February was a quick month with little activity on the Tutorial front apart from the usual weekly classes, February Gathering on Trading Psychology and a Candlestick & Breakout Patterns Workshop on Sat 25. I find it amazing that the Candlestick Workshop has been running for 10 years now and it still delivers the same, if not better “wow” factor as it did ten years ago. Participants still get a kick and a joyous time learning about this old and tested technique that marries financial, risk and psychological management all at the same time. I love teaching it and it remains the most under-rated workshop in this region (mostly because the public thinks its a sales gimmick) even though it is a genuine extension of the Pattern Trader Tutorial.
Then there was Chinese New Year and the usual gathering amongst friends. This year, I was too tied up to organise the usual get-together at my place so Ariane and Brian did the honours at their place. It was no less noisy and wild and guess who clean up the card game … again
Most of my time since the start of the year has been spent developing my plans and organising my life for after I’ve left AKLTG some time after May this year. Lots of meetings and tying up of loose ends and lots of administrative matters to attend to.
The transition is more energy-draining that I had imagined and it didn’t help that most of the month was spent coughing and fighting a really stubborn flu bug. Because of that, I’ve not been able to keep up my usual fitness regime and have not been in the pool since December last year. I should really re-start my program before I get too out of shape.
And that’s the plan for March. Just hope the weather plays ball.
This has been one of the most bullish Februarys in recent years when the month has been the flattest in market history. In the last three weeks alone, the major indices more than tripled their gains since the start of the year. Year-to-date (as of Fri 24 Feb close);
- Dow Jones Industrial Average +5.4% YTD
- Nasdaq Composite +8.6% YTD
- S&P 500 +5.7% YTD
And this run looks to be able to continue in the coming two months as March and April are typically the year’s most bullish consecutive months in history.
However, whether this run is sustainable becomes the main question when there has been a huge divergence from the behaviour of bonds.
Yields have fallen in the same period that risk has risen suggesting a flight to safety in spite of rising risk.
Meanwhile the dollar strengthened in February as more speculation of higher rates peppered the market. Although, the past week was very quiet on the economic front, investors did receive the most recent policy minutes from the Federal Open Market Committee.
The minutes acknowledged that a rate hike will be in order fairly soon, if incoming data on jobs and inflation remains in line with expectations, which seems highly likely.
We’ll find out between Wednesday 1 March and Friday 3 March when we get the numbers from the ADP Employment report, Initial Claims, Non-Farm Payrolls and Unemployment Rate, along with a host of Fed members making public appearances including Kaplan, Brainard, Evans, Fischer, Powell and FOMC Chair, Janet Yellen. That could shift market sentiment ahead of their FOMC meeting on Wed 15 Mar at 2pm (EST).
With economic numbers showing that America is indeed healthy and earnings returns showing that businesses are running well, there is little to worry about regarding life on the street.
The market, however, is bubbling yet again.
The STI has made some nice gains YTD with more than a 7% gain for the year, something that hasn’t happened in more than half a decade.
The GDP advanced an annualized 12.3% on quarter in the last three months of 2016, recovering from a 0.4 percent contraction in the previous quarter and above earlier estimates of 9.1 percent. It is the strongest growth rate since the first quarter of 2011, mainly due to a rebound in manufacturing.
This 12.3% growth highly contradicts what the streets of Singapore are implying when it seems we’re in the worst economic health since Q3 of 2010. Between Q3 2011 and Q2 2014, the economy was doing much better with less than 2% unemployment and high wages everywhere. Yet, growth never topped 11%.
These days, many have been laid off, many others have had pay cuts and the malls are more vacant than they’ve been between Q3 2011 and Q2 2014.
It’s hard to fathom that an uptick in manufacturing could have such an impact on the numbers even as the manufacturing sector has been struggling on the import/export front.
The GDP number hasn’t yet factored a massive 12-point drop in Industrial Production m/m between December 2016 and January 2017 and a 20-point collapse in Manufacturing Production y/y.
Properties continued their slump into its fourth year with 13 consecutive quarters of decline while Business Confidence in the Island State stayed negative for its sixth straight quarter.
Whether that 12.3% growth number is sustainable now becomes the question because the numbers now are not encouraging for the outlook of the Red Dot’s current quarter. There is no way that 12% can be sustained (short of a miracle or creative accounting) and any pullback to single figures will be no less than a 2.3% contraction which could spell more woes for business and consumer confidence.
March 2017 has a total of 23 trading sessions and one public holiday. March is known as a bullish month especially towards the middle of the month. March starts well and can end poorly. It is the last month of the first quarter and is known for its December Low indicator where if the market closes above the low of the previous December, the year is likely to end higher and vice versa.
Recent years have seen a change in the end-of-quarter window dressing that used to rally the market in the last week. These days, March ends poorly especially since 2008 as fund managers’ participation in the equity space has dropped off significantly post Sub-prime.
- The first trading day of March is normally bullish but has seen the DOW go down 5 of the last 10 (last 2 years up)
- However, it was up 9 out of 11 between 1996 and 2006
- The first week of March tends to swing wildly
- The third day of March (3rd) tends to be very bullish.
- The second week of March is usually mildly bullish and uneventful
- Sunday 12 March 2017 – Daylight Saving Time Begins. U.S. market will open at 21:30SG henceforth.
- The third week of March is the month’s most bullish week
- The Monday before March Expiration Friday has been up on the DOW 22 of the last 29 (last year up)
- March Triple Witching Friday has been mixed in the last 28 years – DOW down for the last 5 out of 8 (last year up)
- The fourth week starts rather bearishly but ends bullishly
- The week after Expiration Friday has been down on the DOW 19 of the last 29 and down 4 of the last 5
- The last session of March has been down on the DOW for 17 of the last 27
Key Economic Dates
Mon 27 Feb
- EU M3 Money Supply y/y
- US Core Durable Goods Orders, Durable Goods Orders, Pending Home Sales m/m
- Australia Current Account
Tue 28 Feb
- EU Core CPI Flash Estimate y/y, CPI Flash Estimate y/y, German Retail Sales m/m
- US Prelim GDP q/q, Chicago PMI, CB Consumer Confidence
- Australia GDP q/q
- China Manufacturing PMI, Non-Manufacturing PMI, Caixin Manufacturing PMI
Wed 01 Mar
- EU German Prelim CPI, Spain/Swiss/Italian/French/German Manufacturing PMI
- UK Manufacturing PMI, M4 Money Supply m/m
- US ISM Manufacturing PMI, FOMC members Kaplan and Brainard speak
- Australia Building Approvals, Trade Balance
Thu 02 Mar
- EU CPI and Core CPI y/y
- Japan Household Spending y/y
Fri 03 Mar
- UK Services PMI
- US ISM Non-Manufacturing PMI, FOMC members Evans, Fischer and Powell speak, FOMC Chair Yellen speaks
Mon 06 Mar
- Australia RBA Rate Statement, Cash Rate
Tue 07 Mar
- Eu Garman Factory Orders m/m
- US Trade Balance, Final GDP q/q
- China Trade Balance
Wed 08 Mar
- UK Annual Budget Release
- US ADP Non-Farm Employment Change
- China CPI y/y, PPI y/y
Thu 09 Mar
- EU ECB Press Conference
- US Initial Claims
- Japan BSI Manufacturing Index
- China Industrial Production
Fri 10 Mar
- UK manufacturing Production, Goods Trade Balance
- US Non-Farm Employment Change, Employment Rate
Tue 14 Mar
- EU German ZEW Economic Sentiment
- US PPI m/m, Core PPI m/m
Wed 15 Mar
- UK Average Earnings Index 3m/y, Unemployment Rate
- US CPI m/m, Core CPI m/m, Core Retail Sales m/m, Empire State Manufacturing Index, FOMC Statement, Federal Funds Rate, FOMC Press Conference
- Australia Employment Change, Unemployment Rate
- Japan Monetary Policy Statement, BOJ Policy Rate
Thu 16 Mar
- Japan BOJ Press Conference
- EU Final CPI y/y
- UK Monetary Policy Summary, Official Bank Rate
- US Building Permits, Philly Fed Manufacturing Index, Initial Claims, Housing Starts
Fri 17 Mar
- US Industrial Production, Capacity Utilizations Rate, Consumer Sentiment
Mon 20 Mar
- Australia Monetary Policy Meeting Minutes
Tue 21 Mar
- EU French/German/Euro Flash Manufacturing PMI, French/German/Euro Flash Services PMI
- UK CPI y/y, PPI Input m/m, RPI y/y
- US Current Account
Wed 22 Mar
- US Existing Home Sales
Thu 23 Mar
- UK Retail Sales m/m
- EU, Long Term Refinancing Operation
- US Initial Claims, New Home Sales
Fri 24 Mar
- US Durable and Core Durable Goods Orders m/m
Mon 27 Mar
- EU M3 Money Supply y/y, German Ifo Business Climate
Tue 28 Mar
- US Consumer Confidence
Wed 29 Mar
- EU German Prelim CPI m/m
- US Pending Home Sales
Thu 30 Mar
- EU Spanish Flash CPI y/y
- US Final GDP q/q, Initial Claims
- Japan Household Spending y/y
Fri 31 Mar
- EU CPI and Core CPI Flash Estimate y/y
- EU German Retail Sales m/m, German Unemployment Change
- UK Current Account, Final GDP q/q
- US Core PCE Price Index m/m, Personal Spending m/m, Chicago PMI, Revised Consumer Sentiment
- China Manufacturing and Non-Manufacturing PMI
- Crude strengthens in March
- Nat Gas also stays strong
- Gold sees some weakness in March
- Silver tops out and starts its decline till April
- Copper moves up in March and April
- Soya stays strong
- Wheat and Corn continue their declines
- Cocoa tops out and starts weakening
- Coffee corrects
- Sugar also stays weak
As Asia struggles with contracting growth (except for Singapore), the U.S. struggles to contain a bubble. These are interesting times and at the same time, daunting. I grow more cautious with each passing session.
Safe Hunting, everyone.