Thursday, May 4, 2017

8 Signs We Are In A Bullish Environment

Stock market worldwide has been enjoying a good year in 2017 so far and seems like it will trigger investor's happy come Dec later this year.

It is quite clear that we are rather in a bullish environment, at least from the sentiments point of view when we see how stock markets perform globally.

I'm going to throw randomly 8 signs that I see recently that substantiates why I feel we are in this bullish sentiment. I will try to make it a mix in between technical and layman (for fun) so it won't get so boring, like what an economist does.




1.) Good News Bad News.... All Green

This is when regardless of how the company is performing, good or bad, the share price goes one way up and that is green in color. 

The most recent example would be starhub which reports a 20% loss in nopat year on year with distinguish falling ARPU but share price went to close green the following day.

Some of us may argue that it might have been priced in but think again. Really? If we are in a bearish environment, would it likely close green upon reporting a poor result?


2.) Companies went XD but share price goes up

The most common case that we've seen is companies' share price tend to go up during Cum-Dividend (CD) and will temporarily drops the following day upon XD. 

The recent case of ST Engineering and Ascendas Reit prove otherwise nevertheless. Upon going XD ,on the following day, the share price returns back to its original price when they are still in CD mode. Wah, so bullish indeed!!!


3.) Number of Gurus have increased

During a bullish environment, there are increasingly many gurus who provide courses on how to make XX% returns in a year with ease by following their "system".

There are correspondingly many followers who follow whatever the guru says because everything has been "perfect" so far.


4.) Self-ego elevated

This is when making money seems easier than learning ABC and absolutely no fret on extrapolating these returns to many future years to come because no one actually realize how easy it is to become a millionaire in Singapore after all!!!

Ah ha!! To top it all off, perhaps we don't even need to work after all. Making money to work for us is so much easier than working for money. Time to write that resignation letter perhaps...


5.) Media Reporting Happy News

You read news in cnn and cnbc that market is breaking new high and only going to go higher.

Economy index like Manufacturing, PMI, ISN are all turning better and Fed likely to tighten the interest rates because of the better performing economy and low unemployment rate.

Analysts started touting higher valuation target price for companies, which is in stark contrast to what they call 12 months ago.





6.) Taxi Driver Selling Options

I've recently took a cab during the last weekend and talked with a driver who is supplementing his income by selling an options.

Now, I'm not exactly an expert in these derivatives but if I understand correctly from him, he is trying to sell a put options and if price continues to go up, he'll earn that premium in between.

I think this is a rather popular strategy among some of my circle of friends too.


7.) Shiller Index Topping High

This is going a bit more technical here.

Rober Shiller is well known for his model that he creates on the cyclically adjusted S&P P/E ratio.

Apparently, the only time it was screaming that high was during the great crash in 1929 and the Dot com bubble in 2000. Nothing else came close to that other than what we are experiencing today.

Still, it's not a perfect model but up to individual to ponder and think about.




8.) VIX index Bottoming Low

The VIX index is a volatility index which basically tells us how complacent the market is (if you ask me to explain that in a layman term).

The only time it went down below 10 is during the Dec 1993 incident, and the peak of the bull in 2007. Other than that, they have hardly gone below 10.




Conclusion

Look, the market is not going to crash tomorrow (oops, I better stop preaching like some kind of guru or fortune teller). In fact, the bullish environment may happen a lot longer than what most people think.

Now, the only think I haven't done is probably to head down to Mandai road, spot a few family members of Ah Meng and try to ask them to throw some darts and see where it ends up.

Hmm, anything I have missed so far?


25 comments:

  1. Hi B,

    Good write up!

    So are you going to cash out your position in the market? If yes, what is the ratio of cash to equity? Thanks

    ReplyDelete
    Replies
    1. Hi Anonymous

      I dont usually cash out by using the market index as reference. I usually divest my holdings if I feel their valuation are over valued.

      At the moment I feel that some of my holdings still have room to run so I am not selling.

      The only sell queue i have at the moment ia keppel dc at 1.275 because i dont feel they are cheap anymore.

      Delete
  2. Quote "3.) Number of Gurus have increased

    During a bullish environment, there are increasingly many gurus who provide courses on how to make XX% returns in a year with ease by following their "system".

    There are correspondingly many followers who follow whatever the guru says because everything has been "perfect" so far.

    Unquote

    Another sign is "Following your favourite blogger's holding and now sitting on nice paper profits and then shouting loudly lucky I follow you. thank you!".

    :-)

    ReplyDelete
    Replies
    1. Hi Uncle CW

      Haha 😂 that seems to happen at all times of the market condition.

      Delete
  3. B,

    One more.

    Property agents, developers, and investment banks say property has bottomed!

    Buy, buy, buy!

    Wait. Aren't they all vested interests on the sell side?

    Nah! They are helping us to get rich!

    :)

    ReplyDelete
    Replies
    1. Hi SMOL

      Im sure they have "altruistic" reasons for doing so hehehe.

      Recently ive heard property shipping and commodities bottoming, maybe the economy is getting better? Haha

      Delete
  4. and when your aunties/grandma/grandaunt/ playing mahjong or at the wet market, say XXX is "bao chia", must buy...
    it is time to sell..

    ReplyDelete
    Replies
    1. Hi FC

      Wah nowadays students stats more accurate than aunty grandma stats. Trades over grades

      Delete
  5. Hi B,

    I think we are at a weird Bull. The way I see it, many bloggers are still holding Hugh cash (anything 50% or more is consider high to me)

    So once there is a dip, it is swallow and the return to glory sharp! This is the most painful trap that will hit the weak in mind. I am referring to myself LOL

    ReplyDelete
    Replies
    1. Hi mike
      Yes you are right
      But if market so easy to predict like what most bloggers think
      Then everybody no need to work.

      I think if u got deep pocket really can do value investing. Bo chap about market l, just buy when u see the value of the stock. Drop some more then you buy.

      Now I regret I buy too little. Hahaha.

      When market is bad, my paper loss hit almost 80-100k.
      Now all turn positive

      Delete
    2. Hi SI

      Just to be clear Im not saying market is topping hor, just observing the behavioural.

      I am personally 93% vested now so no way im suddenly going to cash out everything and wait for that one moment.

      If this turns to be a secular bull run, we could be seeing this for years to come :)

      Delete
  6. Whoa, the one about the taxi driver selling options is a good warning sign. Just recently I read an article about Indians rushing into stocks too: http://in.reuters.com/article/india-stocks-retail-copy-idINKBN180183.

    But I agree with Sillyinvestor that there are still many investors here who haven't bought into the rally. It's not just the financial bloggers - even among my group of friends who invest, all of us have cash holdings exceeding 50%. I still don't see signs of euphoria in the local market.

    ReplyDelete
    Replies
    1. Hi J

      Yep the euphoria is way mild right now as compared to back in 2007. As youve pointed out in the articles and also someone who showed me articles back in 2007, that is what I called euphoria moment.

      Delete
    2. That's interesting, do you still have the links to the articles published in 2007? Unfortunately I hadn't started investing then... was still studying.

      If you do have the links, mind sharing them? They would make for an interesting case study!

      Delete
  7. Hi B,
    Yah, u are right ,,, all sign seems pointing towards bullish market,,,but as what John M Keynes said " The market can remain irrational than you can remain solvent!" ,,,,market still flooded with " cheap money " as interest rate still moving upwards quite slow with much accommodative policy,,,
    Of course nobody sure when the tide with turn,,,or the market will continue to be bullish ,,,be ready with some " war chest " :-)
    Cheers !

    ReplyDelete
    Replies
    1. Hi STE

      I think the people whove experienced or read about gfc are wiser now and they load warchest to standby. We need the irrationals to start coming in to flood the market, else we'll end up neither here nor there :)

      Delete
  8. Hi B,

    I think selling option as a strategy is not a bad thing but the seller has to know what he is doing.

    BR

    ReplyDelete
    Replies
    1. Hi Unknown

      101% agree with you.

      Risk comes from one not knowing what to do and act in specific situations.

      Delete
  9. The signs mentioned, makes me think a bubble is building up.

    ReplyDelete
    Replies
    1. Hi Anonymous

      If you look at the US market, definitely its on its way to thr build up. All it needs is share price to run faster than earnings or fundamentals and wr have that building up.

      Delete
  10. The recent bull run are attributed to a few external and internal factors. The external factors are: (1) Trump's effect, (2) recovery of oil prices, (3) UK PM Ms May strong leadership after Brexit, and internal factors : (1) higher PMI (>50) shows that economy is recovering and not going into technical recession, (2) better result from Blue Chip counters such as DBS Bank and Keppel corp and Sembcorp which help to push up the STI, (3) Property HDB prices slowly recovering. The STI has crossed 3200 and May is the month where the old adage "Sell in May and go away" and some retailers will sell their counters causing the STI to retreat. My near term watch areas are tension between US and N Korea and France President Election. Trump have sent a destroyer and submarine to the Korean peninsular. If a war break out, the US and STI indexes will plunged. If Mr Emmanuel win the French Election, the world indexes will rally as he is Pro Euro.

    ReplyDelete
  11. Hi B,

    Thanks for the insightful sharing.

    Mind to share where did you source the Robert Shiller and XIX charts? Or where you normally get these charts from?

    ReplyDelete
  12. maybe secular multi-years bull run soon....haha

    ReplyDelete
  13. if VIX has bottomed then the only direction it can go is north!

    ReplyDelete
  14. The information that you provided was thorough and helpful. I will have to share your article with others.
    Corporate Finance

    ReplyDelete

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