Investors dreaded the month of October, as most of the major corrections happened in the month of October, thus it got investors and traders nervous in this month every year. After my last post about VIX fear index, it surged to a high of 25 before receding back to a closing of 22. Before my post about VIX index, I did not see any post about using the fear index as a guide. At 22, it is still above the norm of 18-20, so many experts have advised to expect more volatility to come in the market. Apart from the VIX index, there is also another chart one can make reference to, which I found it interesting.
Saturday, 18 October 2014
Sunday, 12 October 2014
Both Dow Jones and S&P500 had not been able to maintain at the previously high level and had started to trend downwards in the past weeks.The past weeks, if you have watched some of the reasons that some of the analysts have given, they are quite interesting, some blamed the europe and Germany potentially going into recessions, China lousy numbers, and Ebola virus (most amusing). Whether these reasons are the cause of the recent correction, one may not know, but in the video clip here video.cnbc.com, a good sharing by Mr. Lim Say Boon, Chief Investment Officer from DBS. He mentioned that the correction is long overdue and that Asia is still cheaper compared to other regions.
One of the indicator which i always like to look at is the VIX index, this is also known as the fear indicator as explained below.
When one google, one is able to find articles on VIX against S&P500 but I was not able to find one for STI. As such, looking at the major data points and major events, I found and as shown above, STI corrects when VIX is above 18.
The first data point is the Asia financial crisis, VIX index was above 18 before STI crashed from 2415 to 857.
The 2nd data point is the dot com bubble, VIX index was above 20 before STI crashed from 2479 to 1267.
The third one is the most recent one where VIX index was above 20 before STI crashed from 3805 to 1595.
And last week VIX index surged to above 21 points, guess it's time to be careful, what do you think?
Monday, 6 October 2014
For those who had read the CNBC news, this was the statement made by Warren Buffet last week. He did not reveal which were the companies that he had added holdings to. As per his statement below in CNBC, in his usual style, he never like to time the market and he would buy more when the stock price becomes cheaper.
In this part of Asia, we had our own problem too, just last week, huge number of protester started the 'occupy central' campaign in Hong Kong due to a reason that we are know and I shall not repeat here.
Let' look at how the 2 markets, Hang Seng and STI, reacted to the events above.
In the month of Sept, Hang Seng has corrected of about 9%, while the STI has a minor correction of about 3.5%. Based on any of the valuation indicators, these 2 countries are consider cheap as per the report by The Telegraph. In this report, it has an interested graph which shows where the countries stand. If you have been buying STI ETF as part of your permanent portfolio, does this present an opportunity?
Do you have the courage to be like Warren Buffet and buy into Hang Seng and STI?