Observations from the market.

Due to my part-time studies school assignments, I have not been posting for a while. However, I am still actively watching the market movement trying to pick up the some experience to enrich myself when the similar situation arises again.

The stock market has been very volatile for the past one month since the 26th July where US market has plunge greatly due to credit risks in the home mortages that made the bear sterns fund to collapse and investors fail to get any money back.

This crisis has spread across to the rest of the world which make investors/traders panic resulting in a massive sellout in the every market and with the exception of the ShangHai Stock Exchange. (Ironically, China should be the major threat but it seem to be in her own world rising like each every other day, and all major indexes decline it did not even not even scratch her)

Even with strong economic growth reported, Singapore was still not sparred. STI has fallen sharply from its peak @ 3685 to the possible bottom @ 2962 in three waves with some false recovery in between. It has broken some major supports that I forcasted using T.A. The situation further worsen when it manage to break 200 days moving averages (last line of defense) an indication that the bear years may be coming in.

In the correction, every counters falls as investors/traders sell in panic. Blue chips were the first to go falling sharply till is is ridiculously cheap as compared to pennies. As the market recover, these market gaints make pretty aggresive movement punching the bear deeply in its face.

As for pennies, this correction is a doomsday to those companies that has their operations funded by debt. This is most noticeable in the construction counters, where construction leader like CSC and yongnam fall greatly. Companies that are overly prices from its fair value also get their beatings. This is seen from the speculative play of serveral counters before the correction.

Another interesting observation that i have notice is, counters (courage marine) with high dividend payoffs are shown to be much more resilient in the correction. This shows that with a possible bear year emerging, traders/investors will flock to these counters to get the dividend gains.

From these observations, I notice that the risk reward is better to buy blue chips on dips instead on investing in warrants. And in times of uncertainties, we should bank on high dividend yield counters as they are more stable and the dividends will be a bonus to us even in the bears years compare to the interests paid by putting our money in the banks.