Technical Analysis fails as money-making strategy for stocks

Making money is not as easy as just mastering technical analysis. It consists of a whole suede of skills.

Birinyi writes "Technical approaches can and should be a useful adjunct to every investor's - amateuer and professional - arsenal, if and only if used properly and with understanding.

Shanghai develops end of downtrend behaviour

Daryl Guppy has confirmed that China has reached a bottom. According to him, the strong breakout above 2,480 is bullish. Investors should wait for the rally to retreat and successful retest 2,480 as a support level. Time to get ready the bullets.

I missed the 2009 bull run

This video captures my missing of the bull run since 2009. I really feel like an idiot!

Where am I invested right now?

Right now, I am a believer that there will be no double dip, and that the correction is just over. Hence, the best time to put money to work in shares. I am currently invested in:

1. NOL @1.93
2. SembMar @3.80

I will be looking to invest in China through the ishares 50 over the next few days. On the local front, may be looking at acquiring 1 or 2 more blue chips.

US stocks are cheap!

According to this article, 13 out of the top 25 companies in the S&P trade at or below 10 times estimated 2011 profits. All 25 stocks look reasonably priced, with good upside potential and little downside. Barron's has written favourably about many of the companies on the list. Banks (JP Morgan, Bank of America, Citigroup and Wells Fargo) on the list are expected to show sharp gains in 2011 profits due to declining provisions for losses. This could be the best time to buy.

Have China bottomed?

Sean Darby, head of equity strategy at Nomura Securities, says China’s A shares are inexpensive right now. That’s because Chinese government wants to bring property prices down by squeezing liquidity. And the expectation of property price deflation has left local investors holding cash, Darby says.

“Foreign investors can buy A shares at cheaper valuations than H shares in many instances,” he writes in a report dated July 9. “In our view, mainland equity markets, because of the closed capital account, afford international investors protection against external credit shocks. They are uncorrelated equity markets while also inexpensive in absolute terms. The earnings integer continues to rise.” The Shanghai Composite Index rose 55 points to close at 2,470.

Personally, I think it is a good time to invest in China. I am looking to seek exposure through either the shares listed in my earlier blog or the ishares China50. The ishares 50 seems a better choice, since it affords me greater diversity.

No Double Dip

Harvard professor Kenneth Rogoff has good and bad news. The good news is he does not expect a repeat of the sub-prime crisis any time soon. “You tend to be vaccinated. The worst is over but it can happen again in 15 years,” he says. Neither does he anticipate a double dip. While Greece is still floundering, the US and Europe are unlikely to go into a recession again, he says.

Rogoff also reckons the “Japan syndrome” is unlikely to materialise in the US because of its easy monetary conditions. “The US Fed will keep interest rates low for a long time.” However, the indicators don’t look so good for the Eurozone. “There is a greater risk for Japan syndrome in Europe,” he says.

Although Rogoff expects economies to recover, he doesn’t expect the US housing market to find their feet. “If you’re a country in the epicentre of a crisis like the US and UK, housing prices don’t come back for a decade,” he says. “One in five Americans are going to lose their homes. Half the people will have mortgages that are worth more than their house.”

For stock market players, there is better news. “The amazing thing about equity is that they have come back to above pre-crisis levels two to three years after the crisis,” Rogoff says. Based on his 200-year data, he observes that the S&P falls around 56% from peak to trough in a period of 3.4 years before turning around.

Risk to avoid China

Wong Kok Hoi from APS turned in 98.3% in 2009, so he definitely knows what he is talking about. He is currently taking big exposures on China, which is the worst-performing stock market in the region this year. Given that China stocks are currently trading at attractive valuations with EPS of over 25% on average, APS says it would be a "risk" to stay out of Chinese equities. Nevertheless, it could take another two quarters before a full-fledged recovery takes place in regional and Chinese equities. His key holdings include Ju Teng and Shenzhen International.

Will stock markets probe new lows?

The Shanghai market has broken below an important support at 2,500. Will it challenge 1,664 Oct 2008 low soon? Daryl Guppy thinks it would. This is despite having tentatively called a "bottom" in China 2 weeks ago. If China makes new lows, the Western markets will likely follow too. I should wait a while more before moving in on China.(although it is very attractive now).