February 2017 In Review, March Preview

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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.

FullSizeRender 2Then 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.

FullSizeRenderThe 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.

MARKET UPDATE

DOW1yr

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);

YieldsAnd 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.

DXYMeanwhile 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.

PE SnP

The market, however, is bubbling yet again.

SINGAPORE

STI

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.

SG GrowthThe 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%.

SG UnemployThese 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.

SG Manu mmSG Manu yy

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.

SG Res

SG BizConfi

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.

Screen Shot 2017-02-27 at 5.51.43 PMMARCH PREVIEW

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.

March Trivia

Key Economic Dates

Mon 27 Feb

Tue 28 Feb

Wed 01 Mar

Thu 02 Mar

Fri 03 Mar

Mon 06 Mar

Tue 07 Mar

Wed 08 Mar

Thu 09 Mar

Fri 10 Mar

Tue 14 Mar

Wed 15 Mar

Thu 16 Mar

Fri 17 Mar

Mon 20 Mar

Tue 21 Mar

Wed 22 Mar

Thu 23 Mar

Fri 24 Mar

Mon 27 Mar

Tue 28 Mar

Wed 29 Mar

Thu 30 Mar

Fri 31 Mar

Commodities

SUMMARY

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.

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