Holding In Your Stomach

 

At times, we come up with ideas which we think would make a difference in the aspect of improving a situation. In reality, it's just some form of fallacy.

Global Margin Call

Yesterday (last Friday) was basically a global margin call.

~~ Art Cashin, on Dow falling below 9900 before rallying up back to close higher.

Crude Palm Oil Discount To Soyoil

Some follow the spread between crude palm oil to soyoil. So, I'll try to update from time to time on their spread value.

As of the end of February's week 1, crude palm oil trades at approximately USD 83 discount to soyoil.

Popping Bubble In China?

The credit clampdown and other measures to cool the real estate market have started to bite, with property transaction volumes falling steeply and prices also easing in some cities. Many properties in China bought for investment are said to be left vacant and rental yields had turned low, pointing to a possible 'bubble'.

Ever since the news flow of credit tightening in China, regulators have issued banks with strict lending quotas and begun demanding daily notification of loan volumes in order to avoid a credit surge like the one at the start of year while continue to keep lending flows more balanced over coming months. It indirectly shows that the government has little faith in the banks arriving at that target in a reasonable manner by themselves and they must be watched every step of the way.

Beginning February, banks appeared to be mainly paring back discounted bills, a form of short-term financing, which swelled loan totals at the start of last year and did more to fuel stock and property market speculation than real investment activity. The government had introduced the discount mortgage rates in 2008 to stimulate the then-flagging property sector. Almost all first home mortgage applicants could enjoy 30 percent rate discount and only needed to make a 20 percent down payment on first homes.

The days of easy access to the 30 percent discount on mortgages have expired. It's definite that it will be much more difficult to enjoy preferential rates in the future. Banks throughout the country aggressively called in loans in the second half of January to fall into line with the government's directive to slow lending. Now only applicants with good credit history and who make a 40 percent down payment can avail themselves of the 30 percent discount.

The Shanghai Bureau of the China Banking Regulatory Commission conducted a citywide test on individual mortgages and found that the bad loan ratio on these mortgages would rise to 1.28 percent, 2.6 times more than usual, if housing prices fall 10 percent in the city,The ratio would rise to 1.51 percent if home prices fall 20 percent and further jump to 2.08 percent if home prices tumble 30 percent in the city.

~~ Compiled from Bloomberg and CNBC

Servis Bertukar Tangan ... Lagi?

"Oh! Cantik pukulan smash itu! Sekarang servis bertukar tangan kepada pemain kebangsaan kita. Mata akhir perlawanan..."

I think the phrase above is 'so in the mind' of those who used to enjoy watching live badminton through our national channel (sometimes siaran ulangan). No, I am not talking about badminton this time around but I am trying to relate it to trading analysis.

Now, in reality when we look at trends at a bigger picture (not talking about super-long term outlook), we tend to see two main element that constitutes it. One, a directional movement of price, visible to the eyes who has normal to near-normal visions. Two, time element.

The time element is what I intend to elaborate a little.  Now, all trends has a beginning and an end, and it usually covers a large span of time/period. (Here, I would like to remind the readers to not confuse trend with those small fluctuations in price that does not exhibit any meaningful direction.) Depending on the time frame being used, a trader may come across different conclusions. For example, an hourly chart may exhibit a clear uptrend, but while counter-referring back to the daily chart, the trader may find that price is just retracing after a strong downtrend

Price outlook (bullish/bearish) in reality, whether derived from fundamental or technical analysis should come from a longer time frame perspective. Especially when technical analysis which could give quantitative conclusions, often clouded the big picture when done at small time frame charts. Imagine that we're in a bearish market (for eg. daily chart shows price cut below 200MA convincingly), but because hourly chart is trending up, we declare that the market is bullish. Perhaps, a more reasonable conclusion would be 'price is retracing from a downtrend'.

Now, here comes the funniest part if we analyze charts without counter-referring to a chart of larger time frame. Say, hourly chart kept changing signals, from uptrend to downtrend and then to uptrend again, all within a week period, can we also say that the price outlook is like the servis yang selalu bertukar tangan?

Eurozone Monetary Union Under Stress Test

Sovereign Debts

Traders are buying protection against defaults on sovereign debt at more than five times the pace of company bonds. European countries led the increase, with the amount of protection on Portugal rising 23 percent, Spain 16 percent and Greece 5 percent (percentage change as of early this week).

Many believe that hardly any country is able to cope with debt of over 100 percent of GDP, and the classic question is whether or not the country will default or try to inflate it away. Greece, which had the EU’s widest deficit at 12.7 percent of gross domestic product last year, has struggled to convince investors that it can bring the budget shortfall within the bloc’s limit of 3 percent.

It seems like an even 'taller' order when the Greek unions called on workers to join a strike to protest the government’s initial plans to cut bonuses and put a partial freeze on wages as part of reducing deficit. The plan is a reversal of a pledge made by the Greek Prime Minister before his Oct. 4 election victory.

Some believe that even if the EU may resolve Greece, they're not going to resolve Portugal, Spain, Italy, one after another coming at them.

Euro Feeling Effect

The European Central Bank in January kept borrowing costs at a record low and forecast an “uneven” recovery this year. Although economic recovery is continuing, unemployment is still expected to rise further in the first half.

Previously, the feeling was the Eurozone was going to be the first to tighten monetary policy versus the U.S. Now at best, people think it's even money and if the US jobs data start coming in better (if in some way were to happen), the bet is the Fed will be the first to make the move.

As of now, the Euro has a long way to go down (we've seen much yesterday). On the other hand, the dollar is going to trade more on growth expectations than on risk.

Introducing Weena Marcus

 

Miss Malaysia Tourism Global 2009

http://weenamarcus.blogspot.com

Pondering On The Need To SAR (Stop and Reverse)

I don't champion the philosophy of SAR trading (where one generally reverse his trade position once his stop-loss point is triggered), especially if the trigger signal comes from a small-time frame analysis. One can always argue that prudent implementation can significantly cut down drawdowns, but I still believe that such trading philosophy reflects one's insecurity of missing a big trend.

Lets ponder upon it. If missing the 'Big Trend' is what is dreaded, stepping aside for a short instance and wait for the establishment of the 'Big Trend' may not cost the trader much. After all, it's a 'Big Trend' hypothesis, so, there's always enough time (big trends generally last for quite some time). There's no issue with late entry if that's the trader's concern.

A chameleon does not leave one tree until he is sure of another. 

Powerhouse India and Crude Palm Oil

India imports almost all its palm oil requirements. Palm represents 80 percent of all cooking oil purchases, which will jump 34 percent to a record 9.4 million tons this year.  Increasing demand will maintain India’s reliance on imports for the next few years.

Imports should climb this year after drought across half of the country damaged crops. Also, an import-tax waiver helped lowered costs. Monsoon-sown oilseed production probably drop 9 percent this season to 13.7 million tons.

India’s government subsidizes as much as 60 percent of the cost of growing oil palms in a bid to reduce purchases from Indonesia and Malaysia. In the future, the Government may plan to ramp up oil-palm cultivation, in order to substantially reduce their reliance on import. Boosting the national crop to 1 million hectares is the target.

In the short term, vegetable oil imports by India should drop this month and next as stockpiles at ports have risen to more than 30% above the level deemed normal.

~~ Compiled from Bloomberg

First, Second, Third

A trader without a trading plan is the first to get knocked out of the market since he has to always ask for second opinion from a third party. Let alone coming up with an outstanding track record.