Can past give Singapore stock investors lesson or two on STI?
Past performance does not equate future performance but perhaps we can find one or two similarities.
Straits Times Index 1996-99 ‘Asian Financial Crisis’
- Price action appears to fit into 5 stages: 3 down 2 up.
- Stage A (down) nearly 20% retracement off the top.
- Stage B (up, lower high) recovers half of A.
- Stage C (down, lower low) takes nearly 60% off the top.
- Stage D (up, lower high) recovers half of total losses.
- Stage E (down, lower low) ends below with nearly 70% discount.
Straits Times Index 2007-09 ‘Subprime Crisis’
- Price action also fits 5 stages.
- Stage A (down) 30% discount off the top.
- Stage B (up, lower high) recovers nearly half of losses.
- Stage C (down lower low) shaves more than 60% off market top.
- Stage D (up, lower high) recovers little over 10%.
- Stage E (down, same low) finds base at same.
This is what it looks like to me:
- Market loses some, recovers half of that loss in stage B.
- Stage C is the killer.
- Stages D and E looks different.
Straits Times Index 2015
- Charts don’t tell us whether we are experiencing a minor correction this time or the precursor to a major crash like Asian Financial Crisis or Subprime.
- Based on #BlackMonday action last night, I see instability.
- We are at stage A with 20% loss and possibly seeing turning point going into stage B. We can’t tell certainly. If market follows the Subprime ‘plan’, there is another 10% loss coming that belongs to stage A.
- Stage B likely to recover half of losses of A. I call this the sucker’s rally. Don’t get trapped.
- Top of stage B is the best point for long term investors to exit their positions or complete portfolio restructuring. This is the point where aggressive traders position for short selling. Expect lower high.
- Stage C will be the killer that will test every investor’s pain level. Expect lower low.
Stock market crash guide
I wrote a ‘9-point market crash guide for bulls and bears’ early this July. Click here to read more.