Sunday, 6 January 2013

US market in super drive mood, what is next?

Dear Friends,

On Friday, Dow increases yet by another 44 points with S&P500 increasing another 7 points with the better than expected non farm payroll job report.

It has capped off a tremendous week with the DOW adding 500 points to the week. US market is accelerating at its fastest speed before entering the earnings season starting with the first DOW index company Alcoa issuing its forecast on Tuesday. This kicks off one month of intense evaluation of the earnings results.

I foresee great opportunities to make money in the US market as analysts have lowered their forecast across the board last year. This makes it easier for companies to do better than expected. Expect stocks gapping up more than down. If you remembered, 3rd quarter earnings was a disaster in october which brings about the slump before the election.

Do bear in mind that earnings season got their cycle! In America, the best earnings quarter is always the last quarter with people in great holiday mood to shop, shop and shop. So it bodes well with the stocks.

Some of you may wonder when the debt ceiling showdown between the Democrats and Republicans is going to kick off. I agreed with you that before the dateline in March, there will again be uncertainty and volatility in the market. But my prediction is that it won't happen this month, when all the analysts and media focus their attention to the fundamental earnings results. After the earnings season, we need to be careful.

Our market sentiment indicator has shown that all major sectors in US are bullish now. More than 70% of the companies are bullish. This shows that US is in bullish acceleration mode.

Our market sentiment indicator is as shown:

Bear in mind that now is not the time to short any stocks as short sellers will likely be crushed. You should only start to be wary when one of the sectors turns bearish. I anticipate that to come one month later from now, perhaps after the earnings season and one month before the March debt ceiling dateline.

In the meantime, let us focus on how the US companies are doing, because it will determine if STI still has the strength to power forward. A few weeks later, it is our time to focus on our local stocks' earnings results. That is the best time to screen out the good apples from the bad, and a good time to review our portfolio of stocks.

Daniel Loh


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