The worst is yet to come!

As of today, 7 March 2007, KLCI rallies strongly and injected hope and emotion into many of the retailers. Value buy is now a sophisticated and hard core value investors who believe that they are buying bargain stocks is buying fiercely (particularly on 6 March 2007), creating large volume of trading, which indicate a divergence of opinions between market players.

The buyers are confident, due to many reports in newspapers that are showing a fundamentally good and economic prosperity of Malaysia, either intentionally or not. Rumors sent out to investors that the carry trade effect is over, market is rebounding and the future of the stock market is bright. In fact, it is often argue by some of the hard core investors (who claimed themselves value investors) that now is an huge opportunity to hunt for bargain stocks.

While it can't be denied that there are bargain stocks in the market, the strong forces behind the bear market should also never be neglected. The previous huge down turn with high volume, probably is an indication that many of the value investors are confident and buying many of the so-called bargain stocks. Judging from the volume alone, it is reasonable for us to believe that many of the so-called value-investors are now dead or crippled. While some of the value investors are still defending the support line of 1150, 1110 and even 1000, the force of these people are already weaken. The previous value investors, had lost their power, if not confidence to influence the market. Their money is trapped and thus i believe that the buying power of these group of people in the stock market is diminishing. As indicated by the chart, the strong rallies is actually not so strong, if compared to the shape falling knife, with huge volume and momentum. While a bullish engulfing inject some element of bullish forces into the market, the reverse hammer formed today in the market is also putting more down trend energy into the market. Judging from charting alone, if ever i were forced to predict the next move, i will say it is a bearish trend (while, obviously, at these volatile time, i think not many chartist who are brave to predict the future as the future is really hardly predicted).

Well, talking economics, is our economics really good? Gosh, oh my god, if you ever had your own eyes and brain, it is not hard for you to notice the poor economic condition in the country. Just go around and ask, are businessmen making damn a lot of money? No! Many of them are doomed, particularly those in property and construction sector! Some more, if is said that the trade of Malaysia had increase by 10%, what the heck is this misleading figures is? Malaysia export had been dominated by oil, palm oil and manufacturing... and these products in the previous year had increase in price dramatically, roughly by 100% from the low of past few years. The price increase itself, is the root cause that cause our country trade to increase by 10%! In fact, the real economic environment in Malaysia is perceived (my own opinion) as deteriorating. Further, the concentration of export in the three sector is also another unhealthy sign of the country economics.

Well, then is the stock price now reflects the current economic environment? Huh, not a concern for me. Dumb people are too many, and their combined forces in the country is the force that could influence the stock prices. Fundamentally speaking, i believe the PE is now between a normal (relevant) ratio. However, please be reminded that, the force is now down, and any bad news on the world could cause the investors throw the stocks frantically, crazily and irrationally (Hahaha, this is what really happen when the fundamentalist that buy at 1250 with all their money, and a frightened investor transact a deal at 1200, so gone the fundamentalist money). As the trend is now down, it is often smart to not buy the stock at these periods. For those that haven't profit take (if ever there are still profit), i will advice you that to take profit. A bird in hand is more than two in the bushes, do not risk your money, and if you wish to gamble, there are plenty of opportunity after the storm. The storm is now haven't ended yet, the worst had yet to come...