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.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
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