The SET Index Discussion

[Mp808]

24/6/2011
SET 1014.13 (-9.73) (23/6/2011)

Elliot's third wave is coming and what we had hoped to be a stone castle turns out to be a sand castle that's about to be washed away. SET closed near the day's low and it doesn't look good tomorrow. I know I say that it doesn't look good just about everyday, but tomorrow is extra ugly. If you saw the European and US markets, then you already know. Virtually all markets in Europe declined by about 2% today, with some of the worst going down to almost 3%. The US is down about 1.5% right now.

The International Energy Agency (IEA) are going to release 60 million barrels of crude oil to make up for the decline in production from Libya. That sent oil down 4 to 5%, which sent metals and agricultural commodities down also. Looks like Saudi Arabia got what it wanted. So crude oil is going to drop further due to the European debt worries also. The question is whether or not IEA's decision is a good one. In the short term, it's definitely bad for stocks (as if it wasn't bad already). But in the intermediate to long-run, it might help with inflation and high food prices. While IEA believes that it is making up for the possible supply shortage, I hear that supply was too much to begin with already and this makes it even more oversupplied. Actually, I should say that demand had weakened already and increasing supply will just push prices down much lower as we have witnessed today.

For this Friday, well, it doesn't look too bright. I have a feeling that SET is likely to have a more than 1% drop, meaning that it's likely to test the 1000 zone. Then next week, we'll see what the Greek parliament will do. I think they're going to pass the budget cuts though. I mean, do they really want to be held responsible for a default that would potentially lead to the collapse of the EU? I don't think so. It's already hard enough for them to look at the leaders of other countries. To let Greece default would be an extremely unpopular move on a global level. The Greeks are in trouble anyway. There's no way around it. Either way, the people of Greece are going to suffer regardless of whether or not parliament passes the budget cuts.

Good luck strangers!

[Mp808]

Lunchtime Report
SET 1016.64 (+2.51)

In the morning session, the market didn't drop like I expected; instead, it is sort of sideways, leaning to the plus side. Perhaps my predictions play a role because the market usually acts in the opposite direction of my predictions. :P Anyway, I really don't see the logic of it though. Crude oil dropped 4% yesterday and climbed back up a little over a percent today, resulting in a 3% drop from yesterday morning's price. But oil companies are still fine, down by only about 1%, with the Energy sector down by only 0.31%. BCP is down by about 2% though.

But what's the reasoning behind this? I thought it was going to be hell today. It's good that SET didn't plunge, but I still don't get it. Did investors overreacted last night, leading to a much higher drop than it should, given the amount of oil that's going to be released (60m barrels)? Did it turn out to be that it's not that big of a deal? I read that oil climbed back up today because, with IEA releasing the oil now, they won't have any to release in the future, so they're gonna have to buy it back if they want to have an emergency reserve...hmmm seems sorta backwards to me. For all the 3 readers who reads my posts (I hope there's at least 3! haha), please tell me what I'm missing here. Why is the market so calm about it?

[Mp808]

Lunchtime Report
SET 1011.50 (-11.44)

SET declines on the same old reasons, plus Basel plans to raise reserve requirements for banks. The market is unpredictable as usual, a sideways behavior. For the afternoon, SET is to test the 1010 support area.

Also, Soros speaks on the idea of an exit plan for countries to discard the Euro. The problem lies in that the EU uses the same currency for different countries; therefore, treating these countries as if they were states and provinces when, in fact, they are not. The EU lacks control over individual countries the way a government controls states and provinces. Political and economic situations that are idiosyncratic to each countries interferes with the success of the EU. In order for the EU to function properly, countries would really need to act in accord with each other for the greater good. However, one cannot expect that to happen, since each country is ultimately looking out for their own benefit. The difference in politics, economic health, culture, and beliefs results in clashes, whether direct or indirect. Also, you have the problem of one country dragging its legs.

People are having doubts on whether or not Greece will be able to meet the conditions in paying back their loans. And they should. Greece suffers from a crucial problem of being "stuck in the middle". This refers to Michael Porter's theory that a company must choose whether or not they will be a niche producer or a low-cost producer. Being neither results in being stuck in the middle. Greece doesn't have a large poor population like many of the developing and underdeveloped countries, which means that it isn't likely to become a low-cost provider. At the same time, it does not have an advance enough infrastructure to really do very high-tech or niche products. This, in turns, causes Greece not to have any real competitive advantage. Either way, unless they are able to somehow become the main supplier of a new product, commodity, labor, services, whetever, their growth outlook is mediocre at best. (Greece's real GDP growth (adjusted for inflation) from 2003-2008 was roughly around 3.70%, whereas projection for 2011 is -4.8%.) I guess this is what happens when you have a mediocre economy with no real edge and slow growth, trying to recover from a global financial crisis. I don't think this is a problem that plagues only Greece. There are many countries becoming this way. Hell, even the US can't seem to recover.

You can always count on me for overcast skies.
Good Afternoon.

[Mp808]

Lunchtime Report
SET 1084.28 (+42.80)

So the election is over and there seems to be some closure (for better or for worse) on the political situation for now. Greece is looking okay with the rollover plan. SET made an upward gap up this morning, opening up about 35 points higher at 1077.72, which is the highest upward gap in a long long time.

Turns out that the ugly period we've been having was an ascending triangle, with the upper boundary of 1035. The index broke that boundary on an upward breakout last Thursday before closing right on the 50-day EMA. Right now, SET is trading on the previous rebound made on 31/5/2011. If SET gets past this 1080 zone, then we will see the next major resistance at 1100. Last Monday, we were still at 1010. Support should be around 1070, but if the index does pass the 1080 zone, then 1080 should become the new support area. If it doesn't, and comes back down, then 1070 and then 1050. I'm expecting institutions, foreigners, and proprietary buying, and local investors selling. This seems pretty obvious, I think.

[Mp808]

04/07/2011
SET 1090.28 (+48.80)

These are interesting times indeed. SET went to as high as 1094.26 (+52.78) in the afternoon session before closing a little lower at 1090.28. Leading sectors are Banking, ICT, and Property Development, all of which had an extensively high volume of trading today. Total value traded today was also very high at 63.11 billion baht. It hasn't been this high in a long time.

The SET daily chart made a leap to the moon today. All the indicators shot up. RSI went up to about 67. MACD went up, but it's still below the zero line. Let's see if the index will reach the previous high of 1113.63 (21/4/2011) in this upcoming week. Today's move makes SET more in-line with the Dow index in terms of recovery than most of the Asian markets. If the index goes above the previous high within the next week, we might have to wonder if we are getting ahead of ourselves, as the rest of the world is still playing catch-up. It could very well be that we will hover in the 1080-1110 area for a little bit as the rest of the world continues its recovery. We shall find out.

[Mp808]

Lunchtime Report
SET 1089.94 (-0.34)

SET opened higher (1095.21) before there was a sell-off in the early morning. The index went down to 1080.98 before bouncing back up and trading in the 1088-1092 range. Leading sectors today are the Auto, Property Development, and Steel sectors. As said, I am not expecting any big moves just yet, given what happened yesterday, unless something drastic happens in the country. SET is likely to go sideways for a short time before moving higher. The bull is back on since SET made a higher high above the 1080 level yesterday. We see the 1080 support intact for now, which is a good sign. I would start to worry again if somehow SET manages to moves below 1050, but I don't think that will happen.

The ascending triangle pattern that formed over the past month was definitely hard to spot. It looked like a consolidation before moving down more, but it turned out to be the opposite. First, it looked as though we would see a double or even triple top pattern, but the upward breakout last Thursday would have invalidated that idea. I bet there were some analysts who drew an upward channel, given last Thursday's results, but they would be wrong. So with this huge runaway gap, we might see a move down to as much as 1050 which will fill the gap, but, again, I am not leaning towards that idea so much. I think we're going to trade within 1080-1100 in the short-run for the most part. (I consider yesterday's move a runaway gap and not a breakaway gap cause the upward breakout already happened. So even though it looks like it could be a breakaway gap, technically, I would have to consider it a runaway gap.)

As for other news, the US manufacturing index climbed higher than economists' forecasts, which gave a lot of confidence on the US recovery. The US market was closed yesterday for Independence Day, which meant that I got to listen to Charlie Rose Holiday Marathon. Hooray. Best Interviewer out there.

[Mp808]

5/7/2011
SET 1084.59 (-5.69)

In the afternoon, the market picked up and went as high as 1097.07 (+6.79) before dropping sharply down to the close. Two words: Institutional Selling. The daily results hasn't come out, but I'm pretty sure that's what happened. They don't want the index to test 1100 just yet. Why do I think it's institutional? The selling is too coordinated, which is something that local investors and even foreigners can't necessarily pull off so well. Sure, foreigners do consist of international funds, but I don't think this is the case. I think Foreign buying pushed up the market, but Institutions pushed it down. Along the way, local investors are scared and sold off too, but more are placing the bid trying to get a good deal. Anyway, I don't think they're going to push it down that badly. They just want to push it down enough so there's room to play. What's too bad is that there are smaller stocks that don't attract the institutions, but get sold off in a panic by local investors, which means that they are not likely to come back soon. So for today, I would say Institutions, Proprietary, and Local Investors sell; Foreign buy.

[Mp808]

Lunchtime Report
SET 1083.73 (-0.86)

SET moving sideways around yesterday's close. Seems to be some เล่นรอบ going on. Leading sectors are: Commerce, Food, Petrochemicals, Property Development, and Steel. Lagging Sectors are: Banking and ICT. Asian indices are mixed, trading within a range of -1% to +0.5%.

The afternoon session has some potential downsides as European markets will likely react to Moody's downgrade of Portugal ratings to "junk" grade. But judging from how Asian markets are responding, the concern is probably not as severe as Greece.

So I was a little bit off with my predictions yesterday. Turns out Proprietary had a net buy of 132m. Proprietary buying and selling is the hardest to predict for me. They vacillate like crazy and they have no distinct stocks or behaviors that I can pinpoint. If anyone knows how to spot Proprietary buying or selling, please let me know. I am interested to hear.