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COVID-19 defeated by Mr. Market in 2021 or so the IMF says.

Tuesday, March 24, 2020

I blogged about Mr. Market coughing blood from COVID-19 slightly more than a week ago.

On 13 March, the STI Index was at 2,665.

Yesterday, the STI Index was at 2,223.

That's a decline of almost 20%.

Today, it is experiencing a bit of a bounce.

So, what have I been doing in the stock market?

What will I do in the coming days, weeks and months?

So far, I have only been nibbling at stocks.

They are stocks of businesses which I believe will continue to generate meaningful income in spite of the COVID-19 crisis.

Although I am tempted to buy a lot more, I remind myself that the bear market is very much still in its early days.

There could be more shocks in the days, weeks or even months ahead.

Shock waves are hitting the American economy right now:






So, my war chests which are several relatively large Singapore Dollar fixed deposits and my CPF-OA savings, the size of which is public information, remain locked.

Some might ask where is the money I have been using to nibble at stocks coming from?

I do keep a float which is money I can access easily at any time.

This float is money in all my savings accounts and current account.

When am I going to deploy money from my war chests?

I said in the blog about Mr. Market coughing blood:

"There could be some rebounds in stock prices as, in a bear market, prices go down a river of hope.

"However, until I see signs of the downtrend breaking or, better still, a trend reversal, my war chests stay locked."


We have seen this happening.

Prices go down.

Prices rebound.

Prices continue to go down.

Prices rebound.

Prices go down somemore.

This is what is meant by prices going down a river of hope.






Fundamentally, many stocks look really attractively priced right now.

However, the fear of the unknown is crushing prices.

After all, we can only say that these stocks look attractive right now because of past information that we have.

Do we really know everything there is to know about the COVID-19?

There is much talk about the Spanish Flu and how long it lasted.

The Spanish Flu killed millions and it came in three waves.

Just when everyone thought it was over, it hit again and again.

Will COVID-19 be like the Spanish Flu?

Are we only seeing wave one now?

Nobody knows.

That is the truth.

So, what are investors to do?

I cannot tell you what you should do, of course.

I can only share what I am doing or not doing.






There is no doubt that we will survive the COVID-19.

There is no doubt that Mr. Market will survive the COVID-19.

If we don't, the human race will be extinct, anyway.

So, what is the point of having or making money then?

Stiff upper lip and soldier on, as the British would say.

Be brave and ignore the doomsayers.

So, I will buy a lot more at some point.

When is that?

Like I said before, I will wait for the dust to settle.

When that happens, we should see prices trying to find a floor if there is to be a bottoming process.

The bottoming process should see prices break their declining trendlines eventually.

Bottoming doesn't always happen this way, of course.

In case we have a V-shaped recovery, we should see prices breaking their downtrends on high volume.

I might miss plenty of upside in such an instance but I remind myself that money not made is not the same as money lost.

We could also see a double or triple bottom pattern forming.

Prices rebound, hit resistance, retraces to a support band, rebound and if it breaks resistance on high volume, that's a buy signal.






Like I said, it is still early days but these are the things I will look out for.

What about the Momentum Oscillators?

At the moment, all I can say is that the Relative Strength Index (RSI) for many of the stocks I am monitoring has formed higher lows.

What this tells me is that the rate of decline in prices has slowed.

It does not tell me that prices are going to recover in a sustained manner.

Another momentum oscillator which I look at is the Moving Average Convergence Divergence (MACD).

The buy signal here for me would be a positive divergence where the MACD forms higher lows even as share prices form lower lows.






Although I have tried to make this information as accessible as possible, I know this might sound gibberish to some people.

Some might even wonder if this is English.

Well, if you think that way, perhaps it is time to pick up some Technical Analysis (TA).

Yes, I know.

Bad AK! Bad AK!

OK, this might not be perfect but if you have absolutely "no time" to learn TA, just take note of the news and stock prices.

If stock prices stop declining and simply move sideways even as we are bombarded with bad news, possibly, the worst is behind us.

Indeed, if stock prices keep moving higher even as we are bombarded with bad news, prices might have truly bottomed.

TA is about probability and not certainty, I always say.

Without looking at charts and just taking note of news and stock prices will make it even more so.

However, it is something everyone can do.

Till the next blog, take courage, stay safe and watch the following video from the IMF ("COVID-19 Economic Outlook Negative, But Rebound in 2021").





Recently published:
Eagle Hospitality Trust: In danger of extinction?

Related posts:
1. Mr. Market is coughing blood...
2. Books on Technical Analysis...

19 comments:

Verseun said...

Thanks AK for your views ,

Talking about biting the dust.

Suspicions on Eagle Hospitality trust and why insiders were selling proved omniscient.

https://www.businesstimes.com.sg/companies-markets/eagle-hospitality-trust-gets-notice-of-default-on-us341m-loan-delays-distribution

JH said...

Thanks for sharing on how to get the near bottom out price.

Some analyst advised investment in parts...
e.g. price drop 10 to 20%, invest some
price drop another 10 to 20%, invest some
price drop another 10 to 20%, invest some again

although they didnt talk about war chest.

I think your method is that you would open war chest and invest more when you see recovery happening? and not allocate equal portions to each percentage decline in price... Am i right? :)

AK71 said...

Hi Verseun

I know some people including financial bloggers who are invested in EHT.

The wealth destruction is enormous and almost surreal as it happened within a very short span of a few months.

My first blog on EHT was only published in November last year.

I wish I was wrong about EHT. :(

Reference:
Eagle Hospitality Trust: In danger of extinction.

AK71 said...

Hi JH,

You know what I always say.

It is never my way or the highway. ;)

All of us should have a plan, our own plan.

I am just sharing mine here. :)

My blog is pretty self explanatory.

Don't ask me to explain my explanation leh.

AK lazy lah. ;p

Further reading:
1. A great crash is coming and I am ready!
2. Sit with all that cash and do nothing?
3. Investors eat crusty bread slowly for peace of mind.

laurence said...

Everyone waiting for AK to All In and Show Hand.
;)

AK71 said...

Hi Laurence,

I will blog about it if I do but I hope everyone has his or her own plan.

My plan is good for me but it is probably not good for everybody. :)

W said...

Hi AK,

Given yesterday and today 2 big gains in STI, is the market slowly recovering from the sell off?

or maybe in another words, has the dust settled?

AK71 said...

Hi W,

The Moving Averages are still down trending and will provide resistance.

Of course, just do whatever you feel comfortable doing.

Don't mind me. :)

Joe said...

Hi AK,

Maybe you should do.a webiner and teach TA! HAHAHA. Or maybe do a AK & friends "zoom" edition

csky said...

Hi AK, are you using STI as the base to do TA in times like this?

Thank you.

AK71 said...

Hi Joe,

If we want to do some trading, TA skills are a must.

I haven't done any trading in a long time.

Rusty liao lah. ;p

My TA skills are very pedestrian and can be picked up from books.

See related post in the blog above for some recommendations.

AK lazy lah. ;p

AK71 said...

Hi csky,

It depends on what we are interested in getting into, I believe.

If we are interested in buying an STI ETF, we should be using the chart for the STI Index.

huiteen said...

Dear AK , in your previous post, you mentioned you would get sphreit when it gives you 6% yield. Would you nibble now that it gives 7%? happy to read this latest post !!! Been waiting for Long ....

AK71 said...

Hi huiteen,

That was then.

Things have changed.

In this current environment, in my opinion, there are better investments available. ;)

D said...

Hi AK,

Thanks for your response earlier.

Something that I dont get it hence like to hear your thought.

I understand market can be irrational. But still the road ahead to fighting the virus and revive the economy is a long one plus at this point, there is not even a cure for the virus. Even though several central bankers are doing their best to provide liquidity to the market but without a cure (for the virus) in sight, plus not all the 100+ nations are equal in terms of helping businesses and lives, why the market (US basically, and the rest follows) seems to be recovering from the fall just like that?

Many thanks for your thought.

AK71 said...

Hi D,

I have decided to publish my reply to your comment as a blog to make sure this reaches more readers.

See:
COVID-19 defeated by Mr. Market already?

Jason said...

Hi AK

So you mean that beside the money u put in the stock market ( reits non reits) , you still have fixed D cash war chest?

How do you determine the ratio between the two? And why are you not tempted to deploy the war chest on 23 march?

AK71 said...

Hi Jason,

I have several blogs on how I believe in staying invested but also having a war chest ready.

For example, this blog from 2017:
Wait for a big crash to pick our durians.

It is not just fixed deposits.

In fact, when we take into consideration my CPF-OA savings which is another war chest, I am never fully invested.

I am more inclined towards having my war chests forming 30% to 50% of my portfolio.

If there are more investments which I like, it goes closer to 30%.

If there are less investments which I like, it goes closer to 50%.

While waiting, I get paid.

23 March?

I have been injured by falling knives before and I remember the pain.

It is safer to buy when things have settled down even if it means losing some of the upside.

Like I said in a recent blog I have grown more timid with age. ;)

Reference:
Buying DBS, OCBC, UOB...

AK71 said...

My reply to a reader's comment: HERE.


Hi Unknown,

You said:

"U said before... If market keep going up even with bad news... This mean the worse is behind us... So can deploy warchest already... Lol"

I didn't say that.

These were my exact words:

"OK, this might not be perfect but if you have absolutely "no time" to learn TA, just take note of the news and stock prices.

"If stock prices stop declining and simply move sideways even as we are bombarded with bad news, possibly, the worst is behind us.

"Indeed, if stock prices keep moving higher even as we are bombarded with bad news, prices might have truly bottomed.

"TA is about probability and not certainty, I always say."


You left out important modifiers in my statement. ;)

Without actual TA, this observation provides an incomplete picture.

For example, stock prices which are moving sideways but are still trading under a declining moving average, they could continue to decline after some time.

So, if you want to take a chance, please remember that you are taking a chance.

What I said before was that TA is about probability and not certainty.

In the blog, I also said:

"Without looking at charts and just taking note of news and stock prices will make it even more so."

Reference:
COVID-19 defeated by Mr. Market in 2021.

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