STI Statistics For Mar

Dow managed to close at 10,566 points on Friday, moving up 122 points. Nonfarm payroll for February came out better than expected. 36,000 jobs were lost compared to an expected decline of 68,000.

In Singapore, the STI index managed to close on higher grounds on Friday as well with the index closing at 2790.

The performance of STI in Mar is slightly favorable to the Bulls. Going with trading data from 1998 to 2009, there were 13 winners in the month of Mar versus 9 losing “Mar” months. In terms of percentage, the biggest gain of 7.42% was attained in 1999 whereas the biggest loss of 13.89% was established in 2001.

Entry Date	Entry Price	Exit Date	Exit Price	% Change
1-Mar-88	890.3	5-Apr-88	926.8	4.1
1-Mar-89	1105.80	3-Apr-89	1187.30	7.37
1-Mar-90	1546.10	2-Apr-90	1549.20	0.2
1-Mar-91	1463.00	2-Apr-91	1480.50	1.2
2-Mar-92	1460.50	1-Apr-92	1394.10	-4.55
1-Mar-93	1665.30	1-Apr-93	1668.60	0.2
1-Mar-94	2342.70	4-Apr-94	2080.90	-11.18
1-Mar-95	2126.70	3-Apr-95	2093.10	-1.58
1-Mar-96	2438.50	1-Apr-96	2387.30	-2.1
3-Mar-97	2195.70	1-Apr-97	2072.50	-5.61
2-Mar-98	1616.00	1-Apr-98	1629.50	0.84
1-Mar-99	1414.56	1-Apr-99	1519.58	7.42
1-Mar-00	2129.17	3-Apr-00	2135.76	0.31
1-Mar-01	1935.75	2-Apr-01	1666.90	-13.89
1-Mar-02	1716.96	1-Apr-02	1806.62	5.22
3-Mar-03	1278.35	1-Apr-03	1260.03	-1.43
1-Mar-04	1898.09	1-Apr-04	1856.80	-2.18
1-Mar-05	2120.94	1-Apr-05	2141.38	0.96
1-Mar-06	2472.03	3-Apr-06	2542.77	2.86
1-Mar-07	3133.88	2-Apr-07	3240.07	3.39
3-Mar-08	3026.45	1-Apr-08	3007.36	-0.63
2-Mar-09	1594.87	1-Apr-09	1699.99	6.59
1-Mar-10	2750.86	Open	Open	1.43

Hang Seng Index

Hong Kong stock market improved over the week. The Hang Seng index dropped below its 200 day moving average in early February but managed to close slightly above it for the last trading session of February.

The technical charts are showing a mixed picture.

The MACD signal is above its indicator line which is a bullish sign. However, the RSI is approaching overbought levels. In a bullish environment, market may stay in overbought territory for some time before falling back. But this time, the ADX is not indicating a bullish trend and –DI is still above +DI. Hence, at best we are seeing a slow down in the down swing.

The market is most likely going to move sideways with the 100 day moving average serving as resistance and 200 day moving average acting as support level.

A break below the 200 day moving average will be a negative sign and if that level is taken out, the next support will be at 19400 level which is near the low set in 8 Feb 10.

Pivot Points

Pivot Points

A trader needs reference point to enter a trade, place stop loss level and profit taking level. There are a number of ways to derive such reference points. One method is to draw trend lines on charts to determine support and resistance level. Fibonacci theory is also another favourite way to check for potential support and resistance points. A more mathematical method is through pivot points.

Pivot points are calculated based on the following formulas:

Pivot point for current bar = [high(previous)+low(previous)+close(previous)]/3

From the pivot point, you can derive 3 support and 3 resistance levels

Resistance 1 = (2*pivot point) – low(previous period)

Support 1 = (2*pivot point) – high(previous period)

Resistance 2 = (pivot point – support 1) + resistance 1

Support 2 = pivot point – (resistance 1 – support 1)

Resistance 3 = (pivot point – support 2) + resistance 2

Support 3 = pivot point – (resistance 2 – support 2)

Taking Dow Industrial Average as an example, the following statistics can be derived:

What we can see from the statistics is that price bar exceeds the R2 resistance around 13% of the time. How can a trader make use of this information? A trader that is holding a short position can choose to place the stop loss level at somewhere above the R2 level for a 13% probability that the stop loss is triggered. Such statistics can be valuable to a trader who needs to decide where to exit an opened position.

US Stock Market - More Weakness Ahead

Dow, S&P500 and Nasdaq index broke below their uptrend line on Friday. Volume has been picking up and this suggests real selling and not just profit taking.

The recent weakness started off from China when news broke that banks have been told to suspend lending. Although the suspension was not system wide, the market reacted nevertheless with Shanghai index moving down more then 3% and Dow closed nearly 1.1% lower. Adding to the uncertainty was US President Barack Obama proposal to overhaul US banks in order to avoid future financial crisis.

Technical charts are looking weak with MACD below its signal line and –DI above the +DI together with an increasing ADX value.

The support level for Dow is near the 10,000 level which is where the Fibonacci retracement is located. Expect to have more weakness next week.

US Market Update

Some negative signs are showing up in the technical charts for S&P500 index.

Firstly, the MACD indicator is about to make a bearish crossover. The –DI is above the +DI and RSI is seen to be turning down from overbought levels. All these signs point to a weaker market in the short term.

However having said that, the uptrend is still intact as the trend line connecting the lows is still not violated.

A test of the trend line is possible this week. A closed below the trend line is negative for the bulls whereas a successful test of the trend line followed by a rebound is a sign of trend continuation.

Let’s see how the market behave this week Happy trading!

Sentiment Indicator

Recently, I read a book that describes an indicator to measure the sentiment of the market. It uses data from data that is readily available from the CFTC website (http://www.cftc.gov).

This website provides a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by CFTC.

This information is useful because market tops and bottoms occur during extreme optimism and pessimism.

An example of the information available is given below: (http://www.cftc.gov/dea/futures/deacmesf.htm)

This example shows futures position for Canadian Dollar traded in the CHICAGO MERCANTILE EXCHANGE.

The “COMMERCIAL” traders are those that make use of the futures contract for hedging purpose. “NON-COMMERCIAL” traders refer to speculators that operate in the futures market.

An example of a sentiment indicator is the %long indicator (based on non-commercial data) which is computed using the formula:

%long = (number of long contracts)/(number of long contracts + number of short contracts)

This is a contrarian indicator meaning that when majority of the speculators that are holding “Long” positions, the probability that the market has reached a top is higher.

For more information please refer to the book

http://www.amazon.com/Sentiment-Forex-Market-Indicators-Strategies/dp/0470208236/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1208178773&sr=8-1

STI Update

STI hit a high of 2827 on Thursday but succumbed to selling pressure to close at 2802 on Friday.

Going towards the end of 2009, the index looks to be consolidating at current levels. The technical picture shows the MACD indicator below its signal line which is a bearish signal. The ADX has fallen to around 17 which correspond to the weakening of the uptrend. Short term stochastic is also giving a bearish signal and points to short term weakness.

Support is at 2770 and 2740 respectively. The break above the strong resistance at the 2700 to 2730 range is still valid. This indicates a target of 2900 which looks attainable.