March 2011 may have been the longest month on the trading calendar but it went by so quickly. It was also a very eventful month both in the market and socially.
On Friday, 11 March 2011 just after my lunch, I returned home, turned on the news and sat there in shock of the “live” images of one of the worst catastrophes in our lifetime. The northeat coastline city of Sendai, Japan was shaken by one of the longest lasting quakes in history and this resulted is a massive 10m tsunami that wiped out most of northeast Japan. It took more than 10,000 lives and left more than 16,000 missing. The 9.0 temblor was the worst in Japan’s history and the fifth largest in recorded history. Till today, magnitude 6.0 aftershocks are still being recorded. There have been no less than 300 aftershocks in the three weeks since the catastrophe.
The undersea quake was measured along a 500km long stretch which was 200km wide, 130km off the Northeast coast of Japan. The quake was so forceful that it moved Japan 2.4m to the east and moved the earth 10cm off its axis. The tsunami also took out the coastal nuclear plant at Fukushima. Several reactors melted down resulting in a massive radioactive fall-out. The government has since evacuated a 3okm radius surrounding the ill-fated Fukushima Daiichi plant and continues to battle the fall-out and contain the radioactive substances that have polluted the earth, air and water in the immediate area.
More than US$500B was injected into the economy in the wake of this disaster. The Yen spiked so high that the G7 unanimously agreed to work together to tame the rising currency. Markets around the world reeled for a week – most of them erasing a whole quarter’s gains in the process – as they watched the most televised catastrophic event in history.
For a while, the world forgot about MENA and a certain dictator named Muammar Gaddafi.
So much has happened and much more is needed before we see the end of these sagas in Japan and MENA.
Moving on …
On Friday 18 March 2011, the Pattern Traders had their monthly gathering and this was a big one. We moved the gathering across the street to Klapson’s Hotel and squeezed more than 200 people into the main ball room.
(Will insert pictures later.)
At this gathering, I introduced the Pattern Traders’ newest inclusion into its batch of teachers – Michael Woo.
Michael is a legend and a friend to whom I have always sent my graduates who want to learn more. His vast experience, knowledge and qualifications in the field of finance and trading are unrivaled in the region. I have always modeled him in terms of his passion, teachings and reputation. This was the proudest moment in my teaching career – to have my role model join my fold because he believes in what I do.
The man will be teaching from under the roof of AKLTG from April onwards and will be focusing on his favorite subjects, Advanced Options and Index Futures. This addition to the Pattern Trader (WAT) umbrella is the brand’s next move in expanding its educational tools to create the most comprehensive financial education package in the region. There will be more to come. (Details of Michael’s courses will be released at a later date.)
Then in K.L. Malaysia, after a solid weekend of education and mind-packing information, the 13th batch of WATMY graduated on Monday 28 March 2011 at 22;30 hours. And they are just getting started … baby steps, my young Padawans, baby steps …
You guys and gals really made it a memorable weekend and I would do it again in a heartbeat! Now I can’t wait to get back for their first gathering!
The market has had one heck of a roller coaster in March. It fell from 12,250 to 11,600 (and even became negative for the year on an intraday dip) in nine sessions and came back in seven. NASDAQ actually went negative for the year for a week after that dreadful March 11 Earthquake, Tsunami and Nuclear Meltdown in Japan.
Here’ something else worth noting – It took the DOW seven weeks from the start of January to get from 11,600 to the year’s high of 12.391 by 18 February. DOW just repeated that same 790 point bull run from 11,600 to 12,383 in only 10 days!! That’s right … it took 34 session to get up there before … and this time it only took 10 – that’s less than one-third the time.
The previous time the DOW went from 11,600 to 12,390 was between September to December, 2006. Then, it took two and a half months or 57 sessions. So is this market getting overcook real quick or is this a new norm? Some would say it was fund managers running in on Window Dressing to capitalize on the Quake/Tsunami downturn. Whatever the reason, I am not taking my eye of the ball now because as quickly as it goes up, it can come down quicker.
Wave practitioners would have spotted the current upside wave as Wave 5 after starting Wave 1 on the June-September 2010 Inverted Head & Shoulders break-out in October above the 11-year old retracement of 10.500. The market is now not that far off the year’s high of 12,391 on 18 February. So the inevitable fear of a Double Top is emerging especially with all the macroeconomic worries in Europe and unrest in MENA. And not forgetting the ongoing threat of a major nuclear crisis if the Japanese are unable to contain the fall-out.
Trivia For April
April is traditionally the most bullish month of the year and marks the end of the best six months on the DOW and S&P500. It is also the start of quarter 2 and has the best earnings season of the year.
Other April Stats:
- April starts very well in the first week.
- The first trading day of April is the most bullish of the month.
- The first trading day in April has been up 13 of the last 16 on the DOW.
- The second week is rather flat.
- The third week is even more bullish than the first week.
- The Monday before Expiration Friday has been up 14 of the last 21, but …
- … it has also been down 4 of the last 6 on the DOW.
- April Expiration Friday has been up 11 of the last 14 on the DOW.
- Monday after the April 15 Tax Deadline is usually bearish.
- The day before Good Friday has seen the NASDAQ close up 14 of the last 16, 10 straight since 2001.
- Friday 22 April is Good Friday. Markets are closed.
- The Monday after Easter Sunday is the worst day in April as it usually has a nasty sell-off.
- April finishes very well.
- April is the best DOW month of the trading year.
- April is exceptionally bullish during the third presidential year.
- The last time April was down was in 2005.
- April has only been down 6 out of the last 20 years with two of them barely unchanged to the downside.
- Oil continues to rally in April while Nat Gas usually peaks.
- Gold usually declines from tax-related selling.
- April also signals an exit from Copper as it seasonally tops out then.
- Grains tend to remain strong especially Soyabeans.
- If you were short on Softs in March, then it’s time to cover in April.
- Prepare to go long on Cocoa and Coffee.
- Sugar, however is weak.
Now that the market has had the best bull run quarter since the Tech Bubble, let’s remember where we are as we close out Quarter One;
- We’ve had a modest Santa’s Rally last year suggesting a good 2011 ahead.
- 2011 is on a bullish January Barometer.
- 2011 is a pre-Olympic year which has a 100% (post-WWII) record for being bullish.
- It’s the President’s third year which is also 100% positive.
- We had a bullish Valentine’s Day which also has a 100% record in the last decade and more.
- We closed out Q1 above December’s Low which adds more impetus to 2011?s bullishness.
- Lastly, we’re in April which is traditionally the most bullish month of any year.
As it stands, there is little to fear given all the bullish indications going forward. In spite of that, I would still prefer to wait for Q2’s earnings to get a better idea about where we’re going with all this. One thing is sure – I wouldn’t dare short the market in 2011.