QE2 Effect on US$ and Stocks

The US government's QE2 (a.k.a. Quantitative Easing 2) is ending this week and I believe this is the main impact that caused the US$ to rise (against S$) and the recent stock market woes.

When the QE2 was first launched, it resulted in a lot of liquidity in the market. Big funds will use the money, convert to Asian currencies, and trade for higher (or some would say safer) returns in the Asian stock markets. Afterall, Asian countries should have better growth prospect compared to the US between end last year till now. This means that US$ would have weakened and Asian stock market would have enjoyed some form of rallies.

When QE2 is ending, the reverse will hold true. Big funds will dumped their Asian stocks and convert the proceeds back to US$. Thus this few days we can observe big volume transactions in some stock counters, while the US$ continues to strengthen. One example that I can point out is SingTel shares. From yesterday I have observed transactions in sizes over 1,000 lots, i.e. about S$3million plus per transactions. There were a number of these transactions for both yesterday and this morning. See the pic below for transaction sizes at 10:03:28am and 10:02:33am.

I guess this period has been great for the bears. Let's see what happens after QE2 ends on 30 June 2011.

YangZiJiang - Price Bottoming?

In mid-June I posted in Bulls & Bears that YangZiJiang continued to trade within its downward channel with more downside to go. True enough, YangZiJiang fell to a low of $1.39 close last week.

Using the chart, YangZiJiang has some signs that the price has bottomed out. Of course, the more seasoned audience will caution that this may be just a short retracement, i.e. the price may have more dowside.

However, given that US's QE2 is ending in a few days and the big funds should already have exited their positions, there may be limited downside to stocks with good fundamentals. YangZiJiang's RSI and MACD show signs of bottoming (last candlestick is still forming in chart above). Should YangZiJiang maintain the support of $1.40-$1.42 and close positive over the next few days, July will be a good upward price movement month for YangZiJiang. No vested interest (at this juncture).

Sunvic - Head & Shoulder pattern completed?

Sunvic has displayed a head & shoulder pattern over the past weeks. Based on the head and neckline, the price pattern seems to have completed its course when it tested the low around $0.71.

However, the price pattern continues to trend within the downward channel, and thus it is unlikely for Sunvic to have any bullish breakout in the short term. MACD (not in this chart) is still trending down.

YangZiJiang

Despite the recent announcement about the Seaspan deal, YangZiJiang doesn't seem to be able to break out of it's downward trend. It is still trading within the same downward trend, and it will be dangerous for any trader to pick bottoms.

YangZiJiang has more downside to go. The only consolation is that the RSI seems to have reached its bottom, while the MACD maybe reversing. With the DJIA moving up more than 100 points at the time of posting, stocks in Singapore may also rise in tandem tomorrow. If the price movement over the next few days can allow YangZiJiang to break out of $1.60, then there may be hope for this big shipbuilder.

Pit Bull by Martin "Buzzy" Schwartz

I've just finished the book "Pit Bull" by Martin "Buzzy" Schwartz and I must say that it is an excellent read.

He has very aptly and humorously described the life of a trader. It is a stressful life, judging from the different events that happened to him. I couldn't imagine myself running to the bank and withdraw my 'gold & jewellery' in such panic state of mind; he did that twice. I think I would get a heart attack if I were in these extreme stress situation. Of course, Martin Schwartz has earned millions from the market from his trades.

The book offers many advice (not just his last chapter on methodology) and any aspiring trader should try to read "Pit Bull"; it offers an insight before one jumps into the trade.