July 2013 Review, August Preview

Besides the rocking and rolling in the market, my health also took a helluva beating in July. First it was stress, then my back gave me tension problems. Before I could recover from that, I got the flu. And before I could recover from that, I got some strange bug that’s making me cough and snort. I am still suffering as I write this but at least I am way better than at the start of the month. Thank God for small blessings, constant meditation and persistent medication.

The month was not so active for me (thank God!) on the teaching front and the highlight of the month must have been my missing my flight home after a Preview in KL – I went to the wrong airport (LCCT) thinking I was on an AirAsia flight when I should have been at KLIA for a Jetstar flight!! After rushing to KLIA, I missed the gate by 3 minutes and had to get another flight out three hours later. What a bummer! The reason for my mistake; being too damn complacent and not double checking my flight details. Thank goodness I am not like that when I trade … better not speak too soon!

WATMY23 (below) got their weekend edition on the weekend of 28 June and 01 July.

WAT66 (below) finished their eight weeks on Tuesday 16 July at 1am (Wednesday morning).

On Friday 19 July, Pattern Traders god a real treat at the July Gathering as Leon Koh and Jay Tun took the stage while I was in KL. The place was overflowing from what I heard and it made me proud to know that these guys can pull the crowds as well as I do. What a community we’ve built.

Now I go into one of the busiest periods of my training year. It’s going to be so nuts that I won’t be appearing at this year’s Wealth Academy Expo both in Singapore and in Kuala Lumpur for the first time since we started it in 2010. I will also be finalizing the details of my next book and finishing up the updates to the Tutorial’s Seventh Edition Textbook. So much to do with so little time.

MARKET MATTERS

July 2013 has been the most bullish one since 2010. But the gains have come at a price. Volatility was intolerable with average intraday swings of 1% either way and divergence in its market internals while volumes waned and the VIX fell to complacent levels.

The start of Quarter Three saw earnings come in at its lowest surprise in the last four years. With more than half the S&P500 companies having already announced their earnings at the time of this report, the number of companies beating their estimates have only managed to do so by 3.2% which is well below the average of 4.3% from last year and 7% from the last four years.

Amongst those who have surprised are the Financial and Healthcare companies while the biggest misses have been from Utilities, Tech and Materials.

The charts have not been able to break higher convincingly since earnings season began three weeks ago. Volumes have dropped off precipitously – something that has been exclusive to September but certain not in July in the middle of earnings season.

DOW, NASDAQ and S&P500 risk falling off these highs and if they rally back after falling off, they will risk forming the dreaded Head & Shoulders pattern that could possibly send this market down by September or October.

Economic data has not been encouraging and pointing to weaker things ahead. Furthermore, the impending pullback on spending by the Fed (tapering), the constantly rising CPI, the sputtering employment market and falling government budgets could put a damper on any dovish data in the coming months.

So we close out the most volatile month for the year and trade into the most unpredictable (and mostly bearish) month of the year – August.

AUGUST PREVIEW

August is the most unpredictable month of the year and is known for its extreme volatility. August 2013 has 22 trading sessions and no public holidays. The months starts and ends weakly and the middle of the month is its strongest period.

August is fast catching up with September as the most (historically) bearish month of the year. Since 1987, August has been the worst month on the DOW, S&P and NASDAQ.

August Trivia

Commodities

SUMMARY

It would be very prudent to proceed with caution and be hedged – this is going to be a scary two months ahead as we venture into August and September, the worst two months in the worst quarter of the year. Remember that every time the economy went into a decline, the market fared worst in the months of August, September and October.

Happy Hunting!

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And don’t forget to get our Monthly Sector Report for July – Truckers 2013.

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