Tuesday, January 05, 2010

Picking a Market Top Part 5.

Picking a market top part 4 found here.

Towards the end of last year, I wrote a series of articles about how I intend to exit from the market. After a intermediate peak in Oct 2009, I said the one thing on my mind is whether the market will run up towards the end of the year and whether it will form an identifiable peak to make my work of exiting my investments easier. If I can't identify such a peak, I would exit in batches. After inching up for 2 whole months, the market is starting to get somewhat euphoric as we see 2nd liners and small caps starting to move up with much momentum compared blue chips.

Looking back in time, the current period resembles that of 2003-2004 in terms of market psychology. While the 2003 rally is somewhat smaller in terms of size, it was driven also driven by liquidity generated by a series of rapid interest rate cuts. Similar to 2009, very few people got onboard the 2003 rally and throughout the rally there was doubt about the economy, grouses about a 'jobless recovery' and talk of a double dip recession and so on. Towards the end of 2003 and beginning of 2004, investors began to get optimistic, doubts about the economy faded and investors began to pile in with increased optimism. The market peaked in Jan 2004 and spent the rest of the year going nowhere.

Are we going to see a fast final runup to the peak? The activity in lower liners and fall in VIX (volatility index aka fear index) tells us there is a high level of complacency. The rising US dollar carry trade will mean increased vulnerability on the downside as investors get euphoric. The global economy can be beset by problems that were delayed by the record stimulus and flood of liquidity. My take is we will see rising momentum that will take us to an identifiable peak and that is it...that will also be a good time for me to exit fully. I'll update on this as market developments unfold.


Anonymous said...

Now market too high and risky to go in, even if there is further upside.

There is a time to go in, to go out or to wait.

Maybe wait for a "downside". It may not take long, maybe within this year.

Anonymous said...

Most of the important global economic statistics coming out over the next few months will be positive for the market. This will lead many down the slaugher house.

LuckySingaporean said...

anon 12:37,

A mistake frequently made by investors is buying when things look good and selling when things look hopeless.

When was the best time to buy? When the economic statistics look downright hopeless.

lim said...

The good time to buy/bought was in mar/apr 2009... I used my cpf to buy some blue-chips and quite happy as it has gone up at least 100%..

Only regret is should have used cash, and not cpf..

6,753,221USD said...

blah blah blah. remind me of the grand old donkey art cashin on cnbc. i have made so much profits over the past year, no thanks to donkey like him.

they will forever be telling you to go in slow, cash is king, be cautiously optmistic, i wouldnt jump onto the bubble just yet, data does not support full economic and sustainable growth and the list of bullshit goes on.

Just get off your butt and makes some money, all this talk about fact and ficition will get you nowhere. just buy

DanielXX said...

Art Cashin and R Sivanithy from Business Times are losers who'll forever be confined to their own little column in a newspaper.

Anonymous said...

Mr Lucky

A mistake frequently made by successful investors-bloggers is that they assume everyone is cash-rich, financially smart and disciplined like them.

Pls Lah.
Most Singaporeans are clueless when it comes to$$$.
You beat Mr Warren Buffet. In percentage terms.
Just post in CAPS when it is time to buy or sell.

Btw, how many of your readers do u think pay taxes higher than 5%?

I find it very sad there are so few readers when you actually post something useful.

Anonymous said...

Mr DanielXX

There is a 99.9% chance that Art Cashin is paid better than you are.

LuckySingaporean said...

There was this report yesterday that investor's appetite is slowly returning after they avoided the market during the crisis.

See the problem? You're suppose to buy low and sell high. Price are not low when the crisis is seen by most to be over.
Investors' risk appetite slowly returning: Poll

Gabriel Chen
Tue, Jan 05, 2010
The Straits Times

THE financial market rebound has put a spring in the step of Singaporeans. They are now showing a greater willingness to take risks with their money.

Investors who had sought refuge in cash and steady yield products like bonds are now looking for higher returns and ways to better grow their wealth, according to a new Citibank survey.

It found that 44 per cent of people who stopped investing in the midst of the economic crisis have now either resumed investment activity or are open to it once the right opportunity arises.