Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Stock Markets Poise for a Rebound

Stock-Markets / Stock Markets 2011 Aug 10, 2011 - 07:01 AM GMT

By: Submissions

Stock-Markets

Best Financial Markets Analysis ArticleSam Chee Kong writes: Due to the Downgrade of the US Sovereign ratings by S&P, the current rout in the global stock markets seems like there is no end in sight. Last week the authorities hoped to downplay the severity of the downgrade by announcing the downgrade over the weekend when most markets are closed. Come Monday, all hell broke loose when trading bells open in Asia and Europe, markets are dropping like flies.


This event has long been overdue and it is just waiting for a catalyst and this time the main culprit being the downgrading of the US Sovereign status from AAA to AA+. It seems like it’s the end of the world with markets down 3-5% for the past few days. As such, there is no better time than now for contrarian play because “there is always light after the darkest hour of the night”, and now it seems to be the safest time to trade (not invest) in the markets.

In time of turmoil like this, the men will be separated from the boys. Truly professional investors are always contrarian investors. They are always will be the first to bail out from the markets when ordinary folks starts to crowd the market and always will be the first to get in when everyone abandoned the market.

According to Bloomberg’s July report on the ratio of insider selling to buying on the S&P , total shares sold amount to US$ 261,452,403,000  verses US 70,750,000 in buying . In other words the selling/buying ratio for the month of July is a whopping 3695.4 times or a ratio of 3700 : 1. In other words there are 3700 times more selling than buying for the month of July. Talking about smart money exiting the market !!

Another indicator on the flow of funds is the ICI fund flow data. For the week ending July, investors withdraw a massive $10.4 billion from the market. This is the second biggest weekly withdrawal since the May 6, 2010 Flash Crash where investors bailed out with US13.4 billion. This is the 15 weeks of consecutive outflow of funds which amounts to about $50 billion. Moreover with Bank of America’s July data showed that the cash/asset ratio of about 3.4%  held by mutual funds doesn’t seem to augur well for the industry. 

Any further withdrawal will mean that mutual funds will need to sell down their portfolio in order to satisfy the redemption by investors in the coming days and weeks. The following chart shows the Mutual Fund flows.

Technical indicators like Macd, Stochastic, RSI and Money Flow are all oversold meaning that the selling has already been overdone and it is just a matter of time buyers will come in for bargain hunting and eventually will again push the market up. Buying during oversold conditions represents much lower risk and also a higher risk/reward ratio.

For those who are in the funds industry, we know the cost of having funds lying idle. Funds lying idle and not invested only proved too costly because there are operating expenses, cost of funds, opportunity cost and redemption cost need to be taken into consideration. That is why all the funds needs to be fully invested most of the time.

Remember there are huge amount of money exiting the market in July, eventually it will need to find its way back into the market. With current valuations and most markets are oversold, these funds will soon find its way back into the market for bargain hunting.

The stock market operates on the Yin/Yang (negative and positive forces) principle. In any situation, the Yin and Yang forces will adjusts itself until it achieves equilibrium. The Western interpretation of the Chinese Yin/Yang principle is the waxing and waning of financial markets.

An example of the Yin/Yang in action can be seen during the Asian Financial Crisis in 1998. Markets all over Asia is crashing but on the other part of the world in Eastern Europe and Russia , there are experiencing a bull run.

In the current scenario there is too much Yang (selling) in the market, in order achieve a balance, the market needs more Yin which comes from the buying power. So in the current situation the Yang (oversold) forces will soon be neutralize by the Yin (buy) forces.

With the above factors favoring the buy side we will expect the global stock market to rebound soon, the earliest by this week. Attractive valuations  and good fundamentals on markets and stocks alone is not enough to push prices up, you need MORE BUYING THAN SELLING.

by Sam Chee Kong
cheekongsam@yahoo.com

    © 2011 Copyright  Sam Chee Kong - All Rights Reserved

    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

rob
10 Aug 11, 18:31
Still 10% down side ...

Dow Jones still has around 10% downside before a firmer platform (need to see a consolidated platform). Both US and Germany are the last to fall among G7 and they need to bottom before we can conside a bargain of global equity.

What ever fears of deficit - countries in the world are still there......they will not disappear unless there is a war.

So what to fear about ??


Nadeem_Walayat
10 Aug 11, 18:58
What about fear ?

Buy Fear, Sell Euphoria.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in