Friday, 3 August 2012

Big Ben and Super Mario disappoints with no QE, what strategy next?

Dear Friends,

Last week, we did mention that about our game plan. Our plan is to sell into the rally we had when there is a double QE expectation on US and Europe. We told our readers not to take the risk of no QE again which will definitely set the market back.

Check out our last article on this week game plan:
http://www.danielloh.com/2012/07/trading-strategy-for-next-week.html

Today European Central Bank President Mario Draghi, nickname Super Mario is beaten by his own words. And of course when there is no action, the market dissapoints. FTSI 100 is down by 51 points, 0.88% while DAX is down by 148 points, 2.2% on thursday closing. Dow on Thursday mid afternoon, is down by 145 points, a 1.11% drop.

Last week, we mentioned our trading plan is that we are still bullish mid term in the next 2-3 months. In fact, we are looking at accumulating stocks whenever the market sells down before the US election. Today represents one good opportunity. In US, we are looking at Apple and Google to retrace itself. In Singapore, we hope that Ezion goes back to $0.70 again. Fat hope...

In fact after doing an analysis of the jobs reports, our research shows that chances of the Non-farm payroll beating expectation is there. Although we may be wrong as anticipating report numbers are a tough task, we are tilted more towards an unexpected upside surprise. This week I heard a lot of analysts and gurus on CNBC or websites predicting that the jobs numbers will be awful and terrible. I think we are perhaps the first to think positively. Yes, currently we are alone.

I got a sneaky feeling that perhaps Ben Bernanke knows something about the jobs report too. This time in the FOMC meeting, he sounded casual and did not mention anything about jobs may be getting worse or give assurances that FED is thinking about possible measures. He did not try to pacify the market expectations. Don't forget that on Wednesday, ADP employment report is good.

Of course on Friday, the result will tell itself.

However as a trader, I always like to think of possible scenarios. That is how I always seem to be one step ahead of others.

Our trading plan on Friday or Next week is: 

1) If Jobs numbers are good and market starts to rebound strongly after today's fall, start to buy some stocks. I can sense that confidence is still in the market and it seems the market sentiment now is traders are more afraid about missing the bull run than not.

2) If Jobs numbers are not good and market tumbles badly, let the market correct itself, stabilise then enter some small positions. A good way to gauge a change of confidence after a selldown would be a triple digit one day increase in Dow Jones or a 2 day increase in Dow whereby it ends the day on a high or a consecutive triple day increase.

3) If Jobs numbers are good, but market did not rebound strongly. It means that traders probably do not want to enter position over the weekend. Be prepared for any rebound next week. Get ready your weapons.

Rgds
Daniel
www.danielloh.com

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Investment Seminar by Daniel Loh:

Secrets of the US Market and how it affects Singapore Market (Singapore)
- Are turnarounds of the Dow Jones and STI happening soon?

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