May Review, Preview for June, 2013

Sorry the blog went down. It was an administrative thing and it took forever to get it back up again. Rest assured, we’re looking into this problem so that it never happens again.

Now on to current issues …

May was rather uneventful except for the fact that AKLTG moved home after 10 years at Keppel Towers.

On Friday 17 May, we had our first Gathering at the new place with Wong Chen Pang hosting the session on Options.

It was quite a turnout with most curious about the new place. But the session was very enlightening and useful. For those who missed it, we’re repeating the session in June.


May came and went and the market didn’t sell off. This is bad news for next year because every time May didn’t sell off, the following year gets painful … very painful.

In 2003, May didn’t sell off and 2004 was volatile and negative for most of the year. 2007’s May was extremely bullish and look what happened in 2008. Then the following year with the help of stimulus, May of 2009 didn’t sell off and 2010 was negative for 9 months.

So be it then. Let’s bring on the pain because its way overdue anyway.

This has been an unbelievable 6 months. It has to be one of the best November to May rallies in a long, long time. We’re talking about a 22% gain with hardly a correction to bother you at all. It’s scary because every time the market makes such a profitable run, the massive gains were always a precursor to massive losses in the months that followed either through a huge correction (bear market) or through extreme volatility and wild swings.

And this run was made against the backdrop of deteriorating macroeconomic circumstances where global PMIs have contracted, GDPs have contracted with some already in negatives and others in multiple consecutive contractions (aka Singapore), import and export traffic reduced to multi-year lows, consumer sentiments that have been waning for more than a year now and currency values that are going the other way.

However you wish to look at it, one fact cannot be denied; the risk is very high for risk trades.

I will be staying away from equities and trading commodity futures as I usually do during these few months. But I will be managing a portfolio of my favorite vice between June and August as I have always done since 2006 without a loss.

And that will be all the equity trades that I will be interested in until Q4 starts. I’d rather stay away from risk and protect my profits from the last six months than bet on a market that is telling me to cool it or lose it.

June Preview

June is the last month of Quarter Two and is a rather bearish month. This is more so if May had sold off. June 2013 has exactly 20 trading sessions in four weeks. There are no public or trading holidays in June.

June Trivia



Are you ready for another volatile and funky market in the year to come? If you’re not, then this coming June will be a test of your mettle and mental fortitude if you think that this “rally” is going to continue. Let me leave you with some interesting reading …

The Hindenburg Omen

The final session of May 2013 saw the S&P 500 drop 1.4% as the MSCI rebalancing contributed to the weakness. However, the final session of the month included the appearance of a rare technical pattern—the Hindenburg Omen.

  • Named after the German Zeppelin, the Hindenburg Omen is said to foreshadow a market correction amid divergence in the market. While no pattern makes predictions with complete accuracy, historical data suggest the likelihood of a pullback larger than 5.0% in the next forty days sits just under 80%.
  • For the pattern to be activated, five conditions must be satisfied fully:
  1. The number of NYSE new 52-week highs and new 52-week lows must both be greater than 2.2%.
  2. Of these two extremes, the smaller number must be greater than or equal to 69.
  3. The NYSE 10-week (50-day) moving average must be rising.
  4. The McClellan Oscillator must be negative.
  5. Finally, the issues making new 52-week highs cannot be more than twice the amount of shares at new 52-week lows.
  • In addition, a reoccurrence of those conditions within a month strengthens the pattern.
  • Prior to Friday’s session, the first instance of the Hindenburg Omen was spotted on April 15 when the S&P 500 lost 2.3%.

In the months to come, we’ll see how accurate this Omen is. And if it is, we’re in for a big fall.

Finally, don’t forget to get your copy of the Monthly Sector Report. The feature for this issue is Vice.

The last time we featured (parts of) these industries was at the ends of May 2011 and January 2010. And they were good features too because most of the featured securities went on to make gains in the following quarter.

Seasonally, some of these securities have very reliable trends (both upward and downward) and this report looks to take advantage of these seasonal cycles by picking out the highest probability trades (in either direction) based on our seasonal models.

Click here to get the full report.

Subscribed Members can download their copy here.


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