For PSE, I was less defying to recommend PSE index, since it’s the least damaged Index I known to be. Comparing to all daily selloffs on Asia, PSE is now on a very small range trade pattern, which I suggest not to trade since its very risky, and forming also a head and shoulder pattern long term for the entire PSE market, 4500 as the peak of the head, and currently in the shoulders, and may hit the neckline very soon once PSE drops below 4300, neckline is at 4150. A confirmation of the Head and shoulder drop has a low target of 3700-3800.
Since Early August, I’ve done a lot of selling, and now at 75% cash, sitting and drinking coffee(watching people trying to trade got whipsawed), still hoping for a good bounce to totally get out of the market. If Germany which is at P/E of 10, gets a 4% one day drop, and HK market P/E 9.5 drops 500 pts in a day, how come a 3rd World Country with P/E 15.5 just floats around like there is no bad news all over the world?! I doubt.. I really doubt.
Just 2 weeks ago, DAX(Germany) was shocked with a breakdown below its very critical support around 5500, which is the 61.8% retracement level of the Bull market from 2009-2011. Market recalled 38.2% of the gains in just few months time.
This is a very bad scenario, and very first Strong European Nation to get below its very important support, making Recession chance higher in medium term. Last Friday, It went on a battle to come back above 5500 level, to resume its Bullish state, but it failed… A more reason to avoid entirely on Europe Market, and Global Equity Markets. If Germany went down, what more to less GDP generating Nation, especially European Nations and including America and some parts in Asia.
Regarding currencies, The European Money aka. Euro which was introduced in early 2000 at 1.00. Is currently downtrending, hit 1.50 last May 2011 on a parabolic state, where I felt like Professional Traders used the chance to convert/abandon the deteriorating Currency.
Now it is on a huge downtrending channel, and more likely will go down further in months time. Can correct to 1.38-1.40 anytime soon, but may just be a selling chance. Overall, medium term, if this Downtrending channel don’t change phase, we expect EUR to be trading at 1.30-1.32 by Q42011 or Q12012. And 1.20s around Q42012. A possible Default of a European Bond might be the reason for this, and might impact more downturns if it happens. Euro at 1.0 anyone?
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