Wariness or weariness?

STI has been trading quietly these days, with little movement downwards or limited upside for the majority of the stocks. It’s not hard to assume the overall profile of the market is filled with wariness – traders waiting for a clearer breakout before jumping in. Many ‘bitter’ shareholders are also in the making, as huge slides in the previous months have prompted even the hardy investors to switch out of their buy and hold strategy.

In a market like this, it’s trying to scalp a few dollars as a retail investor or a small time trader. The general question asked in the streets – are we bottoming yet? Even the institutions may be finding themselves down for the year, with just 4 months to go and hope of a strong recovery waning. I think the idea is not to ride in such a market, but to switch to more volatile markets where opportunities can be found. I often call STI a lagging bourse, and here we see much more of the characteristics truer than not. For nifty traders who are experienced with trading breakouts, the greatest opportunities are probably in the closing and opening – this can prove even trickier and riskier too.

If you’ve never wandered outside of the local bourse, this may be the perfect time to consider. Despite the ‘bear’ in the US, the markets continue to present very viable trades with sustainable risk to reward ratios, as do the HSI (my favourite Asian index) – short or long using CFD and also FX for the more risk inclined. As for the STI, it’s a cemetery to me, with finds only for the very swift and deadly. Investors may wish to hope on, only if you’re able to cushion any further decline in the coming 1 year.

1 year? This bear looks like it’s going to run for more, isn’t it? I assume no for many reasons, but basically my framework of thinking lies in the fact that more than just deriving an estimate from history, we must also take into account of the human psyche and the change in the landscape of trading in recent years. The shift of capitalism, as seen in China, will not allow for a prolong bear. Rather, we may well just be in a correctional phase in a very long view point, and nowhere near a downtrend broadly speaking. Many correlations will change – broad ones like ‘oil up, dollar down’ will increasingly but subtly desynch from one another. I will not go too much there, but in time, we’ll see.

Meanwhile, start checking around. There might be a better catch down the pub across the regular joint you frequent.