Thursday, January 28, 2021

US Major Indices Price Action Trend Cycle Are Maturing, A Major Correction Could follow

The charts of US Major Indices are showing the narrative that their respective Price Action Trend Cycle are maturing at the same time. 

Both the S&P 500 & Nasdaq-100 are currently trading at the upper band of the Bollinger with the S&P 500 trading at 15% premium to its 200-MA while Nasdaq-100 is trading at 20% premium to its 200-MA.

Since 1997, the S&P500 has traded at a 15% premium to its 200-day MA on 14 occasions with a subsequent average drawback of -0.9% from these levels.

As for Nasdaq-100, it currently trades at the upper band of the Bollinger and 20% premium to its 200-day MA. This is the 18th time the Nasdaq 100 has traded under these conditions with subsequent average pull-back of -0.95% after reaching these levels. 

We at the stage of the financial market where the market’s most aggressive energy has gone racing toward “pre-profit” growth companies, long-shot emerging growth and massive SPACs listing and acquisition spree.

Stock like Gamestop or a Plug has been dramatically surging within a one-month period with momentum investors chasing on them.

Such a euphoria bears a resemblance to that of the 90’s dotcom bubble where this sort of thing kept rolling until the Nasdaq doubled in less than a year and a few-hundred IPOs hit the market before an inevitable correction.

Nobody knows when the market is going into a meltdown. However, the ingredients of a significant correction are in place. 

The charting model used has been spot on many occasions and there is reason to believe that a correction is impending. 


Figure 1: S&P 500 Valuation

Figure 2: What type of bubble are we in 


Figure 3: Dow Jones’s Price Action Trend Cycle Is Maturing



Figure 4: S&P 500 ‘s Price Action Trend Cycle is Maturing


Figure 5: Nasdaq-100 ‘s Price Action Trend Cycle is Maturing








All posts and charts are for educational and illustration purposes only
Monday, January 18, 2021

China Railway Construction (CRCC, 1186.HK) Positioning for a rebound?



Like China Mobile, CRCC (1186.HK) finds itself being in the crosshair of the US government.

US funds are barred from investing in CRCC as the company is controlled by the Chinese government.

The stock showed potential signs of bottoming from market capitulation (5 January 2021) trading at low of 4.10 after the stock was being removed from the major index providers such as the S&P, Dow Jones, MSCI and FTSE.

The stock has since rebounded by more than 20% after China enacted new countermeasure rules to shield its companies from “unjustified sanction”.

The stock currently trades at 5.03 (at the point of this write up), the immediate target level could be 5.51. If the stock does breaks 5.51, it could reach target of 5.70 and 6.00 with a long-term target of 6.55.


All posts and charts are for educational and illustration purposes only
Tuesday, January 12, 2021

CSI 300 set to reach its at-time high at 5885.48.

CSI 300 its broke 2015 high (5,380.42) on 6 January 2021 and could set to reach its 2007 ATH at 5,885.48. 




All posts and charts are for educational and illustration purposes only
Friday, January 8, 2021

China Mobile (0941.HK) Signs Of A Potential Bottoming?



With NYSE delisting China Mobile, global fund providers such as MSCI and FTSE are divesting their holdings in the company. The recent sell off by fund managers has led to the stock trading close at its 15-years low.
The price action is suggesting that the stock could be “capitulating” under massive sell volume. The stock could be bottoming out and potentially provide a window of opportunity for long term investors.
The company currently trades at 41.15 (at the point of writing this article), providing investors a decent dividend yield (based on 2019-20 dividend pay-out rate) close to 8%.
Should price level break above the 42.50, we could see the bulls back in control of the stock and potentially head towards first target level at 44.20.
If prices breakout even further above 44.20, the stock could move towards second target price at 50.

First Target – 44.20
Second Target – 50.00
Stop Loss – 39.00
All posts and charts are for educational and illustration purposes only
Monday, December 28, 2020

Bitcoins - Why the macro uptrend has just begun.

Bitcoin’s break out to a new all-time high 25150 at the time of writing, the debasement of fiat currencies has resulted in Bitcoin becoming an increasingly viable “store of value” for the many institutions.

Microstrategy CEO Michael Saylor has bought $650 million worth of Bitcoin since December 11.

Big institutions who want to hedge against the debasement of fiat currencies are investing in BTC. This is particularly the case since custodian arrangements are now in place for owning Bitcoin offered by the likes of Fidelity.

In this respect, it is worth considering the numbers. The total market capitalisation of Bitcoin is now US$427bn which compares with the US$659bn market capitalisation of Tesla last Friday.


In America, Massachusetts Mutual Life Insurance Company announced on 10 December that it has invested 0.04% of its general investment fund, or US$100m, into Bitcoin. While in Britain, Ruffer Investment, a wealth manager, announced last week that it allocated 2.5%, or roughly US$15m, of its US$620m multi-strategies fund to Bitcoin in November. 


The latter investment in BTC is is interesting since has long being a conservative fund with emphasis on capital preservation.

Bitcoin is the only technology in our lifetime that enters the hypergrowth phase meeting up with shrinking supply.


Bitcoin (BTC)




All posts and charts are for educational and illustration purposes only
Wednesday, December 23, 2020

Tesla is easily the most sensational financial story in 2020. Will it last?

Tesla is easily one of the hottest tech stock in 2020. 


Shares of electric vehicle maker Tesla are up nearly 700 per cent over the last year, a meteoric rise has turned it into the world's most highly-valued automaker.


Is it too late to grab some ? 


With markets running up from its March lows, many would agree that Tesla is one of the most sensational performer. 

Tesla is now larger than the next five largest global auto companies (Figure 1) combined with a mammoth price-to-earnings (P/E) ratio standing at 1,278, according to FactSet data.



Given its gigantic size, Tesla could probably be a big macro driver of the market going into 2021 but is the valuations justified and will it be sustainable?

Looking at the earnings over the last 12 months, the S&P 500 was 26.79 times

Put it simply, investors have been willing to pay $26.79 for every $1 of earnings on an average S&P 500 component while Tesla investors are willing to shell out roughly $1,300 for every $1 of earnings produced by Tesla over the past year.

Apple potential entry into the auto industry could make a bearish case for Tesla

Morgan Stanley analysts see Apple’s rich ecosystem (deep pockets, capital access, ability to attract and retain talent and a large user base) as a strong basis of becoming a formidable opponent to Tesla than other auto-makers.

Should investors continue to plough into Tesla?

Now let us have a look at technicals and price action of Tesla on December 17, 2020, it hit the top of the trend channel and accompanied by high volume, a sign that  it has completed its trend channel cycle.

A similar price action was seen on February 3, 2020 where Tesla price hit the top of the trend channel at $194 before a correction of more than 36% to $70 on March 18, 2020.

If the same price action plays out,  I expect  an impending correction like that of February beginning to unfold in the next 20 days




  

All posts and charts are for educational and illustration purposes only
Friday, December 4, 2020
Total Global Stock Market Capitalisation is now closing in on US$100 trillion - it was closing in on US$60 trillion in March
This is why the stock market has gone through the roof, the whole lot of money printing, its visually shocking. We will have to face the consequences one day , the end will be detrimental.
US dollar will crash
The market will turn to Bitcoins and Gold will soar as seeks for safe haven.
All posts and charts are for educational and illustration purposes only