Saturday, 5 January 2019

What's moving the US market

Time to read some news again to understand the driving factors behind the roller coaster since end of 2018, and the ride is still rolling.








Let's see the different "rides", all about as bumpy...

VOO

QQQ

BABA
Matching each headline with each 1-day candle and look at the share price movements (in %), it felt like some over-reaction isn't it? Whoever that caught up late with the news would be like a deer stunned by a car's headlight.


I am just making some wild guesses here - that any price rebound due to 'good news' would be short lived as share prices would continue to fall in sync with the companies' earning. We all know that now the Fed is tightening up (despite being more dovish compared to last year), the good times of monetary easing and rapid growth is definitely over. Trade war might be making some headway but not ending anytime soon. Investors would continue to price in the slowing growth (keep a watch out for earning release and projected earning data). I really cannot fathom what would be a fair price if going long for "long-term" as it is entirely up to your own due diligence to research on your favourite company. Bearing in mind that slowing growth does not mean no growth.


In a growing economy, it is not difficult to pick winners and, for lucky ones, even multi-baggers as long as you do not pick any obvious rotten apples (e.g. companies with no moat, declining earning, high debt). In a slowing economy where current share prices of the obvious good companies are still higher than just a few years ago, it may be a challenge to find those with sustainable earning growth rate. Because we are not sure how much would earnings fall in tandem with the economic uncertainties and to what extend would the share prices be impacted.


In short-term trading, I shall be staying on the sideline till the trade talk is over next week. (The two big red candles on BABA's chart that stick out like joss sticks are still fresh in mind. An example of optimism seizure sizzle that lasted barely few days...)

The lesson learnt in a volatile market is not to take break out too literally. Let the market's euphoria cook, sizzle and fizzle first before acting.


What's my strategy now? Wait and see.


More in-depth discussion about the current market is seen in this video:


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