Wednesday, May 13, 2009

Answering Your Queries

My replies in purple:

RAD has left a new comment on your post "Market Leaders, Good Ones & Not So Good Ones":

Dear Dali

In your recent postings you have been remarking that the market is ripe for a pullback, that the rally may last for another month

You also said that the pullback will be swift and shallow

Am I correct to intepret that it is not a crash that we are looking at, to the extent of plumbing new lows?

Yes, I do not think the markets will get to new lows this year. I see the Dow finding a solid bottom at 8,000 which means that the KLCI should also find a solid bottom at 980. I doubt very much the KLCI can shoot past 1,50 convincingly this round. There is no need for that. You want an active market to allow for a trading opportunity, and thats what we have. Stop looking for major corrections or major bear engulfing patterns,not going to happen. Its a liquidity driven thing, and the liquidity is nowhere near frothing level.

Does that also mean with the all the money that is sloshing around, aided by tentative signs of recovery, the market will resume its upward trajectory take us to utopia in 3-5 years time?

I wouldn't say utopia or shangrila... but the amount of liquidity will probably push markets near to their all time highs next year. This is provided the central banks do not soak up all the liquidity then. Coming from such a big crisis, it is likely that the central banks will err on the side of caution, i.e. allowing markets to have bullish runs until the real economy catches up.

While all that might be good news for traders, it is not exactly good for those who follow fundamentals, proper valuation models, and those wanting a better quality recovery in the markets. We have basically bypassed the worst of a bubble, and created the ingredients sufficient for another bubble. We can criticise these developments but one should also predict patterns of trade according to the factors given. This is not a high quality bullrun, but its still a bull run.

At the current USD/Yen exchange rate, should an investor transfer his remaining investible amount into the market?

Well, you should have by now. I thought it was very clear from my posting on the yen dollar rate as a way of reading risk aversion.

Looking forward to your invaluable opinion

p/s photo: Kathy Chow Mun Kei (my postings on Angelababy's photos is more because I am away and I do not have access to my saved photos, so I did not want to go searching for images)


chanyip said...

Dear Dali,

I have a question. When you said the market is ripe for a correction, the decrease in DJIA will be around how many points? 100,200,300? Hence, if that is so, what about for klse?

Thank you very much!

sopsky said...

Hi Dali,

"Well, you should have by now. I thought it was very clear from my posting on the yen dollar rate as a way of reading risk aversion."

You mentioned the above but on your dollar/yen posting, based on current rate of 95.xx, shouldn't one reduce the equities holding to 1/3? Yes, it did overshoot the 100 mark and that was went all would have gone in but shouldn't one need to re-balance based on the new rate?