Sunday, August 14, 2011

Market commentary on the stock market collapse that began on 2 Aug 2011

The recent global stock market collapse began on 2 Aug 2011. As of today, the Straits Times Index has dropped more than 10%. As of now, I do not have a significant position in the market to bias my opinion on the market. Differing opinions are most welcome.

Even if the global economy is headed for recession, I am actually quite confident that we will at least have a strong rally before the Singapore stock market heads down further (assuming it does). I don't think the Singapore market will continue its decline at this point.

In the week before 2 Aug 2011, I was surprised by the resilience of the Singapore market in the face of weaknesses in the European and US markets. Compare the price charts of the Straits Times Index with the European and US markets to appreciate its resilience. I suspected foreign fund inflows into the Singapore market to explain our market's resilience. The negative swap offer rates complained by UOB reinforced this suspicion.

There are plenty of cash on the sidelines. In fact, there is so much cash hanging around that the Bank of New York Mellon is charging fees on big deposits instead of paying interest.

The market needs cash to feed a rally. Otherwise, expressions of optimism are just empty talk that cannot be translated into action. At this moment, there is plenty of cash in waiting to jump in once the market stabilises and rationality comes back.

In the past 2 weeks, I observed several SGX announcements on insider purchases. Meanwhile, there are still several stocks on the watchlist with valuations which allows one to buy with peace of mind. In the US, CEOs have been buying back their stock in the past two weeks.

Hence, I am quite confident that we will at least have one more strong rally even if a global recession is impending. I do not think the Singapore market will continue its decline at this point.

My preferred end-of-day SGX price/volume data vendor

There are 2 types of analytical toolboxes available to investors - Fundamental Analysis (FA) and Technical Analysis (TA). Some investors rely on financial statements only for their investments (FA) and some traders rely on price/volume charts only for their trading (TA). I think it is wise to rely on both. You need TA because it provides useful market information like whether the stock you are buying is in an uptrend or downtrend, the strength of the buying and selling, how it reacts to corrections, whether a climax buying or selling is happening ...  You use FA because it is common sense to read financial statements before buying a stock since you are buying part of a company. In the long-term, it is the financial performance of the company that drives the price.

You need data for both types of analysis (FA and TA). Financial statements are basic data for FA and the price/volume information is data for TA.

This post is about the best price/volume data vendor I have found for SGX stocks and indices. Please note that you will still need a Technical Analysis software like Metastock, Amibroker, TradeStation to present the data in a chart and analyse the data using technical indicators.

The best value-for-money bargain that SGX price/volume data is DataFolio.
http://www.technical-analysis.com/prodDataFolio.html

It is the cheapest in town. Other data vendors charge annual subscription of more than SGD100. For DataFolio, there is no annual subscription. You just pay a one-off SGD88. In terms of price, it is a no-brainer.

The data quality is superb. Its data source comes from SGX website itself, so I do not question its accuracy.

Prices for individual stocks are auto-adjusted for corporate events like stock-splits, rights and dividends. These auto-adjustments are needed so that awkward price gaps that distort analytical results are removed. However, I noticed that not all stocks are adjusted, at least not in a timely fashion.

Some may argue that this is not a good recommendation because there are free data vendors around like Yahoo. Although Yahoo provides price/volume data for free, it is not suitable for SGX stocks. Yahoo provides price data up to 2 decimal places. This is inadequate for the majority of SGX stocks which are penny stocks and require price data up to 3 decimal places.

DataFolio provides historical price/volume data all the way back to 1987.

ChartNexus is also a good product for Technical Analysis. However, I prefer the flexibility of specialized TA software like Metastock or Amibroker which gives me the power to write my own proprietary indicators and algorithms. This is my edge as an engineer and it makes sense to make use of one's strengths to beat the competition.

I recommended DataFolio to a relative. He praised Mr Cho Sing Kum for his excellent technical support. Mr Cho is the creator of DataFolio. I do not have first-hand experience of his technical support service because being an engineer, I have a tendency to figure things out and solve problems myself. However, when I asked question on the ChartistUnited forum whom Mr Cho frequents, his response speed is simply incredible.

By the way, if you do buy DataFolio, please keep your password in a safe place. Mr Cho is quite sick of people asking for passwords. This is actually what prompted me to write this post to lend him support.

I am not paid to do advertisement for DataFolio. Mr Cho does not know who I am. I am just a grateful customer for a product that gives me value-for-money.

Lastly, this is a Singaporean product created by a Singaporean that beats all foreign competition hands-down. As a Singaporean, what is there not to support?