after what seemed like dovish Fed minutes and a report that said the U.S. economy grew QonQ.

Upon closer reading, the Fed minutes carried more hawkish news than dovish and the so-called growth was weaker than the previous quarter.

PMIs out of China and other major manufacturing economies also contracted though most stayed above the critical level of 50. Employment around the world continues to be a drag and investor confidence is general at multi-year lows.

So the million-dollar question is; How is the market going to go higher now that the printing presses have stopped, growth has stagnated and inflation on the street continues to soar?

Personally, I really don’t know anymore. The central banks of the world will continue to surprise us with their never-ending array of tricks to keep the markets and economy pumped up. All that will continue to happen with such policies is that the street will suffer more while the Big Money players drown in more wealth.

With talk of QE Infinity on the horizon, we are facing the prospect of fighting for our money on two fronts – against inflation (increasing prices as a result of more cheap money) and a shrinking currency value (as more cash liquidity floods the markets, the value of currency decreases).

Inflation today is a double-edged sword with a handle made of broken glass.

November Preview

November begins well, flattens in the middle of the month but ends very well. November is the first of the best three consecutive months of the trading calendar between November and January. It is also the start of the “best six months” on the DOW and the S&P and the start of the “best eight months” on NASDAQ.

This year, November has 18 full trading sessions and one half-day session on 28 November and one trading holiday on 27 November in observance of Thanksgiving and Chanukah.

November Trivia

Commodities

SUMMARY

Ahead lies the “best six months” on the DOW and S&P and the “best eight months” on NASDAQ starting with the best three consecutive months of the trading year, November, December and January.

However, with two months of 2014 remaining, it would be prudent to note that the year began with a bearish January Barometer that followed the worst Black Friday/Cyber Monday numbers since 2008. With the DOW barely 4.6% above the year’s open and the S&P500 only 8.8% higher for the year, it won’t take much to bring the market down again to make the January Barometer successful yet again.

I am going to be safe and lightly leveraged going into the year-end. It’s much too late in the year to make mistakes after it’s been so difficult to make money this year. No sense throwing away a lot of hard work just so that I can make a bit more.

After all, even if the market looks bullish, the world’s leading economies are not showing any growth that we can crow about.

Trade Safe & Happy Hunting Always!

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Choose – It Makes You

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We’re Getting Real Close

The markets closed down on Friday in bearish fashion although the indices may not look so. The market internals were convincingly bearish across the NYSE, hinting that any bullishness at the open was nothing more than short-covering. In fact, the whole week was dotted with rallies that were nothing more than short-covering (Dead Cat) bounces.

The spike on the Fed minutes on Wednesday was also nothing more than Wall Street’s automated systems that misread the report. The FOMC minutes suggested the global economy was slowing and that its ‘considerable time’ language is misunderstood. The market promptly sold down sharply on Thursday with the Dow falling 335 points for a -1.97% loss while the NASDAQ and S&P500 lost more than 2% each.

After another sharp selloff in U.S. stocks on Friday the main benchmarks recorded their deepest weekly declines in more than two years.

The tech-heavy Nasdaq Composite (-2.33%) dropped 102 points, or 2.3%, to 4,276.24 and suffered its worst weekly decline since May 2012. The index undercut a key support level, prompting fears of further declines.

The S&P 500 (-1.15%) fell 22 points, or 1.1%, to 1,906.13, losing 3.1% over the week, its biggest weekly drop since May 2012. The benchmark index is a hair’s breadth away from undercutting its key support level.

The Dow Jones Industrial Average (-0.69%) dropped 115 points, or 0.7%, to 16,544.10, and lost 2.7% over the week. The blue-chip index turned negative for the year and also fell below its key support level.

The Dow and the S&P500 are now below their 200DSMAs with the NASDAQ sitting less than a point above its own 200DSMA.

The widely watched VIX (+13.22%) a gauge of current fear in the market, surged 45% over the week and is at highest level since February.

Of the 10 sectors, the defensive Utilities (+0.51%) and Consumer Staples (+0.50%) were the only two that registered gains while Telecom (-0.62%) and Health Care (-0.72%) were the shallowest losers, indicating a flight to safety amidst all the fear that is apparently gripping the market.

The remaining sectors closed firmly in the red; Financials (-0.82%), Consumer Discretionary (-0.87%), Energy (-1.18%), Industrials (-1.48%), Materials (-1.52%), with Tech (-2.79%) suffering the worst.

THE WEEK AHEAD:

SUMMARY
I am not expecting any major moves this coming week but don’t expect the volatility to go away either. Be careful to not be lulled into complacency as the week lures the buyers back in. Expiration Friday and the week after October Expiration can be very treacherous.

This is, after all, October, infamous for some of the most notorious stock market crashes in history;

~ The Panic of 1907 (October 1907)
~ Black Tuesday, Thursday and Monday (October 1929)
~ Black Monday (October 1987)

Let’s also not forget that fateful October in 2008 that effectively ended the lives of Lehman Brothers and Bear Stearns.

Trivia:

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The Purpose

Got an email from a past graduate who found life becoming mundane and was afraid of becoming just another working “zombie” like those she sees on the train going to work everyday. She asked me what her life meant and how could she make her life more meaningful and fulfilling.

At last night’s class, I told the class that life is nothing more than the game of knowledge and information. He who knows more and is armed with more information holds advantage and dominion over those who lack the knowledge. This is the power game that is played everyday in business, within corporations, at your office, at home, amongst friends and almost everywhere else you can think of. It is even in the market – the power-players always know more than the retailers.

I may not have the answer to the meaning of life but I do believe that the purpose of life is to continue to educate ourselves and to keep ourselves informed.

I have found new purpose in life by arming myself with information and knowledge. It has made me successful, it has made my life meaningful as I educate others to improve their lot in life and it has made me a role model for my children to emulate as they pursue higher learning.

It has made me the top in my profession as my competitors scramble to find an edge to beat me without realising that it is all about continued learning and improving what you already know. While they busy themselves finding ways to beat me, they join the many in that rat race while I go about learning and improving myself, not caring about what they do. I only concern myself about my continued learning because it is that knowledge that keeps me on top.

Change the way you think. Look for a new focus. If you’re a parent, then you have an obligation to raise your children right. Start by gaining knowledge that you can impart to them in the future. Adopt a skill that they can learn from you for their survival and growth. Do something meaningful for yourself so that they can emulate – continue your learning and education.

And always remember that is not about what you want but more importantly about what you NEED that matters more.

At the very least, you won’t be a zombie on the train because you have a purpose while they don’t.

In closing, let me quote Miyamoto Musashi from the final chapter of his “Book Of Five Rings“;

“I will describe the essence of the Ni To Ichi Way of strategy in this book of the Void. What I call the void is where nothing exists. It is about things outside man’s knowledge. Of course the void does not exist. By knowing what exist, you can know that which does not exist. That is the void.

People in this world look at things mistakenly, and think that what they do not understand must be the void. This is not the true void. It is confusion.

In the Way of strategy, also, those who study as warriors may think that whatever they cannot understand in their craft is the void. Someone like that will continue to be distracted by irrelevant things. This is not the true void.

To attain the Way of strategy as a warrior you must study fully other martial arts and not deviate even a little from the Way of the warrior. With your spirit settled on your duty, you must practice day by day, and hour by hour. Polish the twofold spirit of Shin [heart] and I [will], and sharpen the twofold gaze of ken [perception] and kan [intuition]. When your spirit is not in the least confused, when the clouds of bewilderment are cleared away, there is the true void.

Until you realize the true Way, whether in Buddhism or in worldly laws, you may think that your own way is the one correct and in order. However, if we look at things objectively, in the light of the Straight Way of the Heart or in accordance with the Great Square of the World, we see various doctrines departing from the true Way. What you believe in often proves to be contrary to the true way, distorted as it is by tendencies to favor your own thoughts and views. Know this well and act with forthrightness as the foundation and keep the true Heart as the Way. Enact strategy broadly, correctly and openly.

Then you will come to see things in an all-encompassing sense and, taking the void as the Way, you will see the Way as void.

In the void is virtue, and no evil. Wisdom exists, principle exists, the way exists. Spirit is Void.”

Twelfth day of the fifth month, second year of Shoho (1645)
Teruro Magonojo
SHINMEN MUSASHI
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September 2014 Review, October Preview

September 2014 was a time for reflecting and considering the future. Crossroads are never easy to navigate but there will always come a time that each and everyone of us will have to navigate these obstacles at least several times in our lives. Now I face my umpteenth crossroad but I will prevail.

Such things only serve to makes us stronger and wiser. They happen for a reason. We may not know the reason now but it will all make sense when the time is right. The pieces will fall into place and they will tell us which path to take at that crossroad.

I’ve been there many times and if there is one thing I’ve learnt, it is to never force the situation and never second guess the outcome … okay, that’s actually two things I’ve learnt.

SEPTEMBER 2014 IN REVIEW

On the 6th and 7th, I came back to the public stage and spoke at the Financial Mastery event on both days. It wasn’t as big a crowd as any of the Expos I had previously done. Nevertheless, I thoroughly enjoyed the experience but I doubt if I’ll ever do such an event like that again.

The following Sunday 14th, I did the presentation again in KL to a smaller crowd but the response there was unforgettable.

But the one event that stood out for me didn’t involve me – it featured my apprentice, Jason Lee.

He held court in front of his peers from SIM and pulled off a four hour session on Business Finance. It made me proud to sit there and watch him share with his Alum on business skills and finance, knowing how much he has evolved over the three years I have mentored him. I give him a lot of credit for this – the boy did much of this out of his own hunger, motivation and determination. He will be big one day.

I didn’t teach in September and that left me a lot of time to catch up with old friends like Gracie Yap,  Ruben Koh, Calvin Lau and GM Teoh and a whole bunch of other long-time-no-sees. Its good to have company like these wonderful friends.

MARKET MATTERS

With that, we’ve come to the end of the worst quarter of the trading year and ended two of the most bearish months of the year. And what a wild ride it has been. September 2014 closed all three benchmark indices in the red for the month. The bad news is, in my opinion, the worst is yet to come.

As of the close of 30 September 2014, 391 of the 500 components on the S&P500 have PE Ratios above 15 while 23 of the 30 DOW components were also above 15. That works out to 78.2% of all the S&P500 companies and 76.7% of all the DOW components being overvalued. By comparison, both indices were approximately 75% overvalued in 2007 before the market collapsed in August that year.

The VIX is starting to show that maybe the big boys are starting to take this bubble seriously. In just six weeks, the Fear Indicator has risen from 11.50 to 16.30 for a 41% gain. By the first trading session of October, its 20DSMA will have completed a Death Cross over its 200DSMA. The ultimate 50/200 Death Cross should happen before the end of the week if this trend continues.

Although the CPI fell for the first time since March 2013, Core Consumer Prices reached an all time high of 238.34 Index Points in August of 2014. The Manufacturing PMI has stalled out at 57.9 while its Services PMI has contracted for its second straight month.

Thus on the macro economic front, while on the surface things in America look to be “recovering”, certain numbers are telling us that this “recovery” is starting to falter more and more as the real threat of the end of cheap money nears.

With October in our faces, I can only get more cautious and shorter term on my positions. I intend to stay very liquid for the coming months and lighten up on my leverage.

OCTOBER PREVIEW

October 2014 is the longest trading month for the year with 23 trading sessions and one Bond Market trading holiday, Columbus Day on Monday, 13 October (Bond markets will be closed). The month ends the “Worst Six Months” and begins the “Best Six Months” on the DOW and S&P500.

October is infamous for some of the most notorious stock market crashes in history;

Let’s also not forget that fateful October in 2008 that effectively ended the lives of Lehman Brothers and Bear Stearns.

Ironically, for all its bad rep and bearish tags, October has ended more bear markets than started it in history. Massive drops in 1987, 1990, 2001 and 2002 promptly and sharply reversed in October to start long-term rallies. If you had been a buyer during Black Monday of 1987 you would have been massively wealthy by the time the Asian Financial Crisis hit in 1997.

With so many being so fearful of this period, and moreso this year than last year, it would take an incredibly brave or stupendously dumb person to invest in anything now. Patience is advised and prudence should be wisely exercised.

October Trivia

Commodities

SUMMARY

Now we begin Q4 and we get it off with a bang – the most volatile earnings season of the trading calendar. It is going to be tricky to navigate this October given the scary numbers we’ve been getting on the macroeconomic front. Earnings are going to be key in telling us where the market will go between now and the end of the year. Guidace will be keenly watched especially amongst the benchmark stocks and index components.

Personally, I hold little faith in companies beating their revenue targets in spite of their lower guidance in Q3. The slow-down in most industries will undoubtedly have a hawkish effect over the broader market.

I will be extremely cautious and but I won’t be denying any trends that prevail.

So Trade Safe & Happy Hunting Always!

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Appreciation

The best testimonials are the ones from those who have benefited from your contributions to them over the years. It is always very gratifying to hear that my students have grown, improved and become better over the years since they came to the Tutorial. I live to change people’s lives through what I teach and share with those who want to make a difference in their lives.

And it is exceptional gratifying to know that they are making money from the things I have taught them;

Within the span of half a day, two of my senior graduates made postings in Facebook regarding their various experiences as a result of the Pattern Trader Tutorial (PTT).

Leonard, from Malaysia who was formerly working in Singapore with a finance based institution, made this posting based on the lessons he took from his Trader’s Journey.

Ariane attended PTT almost 4 years ago …

… and was so convinced that she got her reluctant son, Brian, to attend within a year later.

Brian today, is one of my brighter sparks.

After I made this post, Jimmy, a graduate from early 2008 made this posting …

… and Irene, a former cabin crew and mother of three wrote this …

And Irene’s husband attended the tutorial about a year after Irene …

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

BECOME A MACROTRADER NOW!

Between Ariane, Jimmy, Irene, Leonard and Brian, who says age matters?

When you learn to trade, you will be focused on not losing money rather than focusing on that one lucky big win. You will be trading for a steady income. You will learn to be in control of the trade rather than to be under the control of a trading system. You will be trading in a style that suits your life, needs and wants. You will learn a skill that is sought after by financial institutions as many of my successful graduates are now working with such institutions as proprietary traders, advisors, account managers and portfolio managers.

The Pattern Trader Tutorial has transformed many lives in the last 8+ years. It has given the graduates a new outlook on finance and economics. Those who assumed that the Tutorial was “just another trading course” have been surprised at how much more value the education has been. It has stood them in good stead in their lives, their personal finances, their jobs, businesses, investments and trades.

The Tutorial arms you with the financial knowledge and knowhow necessary to fight and win in any aspect of today’s economy. It makes you savvier about your money. You’ll be smarter about running your business by knowing the state of the economy. You’ll be wiser about your next property investment. You’ll find out that you don’t need to trade on-line to make money – there are other safer ways to make your money work smarter without the risk of taking on an on-line trade.

If you’re sick and tired of attending workshops that don’t work, then attend a tutorial that will change your life. Check out the blogs of some of my graduates years after they attended WAT.

  • http://jeannekong.blogspot.sg
  • http://www.phillipneoh.com
  • http://www.mindsetconnect.com
  • http://trendspottingmadscientist.blogspot.sg
  • http://usdma.blogspot.sg
  • http://thefinancialalchemist.blogspot.sg
  • http://www.thebimboinvestor.com
  • That’s just the tip of the iceberg.

    Meet many more on my Facebook account; https://www.facebook.com/conradalvinlim

    Cheers!

    ___________________________________________

    Spammers: Take your spams elsewhere. If you haven’t learnt by now, you’re only wasting your time spamming here.

    cpm homework help
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    Testimonial 19 Sep 2014

    It always makes my day when someone takes the effort to make an acknowledgement to help me inspire other to do the same …

    Well done, Chow Yong. Remember to stay grounded and not let greed and impatience get the better of you.

    Success comes to those who
    work at it the hardest and
    believe in it the longest.

    Meanwhile, in Kuala Lumpur at about the same time …

    Rock on MY27! Keep up the good fight and always stay in touch. Your real Trader’s Journey begins now. Happy Hunting!

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