August 2009 Preview

The one and only sickening thing about being a trader who teaches is that when the demand for the teacher gets hot, the trader has little time to trade. I have paid a hefty price for taking my eye off the ball during a period when there were so many opportunities to grab. During the months of June and July, some of my favorite stocks had gone into consolidation patterns (which are my favorite pattern to time a swing entry) and broke out while I was in the middle of the busiest time in my teaching career.

DOW 31 July 09 AMC

DOW 31 July 09 AMC

The DOW made the expected pause in June but July’s behavior was uncharacteristic as it quickly became overbought. One reason could have been the break above its 200DMSA signaling a return to a Bull market. The other more obvious reason was the many earnings surprises from Q2’s performance amongst the bigger names. Whatever the reason, this market is running up, unabated. In spite of Friday’s (still poor) GDP numbers, the market kept its head above water.

The plain truth behind these numbers is that they are still painting a picture of economic pain. Most numbers were revised down to start with and other numbers coming out “better-than-expected” are still below acceptable norms. In the case of Durable Good, it directly implies that consumer spending is still on a decline! Non durables (shorter term) fared even worse! The bulk of any of the numbers being released are always against a number that has been cut, some by as much as 50% anyway. I sersiouly wonder why we have economists …

Economists and Analysts behave like cream on a wedding cake … looks and tases nice when it is fresh but turns and churns as the wedding sours!

By this coming Friday, however, we might get a different color on the economic health of the U.S. with its employment numbers. In my opinion, it can’t get any worse than that pre-4th of July reaction to the worse return on employment in 26 years. Any return this month must be better than that. To say otherwise could spell doom and gloom all over again. Plus they have already revised those numbers down to buffer the damage. At this point in time, I’ll stay away from the gloomy stuff and take the ride up for as long as it lasts. The longer term picture is another subject for another post next time.

The ride up, based on current economic temperatures, might just last longer than the usual Summer Rally (which is traditionally the weakest rally in a trading year) and might just be fuelled (pun intended) by Oil’s pattern of running up from July to October.

OIH 31 July AMC

OIH 31 July AMC

UTY 31 July AMC

UTY 31 July AMC

Having missed out on that brilliant wave in July, I will be looking to catch the next ride up after the recent week’s pull back.

Another sector that I had been watching for a while was the construction and homebuilders. MDR had gone parabolic and now that the correction seems to have completed itself, I’ll be looking at timing an entry on this pullback.

MDR 31 July AMC
MDR 31 July AMC

XHB 31 July AMC
XHB 31 July AMC

XHB on the other hand has gone from nothing to hyper-euphoric and the question now begs, “… is this sustainable?” I think not, at least not at this pace. I’d love to get in on this but there are too many obvious reasons to hold back. Bear in mind that the seemingly good housing reports hide the fact that the banks are still the major holders of existing inventory. If and when this glut of inventory hits the streets, housing prices will take a hit. So in my books, it is still too early to say that the housing sector is back on the road to recovery.

Silly stocks are still the way to go. Safe, low risk and assured, these stocks may just continue to be the way to go as the market and the economy find its feet … if it does find its feet eventually. I really hate myself for missing out on ENR’s fantastic run. After consolidating for two months, this was what I was waiting for and I MISSED IT!! ARRGHH! Well, there’s always a next time.

ENR 31 July AMC

Same goes for all the other “silly stocks” that I rant about every so often …

Clorox, Scotts, Honeywell, Kraft, Altria and Proctor & Gamble

Clorox, Scotts, Honeywell, Kraft, Altria and Proctor & Gamble

And how about the miss of the quarter … Healthcare Maintenance Organizations ($HMO).

Aetna, Cigna, Coventry, Wellpoint, Humana and United

Aetna, Cigna, Coventry, Wellpoint, Humana and United

This is really a case of not watching and waiting. I really need to free up time to trade. I have never missed out on so many opportunities especially when I was expecting it to happen. But I don’t think it’s too late yet.

August tends to open poorly. It is about the only month that doesn’t have a consistently bullish first day of trading. Its first week is also traditionally the weakest of all the months. Mid month, however, there is strength. The last days of August then sees a consistently reliable correction that sets the tone for the worst month of the worst quarter, September.

I’ll be sticking to short term bullish swings for now and will be conservative (but alert) with my Puts. Since most of my picks have already made higher highs, the early part of August may just be the pull back I need to time entries for the mid month run.

And August, as I look at my schedule now, will allow me some time to trade. Thank goodness!

On the local front, our market will be on tenterhooks as the big banks release their earnings this week. Their numbers should look good especially with all those new accounts on new housing loans over the last month’s euphoria over new project releases. Bankruptcies continue underperform discharges while the powers-that-be see fit to “free” more credit prospects from the last recession. The latest string of discharged bankrupts also included a large number of those that went bust in 1997 and 1998. Unemployment continues to hurt the economy. Regardless of how they paint the picture and how the bad news/worse news is distributed over several pages in Saturday’s papers, No amount of GE’s returns nor the return of our heroes from the Gulf of Aden will hide the fact that our economy is still in pain … I don’t care what the economists and analysts say.

Economists and Analysts are like the wipers on the rear windshield … they hardly matter in a storm because the danger is always in front!

And that is why they still they queue for $850psf.

On a side note … this is a good time to sell! So I am wondering how much my corner 3-I HDB flat on the 8th floor (unblocked front and back) in Bedok North will fetch? Remember that this is really a GOOD flat with a good unit number and definitely damn good fen-shui – this flat turned my fortunes around from bankruptcy into bankroll – and comes with the good, lovely, family-home atmosphere that has made my family a really happy one. Move in condition. I’ll even throw in the 1 year old fridge and the pair of washer and dryer. You can even see clear towards Bayshore and Laguna park on a clear day. The lifts have been upgraded with four lifts serving every floor of the block.

It sits less than 150M away from an encirclement of 5 food establishments including a 45 stall hawker center and refurbished wet market, supermart, 7/11, great massage and reflexology, 3 coffee shops offering free football cable, 4 clinics (2 of them H1N1 ready), 2 sin-sehs, 2 Chinese medical halls, 2 bicycle and tyre shops, 3 tuition centers (including one belonging to one of my graduates), Fengshan, Yu Neng, Katong Convent and Red Swastika Primary Schools, 7 hair salons, 2 internet cafes, 3 bubble tea shops and ample parking to boot (free on Sundays and public holidays).

Oh, did I mention, durians during the duration of durian season?

It would sadden me to sell it but if the price is good, a good investment is worth money in the bank. I’ll let the analysts and economists hype up the price for me a little more before I decide.

Economists and Analysts are like pimps and slave hunters … they make money from other people’s misery!

Note:, I don’t need to sell it and am in no hurry to do so. But if the price is right …

Till my next posting, stay safe, trade wisely and happy hunting always!

Comments, Feedback and Offers: http://www.conradalvinlim.com/?p=1434#respond and scroll down.

Share

If you enjoyed this post, please consider to visit Pattern Trader Tools, leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Comments

I tried to look for some information in your article but instead only see up selling, advertisement and scams

I am sorry you can’t read properly beyond your prejudiced eyeballs. Thanks for dropping by. Stay Bitter, Stay Sad.

Dear Conrad,
hi, my warmest regards to U!
I’m one of your student-to-be who is looking forward to join your WAT course in Sep(hopefully) once my personal commitment is met. My suggestion would be: DON”T SELL YOUR HOUSE!! I’m one who believes in Feng Shui & feel tat your hse is the ROOT & CORE BEING of your’s turnaround!! Keep e Root deep-rooted & allow e ENERGIES to keep U GROWING & GROWING!! Jia You!!
Best regards,
Ricia

screw off. no negative comments on this great blog pls

Sorry, the comment form is closed at this time.