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Hello,
Since recently, the US DJI seems to be freaking a lot of people, i would like to take this opportunity to discuss a little bit about this topic...
First of all, whether the US is going into a recession, honestly... i dont know.... is it going to crash? again, i dont know.... so, wat do i know? nothing much... :P hehe.... but if i were to look at DJI charts, i can only say:
1) it is really very technically bound.... so if you want to know the DJI movement, study Technical analysis and apply on the chart....
2) it has not breached the trend at the time being... so if you think it is now a crash, i dont think so... :)
now, back to our topic... why do i put such emphasis on differentiating between volatile market and a crashing market? well, the biggest difference is tat, in a volatile market, you will see big waves of DOWN and UP... but a crashing market, there will be big DOWN and small ups, followed by more DOWNS... by looking at this, we can see a great difference in the method of play isnt it? since in Malaysia, we can only earn when stock price goes up... so, in volatile market, you can get stocks in "bargain" price because it will go back up in the waves...
But, in crashing market, it is a falling knife... so you get hurt when you try to catch it in between... because, price are going down... so the "bargain" today may be "expensive" tommorrow, and the day after next, and the week after next... tat is why the concept of "never try to catch a falling knife" exists....
and tat is why it is important to know wat kind of market it really is... as these two seems quite alike but the outcome (prognosis) is by far different....
So, how bout our KLCI... i believe the sudden drop is due to US... and since US is only volatile and never broke the trend, i would say it would and is moving back up... so our KLCI, with the fear removed, will correct itself back to its prior trend... which is range trading until it finds his new direction.... (for furter explainations on correction, read my post "market correction" in Market talk column)
Hope this helps in your trading plans....
Regards & good luck!
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