Has STI bottomed out?

STI on 28 October dropped to the lowest point at 1,473. On that day, STI was at 95%

pessimistic line of the linear regression chart, suggesting that the pessimistic sentiment had

reached its lowest level.

For the past 10 years, whenever STI fell to 95% pessimistic line of the linear regression

chart, market began to turn around, as happened in 1998 and 2000. Similarly, when the

trend line was at 95% optimistic line, market also turned around, as in 1997, 2000, and 2003.

Up to now however, I find out that they are coincidental occurrences which I do not have

any theoretical explanation to prove the certainty of the accuracy of the chart. Nevertheless, I

believe the chart is definitely worthwhile for reference purposes.

STI in a short span of 3 days rebounded approximately 25%. The rebound velocity was

too traumatic. We could expect volatile fluctuations in the near term.

The financial tsunami is terrifying. I have never seen it before in my life. Cautious

navigation gives you safe voyages for many years to come. I would not suggest you put your

stake with what you have, but keep at least 50% cash with you until mid year next and to

observe how the market trend develops. The post financial tsunami effects will be traumatic.

Rebuilding devastated properties after tsunami takes a long time.

Many people puzzle over how the United States, the country that causes the financial

tsunami, the government that prints currency notes to save the market could lead to US$

appreciates so much. This has upset the financial system worldwide. Beside US$, Japanese

yen also appreciates.

The appreciation of US$ and Japanese yen induce many people to dispose of stocks

and convert other currencies to US$, and deposit monies into American banks. The

American banks however, dare not lend out monies, and US remains short of funds.

3 months ago everybody thought US would wantonly print paper money, and US$

would devalue; everybody sold US$. When US$ strengthens, the scenario turns around;

people rush to buy up US$, upsetting the worldwide market to such an extent that no

traditional analytical explanation is feasible. The only explanation is: the market has become

a big gambling den.

Governments worldwide have come out to rescue the market. I am thus basically

optimistic. The only worry is the collapse of market confidence which would take a long time

to recover. On top of it, there are many gamblers playing the market everyday, making it so

much irrationale.

For now you must try to curb your greed and fear sentiment. Fear on account of stock

holdings that see the market’s dip; greed on account of chasing stocks on market’s rise.

Share prices have dropped to relatively cheap level. The appropriate stock holding and

cash ratio should be 70% to 50% cash, or 30% to 50% stock holding. It all depends on your

own risk tolerance. Never borrow money to buy shares.