FBMKLCI – where is it heading?

This article is written from the author’s perspective. The chart studies presented here is based upon WD Gann’s principles. 

WD Gann, who? He is a topic of research for generations to come. You can write him off, you can love him but you can never ignore him.

Before you proceed further into my ramblings, take a moment to read the following...it's Important.

Disclaimer

The Author (“Presenter”) is not a registered investment advisor or broker-dealer and does not purport to recommend or suggest any securities to buy or sell. You understand and acknowledge that there is a very high degree of risk involved in trading securities. Presenter assumes no responsibility or liability for your trading and investment results.

Okay.

I'm going to try to keep the flow going so I am not going to slow down to edit the content and, therefore, don't expect them to be as precisely written.

Recession or Depression?

At the time of writing this article for you, the Corona virus has already infected 378,492 worldwide with 16,495 deaths (source: https://www.worldometers.info/coronavirus)

And, it has been escalating in Europe. It is Pandemic. Yes, I know - you know. Do you notice the incremental momentum?  Do you see it slowing down in the next few weeks? I won't be surprise at all if the overall infection hits 1 million by March 31st. 

Hey, China did well to contain it. If they can do it, so can we! Don’t you think so? Anyways, Hats off! - to China.

Listen: This is Not a recession friend. This is more likely to be a depression; with crazy hyperinflation in the coming months! Do you not think so too?  If not, what do you think it is?

Listen: I’m Not trying to induce panic and make you think that the entire world is falling apart even though I haven't really left the house in a few days since the government implemented the Movement Control Order (MCO) other than to go out and buy some groceries and “sayur” on two occasions.

Unprecedented

What we are facing today is truly unprecedented. The world has just seemingly shut down.

Trust me, that's not always easy to do it all, I’m completely open, transparent with you guys.  I am the type of person who worries way too much for no reason. It is better to be. It is better to be  after the 1997 financial crisis.

Listen: to some friends of mine - both 1997 financial crisis and 2008 subprime crisis left an indelible mark on their psyches- and I don’t blame them to be.

And, you know what?  

This is not good at all. This is going to be worse than the 1997 financial crisis. Tun M was spot on this. This time, pegging the exchange rate won’t help. This time it is health driven financial crisis? Do you agree?

Repercussions and Unemployment

Picture this...

The daily wage earners – how are they going to go about their lives?

Imagine...the impact it will have on the daily life of the average person.  I mean most people in the world are already living on month to month salary.

As it is, SME’s will be greatly impacted with the 2 weeks closure of operations.  

Though our government is doing their best to contain the spread, but the number of cases are creeping up way above 100 for the past couple of days consistently unless of course I see a drop below 30 cases than I would say, I have a ray hope of seeing the daylight soon.

Sooner, the better. Isn't it?

What if....it escalates?

Does our Healthcare System designed to cater the growing influx of new patients at the exact same time?

What if, due to the above, the government extends the MCO further for another two weeks?

Can you imagine... what would happen to the airline industry if the current RMO and lockdown in other countries would do?  It would then radiate to hotel industries.  Small hotels will be first one to succumb to financial difficulties.   

At the time of writing this...I got to know that Singapore airline had slashed their capacity by 96 % till April end.

In the local front, in the coming weeks ahead, I anticipate reduced industrial output and job losses, which further reduces spending power and investment.  Reducing output equals increasing unemployment. Not in here alone friend – but all over the world. Those who had borrowed money would not be able pay off their loans.

Think about this, usually SME’s have 2 - 6 months reserves in their bank to run their office operations.  Can you now... Imagine... that the unemployment rate going up? 

Currently, our unemployment rate stands at 3.36 % (2018) and the highest recorded was way back in 1993 when it was at 4. 11%  (source: https://www.macrotrends.net)

 I won’t be surprised, if it doubles in the coming months. Double or double digit? Oh God, I hope I’m wrong!

As it was, 50k Thais have gone back to Thailand before the Thai government shuts down the eight entry points in the southern border as reported by local news portal.  That means - they left jobless. Just like that!  

Change in Spending Power

Yes. I really do worry about the ripple effect it will have on our economy. If that happens, I feel - consumer spending will be changed for the near future as the people aren’t working and don’t have enough money to pay or settle their monthly commitments. Period. I think it’ll take sometime for the Rakyat to come out of this psychological shock and a loss of confidence in the economy to feel comfortable to start spending again. There are only 2 things, Rakyat going to spend on - food and health products.

Black Swan

Definition of black swan:-  An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict.

No one could have predicted it. No one saw that coming. Somehow we got Bill Gates warning about a potential situation like this in 2015 at a TED talk. (https://www.youtube.com/watch?v=6Af6b_wyiwI) Did he have a premonition? Or was it the assumption made after the movie called 'The Contagion' released in 2011 and currently, suddenly, being broadcasted in our Astro HBO.   

I believe, if you, like me, and alike are not the only one who does this. Believe me, I run through every single worst case possible scenario in my mind about...

what happens,  if all of my tenants stop paying rent;  

what happens,  if I can't sell any houses as a real estate agent.

Digest this, the US stock market has now wiped out the entire $11.5 trillion of value it gained since Trump's 2016 election victory. This Covid-19 brought a lot to the surface that our economy just wasn't prepared.

Economy Meltdown

The economic trajectory of the global economy might be the worst it has ever been in history and to prevent this government all around the world have been firing off every possible economic policy and stimulus package they can in order to create economic stability.

Here’s the catch!

The economic stimulus package equates to a small portion of all of your tax for years to come will go towards paying back this debt from the stimulus package so all in all the government is trying to limit the bad times today at the cost of limiting the good times of tomorrow. Understand? I hope you do!

Right now, the goveverment is initiating a move to allow you to withdraw some 500 Ringgit from your account 2 of your KWSP. I believe it is from May. Some day later, in the near future you gonna ask yourself - hey, Kemana Wang Semua Pergi? 

Remember this, or rather I want you to know this.

During the 1929 Great Depression worldwide GDP fell by more than 14%.

Unemployment shot up over 21 %.

And, global production of virtually everything fell by more or less 50 %.

That being said, what might or would happen to the average person?

And, in the near distant, the economy going forward, the first thing is that there is a chance that you will lose your job this year if you work in a service industry or a travel related industry. 

Aftermath and Investing

There’s a saying out there that- every bull market is the same but every bear market is different.

Right now, that’s especially true.

In every stock market collapse, it could be argued that - this time is different.

Indeed, it is.

No two bear markets are going to be the same.

Right now, we are in – Unknown, Unchartered Waters in times of Uncertainty. Twilight Zone!

My hope is that our life returns to normal. 

FBMKLCI Chart

Courtesy of Share Investor Station

The above is the KLCI chart.

It is a Yearly chart. It is a Line Chart with WD Gann lines.

Plotted from 1977. Though 1977 is not visible in the chart because I moved the chart towards the right for your better view.

The KLCI Median line band is at 993.635. Based on Gann studies. It is the Strongest Support line.

Simply put, for your understanding anything above 993 is a Positive territory and anything below 993 is a Negative territory.  Breaking  993, would mark a significant downtime timeline and must be dealt with cautious. Usually it will take a minimum of 6 months before major changes takes place.

Current reading is at 1259 (23March 2020)

That being said, there are certain band lines which acts as strong Support lines and Resistance lines. Past pattern band lines are driven by human emotions.

Remember, humans are creatures of habits! They leave a trail of clues.

These lines, projects strong human psychological behavioural lines of Greed and Fear. These are indelible foot prints on the Chart.

These are the Lines of Support: 1091/993/813/768/611/530/422

Just remember, the above figures  Currently, you don’t need to know the Resistance lines.

And, down below here, is a Monthly Chart plotted from 1977 with 2 significant crisis highlighted.  

Courtesy of Metastock

Be ready. Be ready to embrace the storm looming in the distance.

You got to look Beyond the Depth.

Currently, the market Only favours the Professional Intra Day Traders.

So, when would now be a good time to buy? Stay tuned.

Every bear market creates new millionaires.

I hope, I've given you some things to think about. Until then...

Stay Well. Stay Safe. And, Be Strong.

Follow me: Telegram.me/B2MKLSE

Sincerely,

Ravih