Nenix Dreams

Below are the trades I loaded recently

SBSTransit 500: Bought at $3.10 with a cut loss at $3.02
Broadway: Bought at $1.12 with a cut loss $1.01
SpComp: Bought at $0.855 with cut loss at $0.815

Recently, I’ve read the forums and many are still holding to hope. It is obvious to everyone that the current trend is down and instead of trying to time the rebound like yesterday, one could be in big trouble. The fact is the reversal does not make a trend go up. It is only an uptrend if it goes up within a specific time frame. One day is not enough to prove anything.

At the moment, it is risky to load counters (my gut feel tells me so), but according to my scans, there are still a couple of counters that hit the radar.

SBSTransit is lying on its support line for a long time and it broke out. Short term trends look healthy although strength in trend is not large enough.

Broadway rebounded from its ultra short support line (5day) and its still healthily moving upwards despite the recent market downturns. Long term trend is upwards. However, this is an instance where I potentially entered late in the trend.

SpComp triggered my buy signals for both short and midterm. While the upside potential is unclear, what is clear is that this is a start of a new trend in the midterm. If you look at the bigger picture, its high has been eclipsing the previous high, and it might signal a reversal in the long run. This further act as a safety net for the entry.

Labels: Broadway, SBSTransit, SpComp

This correction/downturn will undoubtedly go down as my largest loss in my years of trading. At the moment, I am still holding a couple of paper losses on top of the realized losses. At the point of writing, I’m a bit disheartened at how I approached things at the moment because it seems that my cost-control mechanism has spiraled out of control and the worst thing is that some of it is unforced. I shall now try to rewind back in time to think of what could have possibly gone wrong.

Event 1: Weeks before the fed cut.

During this period, it has gone into a consolidation. At that point of time, many, including me, felt that it is just a normal consolidation. It has triggered some of the cut loss for the counters, but I sold most of them.

In practice: It turned out to be spot on as those counters eventually hit the trigger. However, I feel I should have stuck to my principles. This would reduce my profits, but it’s ok.

Event 2: Days before the fed cut.

During this period, I have thought of a longer term approach for my trading system. Ideally, the position will be divided into portions of different time frames, with approximately 1/3 based on the longer trend while the short term is based on shorter trading positions.

In practice: It turned out to be an outlet for me to run for cover. You see, 1/3 long term, 2/3 trading. But during this period, things turned a bit sour, and I subconsciously decided to allocate it to the longer term perspective. I usually see lots of potential reversals, but have been faked most of the time. In the end, I held it all the way down. My handling of the trading position was downright lousy and this directly cost me dear. Furthermore, I just conveniently pushed my longer trading position to be equivalent to a pillow stock, which is bullshit. Longer trading positions are still trading positions. There should be cut losses and treated like the shorter term, with the difference being that it is on a longer time frame. What I did was naïve and it makes me feel downright disgusted about myself.

Lessons learnt:

I have to admit that the introduction of the new system got me confused as I thought that long term trading = pillow stock treatment, which is crap. The system flaw that I thought I should mention is that I should not just take a primary position first. This isn’t right considering that my positions are determined by technicals (unlike TatHong, which is analyzed by my bro).

Secondly, I have making judgments on my trades. I believed that QDII would be beneficial for S-stocks, I believed that US recession would be a good opportunity for Asia as a whole. I had so many beliefs and I know that it is all wrong because it has affected the way I trade. I lost my mechanical approach and hung on those beliefs. I lost the plot. In the past, I would buy the shares based on technical data, then looked at forums for “guidance”. But now, I’m not as decisive as before. The fear to realize losses is present now and I must rectify it.

I have decided to put this whole post in RED and BOLD as I am extremely pissed and humiliated by my own actions. It is appalling that my losses are worse than that of the subprime crisis and February correction when I have more time to deal with the correction at the moment. It is appalling that I held on to hopes that market will reverse. It is also appalling that I tried to use technicals to predict a reversal, which is something that I never believed in.

You see, I worked against my fundamental blocks of my system. And is apparent that this sort of ill discipline is much worse than all the mistakes I’ve made in the past few corrections.

I will reflect upon it and I MUST ENSURE that this is the last time that I make such an error.

Tomorrow will be another day full of opportunities and hope I can close this chapter of poor trading.

I have decided to cut on my trades. It is a painful decision and I will discuss about the issues in the later posts.

CFD:

OKP buy price: 0.775

OKP sell price: 0.690

Profit/Loss: -54.83%

CASH:

CAO buy price: 2.67 (Ave)

CAO sell price: 2.122 (Ave)

Profit/Loss: -20.5%

FerroChina buy price: 2.505 (Ave)

FerroChina sell price: 2.25 (Ave)

Profit/Loss: -10.17%

PacAndes buy price: 0.8225 (Ave)

PacAndes sell price: 0.685 (Ave)

Profit/Loss: -16.71%

Labels: ChinaAviationOil, FerroChina, PacAndes

No one expected this recent drawdown, and thus I thought my 2nd level of buying are spot on. But then I was wrong. I didn't expect it to go so much lower. And now I'm facing liquidity issues. Some are still sitting on long term up trends even though they are facing slowdowns/retracement. Ideally I would like to buy at the support level of the long term trend but I'm facing a shortage of cash for it. In the end, I had no choice but to offload my shares.

LyxorChinaH:
This is one of my only counters which tap on markets outside Singapore. Strategically, it is a good positioning as it targets on the China shares in Hong Kong. Furthermore, HangSeng is much more resilient than in Singapore as their market recovers much faster. Another thing to note is that Singapore likes to mirror Hang Seng’s movement. All this reasons makes it a strategically sound position to hold.

However, like most counters across the board, it is currently undergoing a price correction. It is actually more severe than most as many deemed the valuations of H-Shares to be too high and charts do not lie as it does shows weakness in the trend. Unlike movement of other counters, this counter’s volume doesn’t decrease together with the price which underlines a bearish tone in this counter.

Having bought at US$16.90 on 23^rd August, I have sold at US$21.50. My cut loss is at $22, but I didn’t want to let go as I was having a mini Identity Crisis (read previous postings). Anyway, after taking into account conversion rates, transaction costs and whatnots, I have managed a 20.92% return, which is not bad.

I will reconsider re-entering if it goes to $19. But I have to consider the US rates as I do not want my holdings to be excessively eroded by the decreasing rates. A price of $18++ would be wishful thinking, but I would 100% enter this position if it goes below $19 anytime soon.

Gold:

I have no idea if this was a wrong investment. My brother told me it’s quite silly to diversify like this and maybe it is true. However, I wanted this to be a long term counter. It is supposed to be kept for like years. But its US denomination made the counter less attractive.

I bought on 19^th September at US$71.60 and sold at US$80.90. After deduction of all costs, I managed a 5.79% return, which is ok, considering the time vested.

I will take a look at it again in the future when I have more cash in hand, maybe placing my opportunity funds in indexes and gold funds would be a good idea, although I have to analyze it more carefully again next time.

STI-ETF:

Another long term stock being offloaded because of my poor management in averaging my other counters. Bought at a price of $33.80, I sold recently at a price of $36.08. A return of about 4.993% kind shows how desperate I am in offloading a long term counter. Nothing much to say about this, only that it has been time proven that indexes in the long run has more than 8% annual returns compounded.

ChinaAOil:

I used part of the cash to top up the supposed 3^rd tier of CAO at $2.31. As stated in various postings, CAO shows huge buy up volumes and low sell volumes. I have no idea who are the major players of the counters and why the lack of analyst coverage for this counter. This brings my average to $2.62, which is at the support level for the weekly charts.

Conclusion:

The global economy is seeing some consolidation and it is coming to an end soon. The direction that it sets following the consolidation will determine if it’s the last leg of the bull or first leg of the bear.

Nonetheless, most of the problems stem from the States. While China is having issues like inflation as well, coupled with soaring food prices, it seems likely that regulations will be placed to curb inflation. This is also the reason why SSE is showing a correction as well.

Most of my counters have affiliation with China, (FerroChina, ChinaAviationOil, AsiaEnv, PacAndes) and though it is a risk by itself for focusing too much on China, it can be seen that the global trend points to Asia in general.

As for asset management, I now have some free float cash and I am not eager to plunge right into it. I have learnt that while that gives you good returns in the short run, in the event of a correction, it might just harm you. My main objective now is to accumulate free cash first (which I might invest in index, gold etc etc).

Next, while accumulating, I will look for opportunities to:

1) Top up 2^nd tiers for Tat Hong (Around $2.45 would be excellent)

2) Top up 3^rd tier for PacAndes (Note that at the moment, prices are fluctuating wildly around the long term support level and it could go either way. This explains why I am unwilling to top up the 3^rd tier now).

3) Top up 3^rd tier for FerroChina ($2.19 would be a good price too)

For 3^rd tiers, I should NEVER be too hasty to go in because what goes down will go down further. There’s no need to be too fussy about picking the bottom as it is too difficult. Instead, the more important concept is to ensure that it has already reversed.

Meanwhile, I will keep a lookout for counters which shows macro uptrend.

Labels: Gld10US$, LyxorChinaH, NenixDreams Fund, STI ETF100

Labels: advSCT

The one mistake I think I made is the fact that my 2^nd and 3^rd tier additions are bought too early. While these two tiers ideally load up on the support levels, the price I loaded wasn’t exactly optimum.

Firstly, my 2^nd tier is way to close to the initial loading position. This makes cost averaging quite crappy in my opinion. Since I am loading a counter based on the long term trends, the 2^nd tier should rightfully be used to load on the price slightly above the long term support level (this happens in corrections) while the 3^rd tier is to be loaded at levels way below the base support level. This will fully stretch my time horizon of my holdings, which might be a good thing.

Secondly, the idea of holding free cash float is easier said than done. This is because it is difficult to identify when the opportune time to buy is. I have used up my cash float on buying my 2^nd tier counters during the time when I thought the correction would be mild.

This sell down taught me few valuable lessons. I shall list them even before the correction ended. The list will consist of those that I learnt in the August Correction as well.

Mistake 1: Itchy Fingers

The random buying I did during the crash resulted in a more painful cut loss. The counters I loaded were done on impulse as I thought it was the bottom of the correction. I made this mistake again with OKP currently but generally, at the moment, all my positions held have been carried out with thought.

Mistake 2: Free Float Cash Management

Free float cash is important at times like this. What I failed to do is to load the counters too early on (this is not an unforced error as it is due to my rules which are not analyzed clearly). At the moment, to free my cash float, I have unloaded STI ETF, Gold, and Lyxor China H. I really hate to do that, but I don’t have much choice. As a result, this leaves my portfolio heavily unbalanced as my “Tier 1” is too weighted. The adjustment is due to the funds available to act as Tier 2, even though they might not been sufficient.

Mistake 3: Wearing too big a hat for my head

It suddenly comes to a point that I began to predict price movement. What started off as casual predictions soon ends up with me holding those beliefs. As a mechanical trader, this is just wrong. If I think back the primary reason for being a mechanical trader, it is because I suck at analyzing the market and valuating of stocks. I know that this is something that I might only be above average at best but not exceptional. Which is why I decide to go the path of actuarial science, which is by no means easier but given the upward bias of stocks in the long run, it gives me avenue to hone this skill.

Anyway, last week, several of my counters have hit the cut loss trigger, but due to my belief in the market, I decided to act against it. This is wrong, as I should have kept faith in my rules instead. But now at the moment, it has been so oversold that it does not make sense to sell now. Thus, it will be a lesson learnt if I am bailed out in the long run. But my faith in the economy (which is crap), has incurred in lots of losses. These losses are not only the losses incurred by the sale of counters but it also includes the loss of grabbing the opportunities of rebounding counters.

Mistake 4: Identity Crisis?

I would not have classified this as a mistake but felt that I had to blog it down so that I can remember. Past weeks, I have been discussing about the merging of funds. It is at this point, that I feel that incorporating fundamentals to my fully technical and mechanical trading to be a good idea. However, it turns out that it has resulted in an identity crisis. Suddenly, I do not know whether to hold or to sell as both schools follow totally different approaches. Thus like a fool, I’m stuck in the middle of nowhere. I will sort this out after my tests this month.

Labels: NenixDreams Fund

The story is taken from Bloomberg and I highlighted the important points in red.

Nov. 7 (Bloomberg) -- The dollar slumped to a record low against the euro after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign-exchange reserves in response to a falling U.S. currency.

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. The dollar is ``losing its status as the world currency,'' Xu Jian, a central bank vice director, said at the same meeting.

The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar.

``We're likely to see further pressure on the dollar,'' said Thomas Harr, senior foreign exchange strategist in Singapore at Standard Chartered Plc, a U.K. bank that makes most of its profit in Asia. ``The potential for diversification is quite big.''

The U.S. currency slumped to $1.4666 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4656 as of 9:05 a.m. in London, from $1.4557 late yesterday. The dollar traded as low as 113.69 yen, the lowest since Oct. 22. The euro was little changed at 166.80 yen.

The dollar fell to an all-time low against the synthetic euro, a theoretical value that estimates where the currency would have traded before its inception. The prior record was $1.4557 set in 1992.

The U.S. currency may fall to $1.50 against the euro, Harr said.

China's Reserves

Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.

U.S. 10-year Treasury notes rose today on speculation a two- day increase in yields will lure investors to buy them at a $13 billion sale of the securities today.

``The world's currency structure has changed; the dollar is losing its status as the world currency,'' Xu from the People's Bank of China said at the conference. Cheng, speaking to reporters after his speech, said his comments don't mean China will buy more euros.

``Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.

Cheng's remarks on Jan. 30 that China's stock rally was a ``bubble'' caused the benchmark index to fall the most in almost two years on Jan. 31. The Shanghai and Shenzhen 300 Index, then over 2,500 points, has since climbed above 5,300.

ECB

Gains in the euro may be limited by speculation European economic growth may slow, reducing the need for higher interest rates.

The European Central Bank will keep its key rate at 4 percent tomorrow, according to all 61 economists surveyed by Bloomberg News. Data yesterday showed manufacturing orders in Germany fell more than expected in September.

``There is a European industrial complex which is now suffering from the euro being at such super expensive levels,'' said Peter Pontikis, treasury strategist at Suncorp-Metway Ltd. in Melbourne. ``The data all suggest you'll get a real slowdown. I'd be against the possibility of a rate hike.''

Europe's single currency will trade at $1.43 versus the dollar by year-end, according to the median forecast of 42 analysts and brokerages surveyed by Bloomberg News.

Commodities Prices

The dollar's decline helped drive the price of crude oil to a record $98 a barrel and gold to a 27-year high, encouraging investors to buy assets in commodity-producing nations.

Commodity currencies led the gains in currencies today. The pound rose to $2.0955, the highest since May 1981. The Canadian dollar advanced to $1.1010. The Australian dollar gained to 93.89 U.S. cents, the highest since April 1984, from 92.87 U.S. cents. The rand rose to 6.4490 per dollar, the highest since May 2006.

The dollar's 9.8 percent drop against the euro this year boosted the competitiveness of U.S. exports, helping shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.

French President Nicolas Sarkozy yesterday brought his concerns to the U.S., saying ``you don't need too weak a dollar'' to spur growth in the world's largest economy.

``This is an asset story and shows sentiment for the dollar continues to be quite negative,'' said David Forrester, currency economist at Barclays Capital in Singapore.

The Australian dollar gained after the country's central bank raised its benchmark borrowing cost to 6.75 percent today. Governor Glenn Stevens, announcing today's quarter-point rate increase, said inflation will exceed his target.

Dollar Depreciation

The dollar fell against the Norwegian krone as traders added to bets Norway's central bank will increase its 5 percent deposit rate. It declined to 5.3011 kroner, from 5.3474. The dollar also fell as losses from subprime-mortgage defaults added to pressure on the Federal Reserve to lower its target for the overnight lending rate between banks to 4.25 percent next month.

``The interest-rate outlook is dragging down the dollar against major currencies such as the euro and the Australian dollar,'' said Seiichiro Muta, director of foreign exchange in Tokyo at UBS AG, the world's second-largest currency trader. ``I cannot see the bottom of the dollar depreciation yet.''

Subprime Loans

Interest-rate futures traded on the Chicago Board of Trade show a 62 percent chance of a quarter-percentage point Fed rate cut on Dec. 11, compared with 6 percent a month ago. Citigroup Inc. may write down an additional $2.7 billion worth of subprime- related assets, CreditSights Inc. said yesterday.

New Zealand's dollar rose to 78.38 U.S. cents from 78 U.S. cents on speculation a report tomorrow will show the unemployment rate remained at a record low, boosting the chance of another increase to the country's record 8.25 percent benchmark interest rate.

``The dollar is weak against a host of currencies, including the euro, the pound and the Australian dollar,'' said Mitsuru Sahara, senior currency sales manager at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded lender. ``We can't tell how much money banks will lose on subprime loans. The Fed is likely to cut rates again before the end of the year.''

Last Updated: November 7, 2007 04:12 EST

This important issue is that US now show significant reaction to China’s intention to diversify and this might potentially show the power shift from US to China. The intention of Chen SiWei to announce their plan is unknown as they would have known that such announcements will devalue the US dollar.

Thus what we see now is a consolidation, especially in Singapore market, maybe because of the “kiasi-ness”, we are at the sidelines watching how events unfold first. And it could be seen as many have closed their positions today as they do not want to hold their positions overnight, which resulted in selling down of shares. While we thrive to be a world class market, the nature of our market is very sentiment driven. Most of us react to daily movements of Dow Jones, or Hang Seng, or European markets to guide our market direction. Even for me, I always tend to use daily movements of these markets as a guide.

So now we know that we are still consolidating, what can we expect from our market? Firstly, it won’t be surprising if we see a long consolidation as many will have the “sell on strength” mentality. Secondly, STI will generally be directionless as they will be looking for someone to “follow”. Thirdly, China stocks will be pressed down for the time being.

Personally, a few of my counters have hit the down trend. It’s most probably time to trim my trading positions, and of course my CFDs. It’s disappointing that I have to do that as I was actually quite bullish for the remaining of the year. But trends don’t lie, and while it seems directionless, the fact is that it turned downwards recently. In accordance to my system, I will have to cut some of them, and that means 2/3 of AsiaEnv, ½ of PacAndes, ½ of CAO, all of OKP(CFD) and all of AdvSCT(CFD). It’s a loss but at least it is true to my system.

Labels: NenixDreams Fund

Labels: NenixDreams Fund