We are now going through what I would term “the best kind of rally”. Why is that? It is because this is the quiet but steady kind of market increases which do not stir up much attention, but it eventually builds up into a bull market. This is the kind of rally that comes off a selloff, like the one we saw in January, and during which there are still concerns aplenty about everything from Greece and the Euro/pound under attack, to the strength of the US recovery.
This is great because it doesn’t draw attention to itself until much later. It’s a slow building kind of rally that can potentially snowball into big gains. A quick and fast 2% to 3% surge in one day, which will draw media attention, will certainly see profit taking the very next day. There are tons of pessimists and detractors who would jump in during a big market surge to question why it is going up so much. But a slow and steady increase is something nobody asks questions about, and one which the media will not cover.
Let’s take the STI index. Just one month ago, it was hovering at 2,750. But now, it is at over 2,900. If it did this with big 3 big 50 point gain days, there would have been the inevitable profit taking, questions on why it can suddenly surge 150 points in too short a time. So, 150 points in 3 days will quickly see it running out of steam and falling back. Yet, 150 points over a month and nobody bats an eyelid. In fact, people hardly even notice! Its not newsworthy at all! The media is more busy covering the latest on Jack Neo or the Thailand mass protests.
I think the market is all set for the next upsurge. It won’t be an eye popping rise, but a more sustained gradual rise. All the bad news has already been said and done to death. People are still talking about US banks’ bad debts, Greece bad debts, China tightening, central bank exit plans and double dip recessions. But its all old news by now. It is fast losing its power to move markets even in the short term now. And all this while, positive economic and company data continues to flow out. The latest is that Singapore’s February non-oil exports grew 23% from a year earlier, and 21% up from January.
It isn’t just Singapore, the whole Asian region is growing fast. Yet, this increasing pace of growth in Asia is being largely ignored by people previously focusing on whether Greece will pull down the Euro, or whether US banks are still hiding tons of debt. Don’t wait until its clear blue skies. Don’t wait until the talk about bad news has died down, because that will only happen when markets have moved much higher such that their strength has muffled these concerns. By then, it would be too late.
There is still time, but before you know it, markets will be a lot higher. Right now, people are still worried, still cautious. Hence, trade volume is still low. But the data that does matter to fundamentals, the economic and company data, these are all continuing their positive trend. If you are like me, and already fully invested, then its just to sit back and wait. For those still waiting, don’t wait too long. We are already in the midst of a rally!
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