April & May, 2012 Review, June Preview

Its been a very busy and crazy two months that hardly gave me any time off. In one stretch, I was at AKLTG everyday for 10 days straight. I can’t complain. I shouldn’t. It is a very good problem to have.

So here’s the update for April and May 2012 …

On 17 April, WAT56 finished nine weeks of the tutorial …

… Batch 57,  completed their nine weeks on 25 May …

… and Batch 58, the weekend batch (4 missing from the picture above) completed their tutorial on 22 May.

In between all that, I was also at InvestFair 2012 on 17 and 18 April and hosted a Candlestick and Breakout Patterns Workshop on Saturday 26 May.

There was also a WA in first weekend of May (above), between the 3rd and 6th, for WA 33.

MARKET UPDATE


As of 30 May, 2012, the DOW has effectively erased all of April’s, March’s and February’s as well as more than half of January’s gains. This is Sell-In-May … the Sell-In-May that the “experts” and “financial advisors” claimed won’t work in 2012.

I don’t make such bold calls. It never helps my portfolio and I gain nothing from it. I’d rather be cautious of the obvious dangers which will then allow me to profit from it if it happens. And it did. And it has been a very profitable month, thanks to some very heavy hedging.

At the end of April 2012 in last month’s report, I wrote;

April 2012 has been the worst April since 2005. NASDAQ and S&P500 closed in the red while DOW squeezed out 2.27 points for a miserable gain on a month famous for being very bullish. If April was that lousy, this now leaves huge question marks about the notoriously volatile month of May. May is infamous for having the nastiest correction of any month in the calendar year. Its reputation goes as far as to send the whole year into negative in spite of a four-month bull run from January to April.

GDPs are contracting all over the place with Spain and England back in recession and inflation in Singapore hitting 5.2%. PMIs are still mired in red and yields stay stubborn stuck to record lows. Earnings have been a bright spark in a dark place but I reckon that is all it will be – a spark that will fade out when the darkness returns. The party is traditionally over and the gloom is supposed to take over now. If this truly happens as it reliably does (except in 2003 and 2009), then we’re going to be glad that we hedged ourselves.

Inflation is Singapore is now at a nose-bleeding 5.4% and PMIs continue to contract and stay mired in red. China’s manufacturing slowdown is no longer a slow down – it is a serious problem. I did mention in a previous report that slowing the economy was not the trick … it is putting the brakes on the slowdown that will be a real test. Spain’s worries are getting increasingly worse and now India joins the pain party. And on the last day of May, America’s GDP has contracted to make matters worse.

The DOW is now sitting below 12,500 and looking ready for more downside with the 200DSMA closing in fast. Year to date, the beg cap benchmark has lost more than 6.2%.

The NASDAQ looks more bearish with its 10DSMA having crossed below its 100DSMA last week and its 200 looming just 86 points away. All it will take is two or three sessions to the downside to cross below that critical indicator. Year to date, NASDAQ has lost more than 9.2% since it started its decline at the end of March.

The S&P also had its 10DSMA cross below its 100DSMA last week. Its 200DSMA is only 35 points away and is likely to cross this week if S&P goes down.

Yields have fallen below last year’s low as more money gets tied up in fixed income in a show of fear.

The DOW on 30 May is only 198.67 points above the year’s open of 12,221.19, NASDAQ is better off at 179.97 above its year’s open and S&P is a couple of sessions safer at 54.46 points above its year’s open. All three benchmarks are wearing bearish configurations on monthly candles – DOW has an Evening Star, NASDAQ wears a Three Inside Down and SPX sports a Three Inside Down after a Fifth Candle Reversal – which don’t bode well for the bulls come June. Let’s not forget that June last year was twice as volatile as May and if history repeats itself, then this May was just a warning shot.

PREVIEW FOR JUNE 2012

June 2012 has 21 trading sessions and no public holidays. June, especially in recent years, is notoriously bearish having closed in the red 9 out of the last 11 years. June is the last month of Quarter Two.

June Trivia

Commodities

SUMMARY

I wish I had good news for the bulls but the truth is I am more bearish now than I have been in the last three years. Economic circumstances around the globe today are far worse than they’ve ever been and the systemic ramifications are further reaching than compared to 2008.

As governments fight to stave off slowdowns and navigate soft landings, each economy falls prey to its own inevitability. If there has been one consistent observation, it is that recessions have to happen … preventive measures and stimulus only help to delay the pain and only serve to make the ensuing pain worse.

Thus if history is about to repeat itself, we’re in for one of the most painful periods in our history – one that could rival the 70s and even the 30s.

Trade Safe & Happy Hunting Always!

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