So I written an article last month, Market Crash Forecast. Which turned out to be true.
I am surprise that majority market players didn’t really anticipate Brexit and when it happened, it turn into a black swam event. During the start of the Brexit referendum when Bremain is leading, all traders are able to see how majority pump the pound sterling and the stock markets, and ya even the commodities like oil, like Bremain is a sure thing to happen. Then, when Brexit surpass Bremain with a significant lead, things goes haywire. market turmoil happen.
The real fear is not really Brexit event but is more on, what is coming next. What will happen to Eurozone? Which country is the next country to exit? What is the real impact to the economy after British exit the Eurozone, how it affect on the global economic? In a large scale, it is really scary. Because no one really go deep into the calculation impact that due to Brexit or maybe minority has done that but no one able to accurately pin point the exact turn of events in future. FEAR is the market sentiment now.
So let us have a look on the indices. I will only be talking about Equities indices this time.
Market hit a high 2127 during Brexit referendum and anticipate a Bremain then event reverse with all the bull rushing to realize profit and the short seller come in to perform a “Bull squeeze” and create an impactful downward momentum and trend all the way to 2000. Then, the short seller realize profit and market reach an equilibrium before the US market open on Friday.
From the chart we are able to see from daily time frame the index is pushing and close near the 200MA where we are unable to see clear 200MA is acting as support or resistance (at the current moment is more resistance bias). The crucial information we are able to see is that the long term 2040-2050, especially 2048 has break strongly where Brexit day is the day where the Bull support has gone totally vain for the first time in the past three months.
Buy at the weakness, sell at the strength is it working today? We only able to see next week but currently the downward momentum is so great where it can squeeze all the bull out of the game. The bear awakening!
Next week will be an interesting week where those short seller already in the game will try to add position to their winner and the bull decision to support at the current stage or retreat all the way back to 1900-1930 area to support the bull camp again.
If 1900-1930 failed we will all the way see the indices fall to 1800 to 1820 area where early this year support stand. If it failed again, new low will be created. Crucial key level 1773, 1687 and 1630 will be tested. All this might happen in a week time.
STI index undergo weakening during Brexit where most players taking early profit and short seller very cautious in advancing. Next week might see an interesting development where 2718 might break and all the way under a freefall zone where the next support only able to see at 2500-2530 level. To be honest, I won’t be surprise to see a gap down next week.
Has the market crash or is just a merely technical correction? Seem like but next week we should be know the clear direction. But my thought process is this, with the current market development, if you want to go and buy stock now, is it the stock price attractive enough? Has the stock price pricing in the future economic development. The demand level now is decreasing unless there is an unexpected positive news arising next week.
Compare to other investment vehicles are there more attractive alternative. As a trader that trades Equities, Forex, Indices and Commodities, I can tell you there are surely are. So if you are buying at this weakness now, you must be able to at least explain, what are so motivating you to buy now.
More likely sell the rumor and buy the news will happen now if market sentiment turn negative. Big players will come and push the market to the lowest point. They have been waiting for ages.
With FOMC coming on next month, I believe the event will still heading to its peak . More to come!
I am going to a vacation soon and slowly hide back to my cave. Also, because I am going on a vacation to this country.
I am thinking to talk about safe havens. Market has favorite these two when Brexit happen.
Yes, Gold and Yen. But personally I don’t think these two are the safe haven.
With Yen fundamentally weak and Japan Financial Minister statement where he signals readiness to intervene as Brexit boosts yen. It is a foolish move to hoard Yen. My valuation on Yen against USD is on 108 to 110 area where if the intervention happen, it might fall back to that area. Currently Yen against USD fall to an attractive zone where a clear price rejection occur from 101 level below.
For gold wise not much demand when it is above 1300. I manage to collect some when the Bremain sentiment is strong but I don’t intend to keep it for too long. It might be continue rally or maybe not. But I guess the ranging between 1200 to 1400 will persist for some time.
I more interested if talking about Safe Haven, to talk about these two currencies.
Aussie and Kiwi.
With New Zealand and Australia attractive yield and its currency strength, they are the real king of safe haven. Also, with fundamentally support. They are my favorite now.
Ok, it has been a hectic week for me and I believe for all the traders and investors out there. Let us have a good weekend ahead and ride the market again next week, don’t forget to take a break and enjoy the world. life’s too short not to enjoy it.
Till then, we shall talk again. Happy Investing and Trading Pals!