To The Moon

Part 1:US market is a Bull Trap 🐂🪤 now & NOT a rock bottom 🪨🪨🪨-Let’s wait patiently💆🏻‍♀️💆🏻‍♂️

Dear 🐯 Friends,

Every time when the US stock market experiences massive selling & big price drops, I believe a lot of us are swinging back & forth asking ourselves these same questions & pulling our hair out 🫠😰🤯 as to whether it's time to buy shares of our favourite stocks: GOOG/AAPL/TSLA/BYD/NIO etc

QN 1: “Is the US stock market at the rock bottom 🪨🪨🪨 or is this a bull trap 🐂🪤?”

QN 2: “Should I take a position now 🏃‍♀️🏃‍♂️? If I don’t buy this stock now at a discount, what if I miss this 🪨 bottom & the market surges without me? I don’t want to miss out!!!”

QN 3: “What stocks are safer to hold/buy now if I don’t want to keep cash now? 🤔🧐”

Below are my personal thoughts on the 1st question. I WANT TO HEAR YOUR THOUGHTS TOO…so PLEASE POST WHAT YOU THINK IN THE COMMENTS SECTION & let’s have a good discussion 🤗 Those who trade more in the SGX, please comment as to whether it’s the same trend in the SGX! The more we discuss ➡️ the more we learn from each other & grow ➡️ the better our collective investment decisions to accumulate wealth together [ShakeHands] [USD] [Victory] 

Answer to QN 1: I think the US stock market will remain a bull trap at leasttt until end July & it’s not the ultimate 🪨🪨🪨 bottom. Why???

1) 30 June 2022 brought us 3 major negative news ➡️ (i) The S&P/ASX 200 Index has finished the financial year down 10.2 percent 😰; (ii) US Personal Consumption Expenditure (PCE) price index remains elevated (see photos) so inflation remains hot 🥵 + Disposable income inched lower + consumer spending reduced + jobless claims inched higher 😥; & (iii) ALL 3 major US stock indexes finished June and the second quarter in the unwelcoming negative zone ➡️ S&P 500 scoring the biggest first-half percentage drop since 1970 + Nasdaq suffering the largest-ever January-June percentage drop since 1971 (worst loss as compared to the dot-com bubble burst in 2002 & after effects of the Nixon Shock in 1973) + Dow getting hit by the biggest first-half percentage plunge since 1962 🥴😮‍💨😱 ALL 3 indexes had 2 straight quarterly declines!!!-the last time this happened was in 2015 for the S&P and Dow, & 2016 for Nasdaq 🙈🙉‼️

So…the US market is likely to continue the volatile downward trend 📉 with short bursts of buy rallies 📈 at least till July 27, (which is the next Feds meeting) & the key to whether there will be further massive selling-another market low or a temporary relief for investors is the GDP release scheduled for July 28 🔑 Another important consideration is that the 2nd quarter reporting season starts around mid-July 😅

This July expected rate hike is another 50 or 75 basis points, although the latter is more likely, which will likely induce more fear in investors of a possible recession, & in turn cause more sell-off 🔄 greater market decline 🔄 lower market bottoms. Then, we can press the replay button 🔂 of increased investors’ fears & start the whole downward ⤵️ cycle again 🔁🔁🔁…

2) Markets are inter-related in some ways (e.g. inflation, rate hikes, shortages, slow economy due to world events) so when the US market is down, the ASX & SGX is likely to be down (although this directly proportional relationship can be broken in special circumstances)…BUT the LARGEST COMMONALITY & the BIGGEST INFLUENCE across all markets in my analysis is….*Drumroll 🥁🥁🥁*…the ACTIONS TAKEN by INVESTORS BASED ON their SENTIMENTS(aka Point of View-POV) of the economic climate + stock market condition + stock’s value‼️

➡️ It’s common to think that it’s the global inflation & rate hikes + ongoing Russia-Ukraine war + China Covid lockdowns + reduced earnings + slowing economy that’s causing the major sell-off & market decline so you might be surprised by my answer…but let me explain my rationale to you 😉

(i) A stock price only increases or 🚀🚀🚀 when buyers are willing to bid & paid for stocks at a much higherrr price & a stock price only declines or💥💥💥 when sellers are willing to sell & sold stocks at a way lowerrr price. Without this important transactional relationship 🤝, the price of a stock should remain relatively stable with minimal fluctuations even during volatile economic & market conditions!

(ii) When the investors’ POV is that the economy & stock market is doing well + a particular stock is valued as “popular” & therefore “worthed more” & can be sold at a higher price later, they formalise their POV into ACTIONS of bidding & paying for that stock at a higher price even if the stock may not actually be worthed that much at the point of purchase. Therefore, this action of repeated purchases at a higher price by many investors pushes the price of a stock higher, above its actual value 🆙 For a stock to be sold below its actual value, the reverse of what is described above happens for the sellers.

➡️ Let’s use TSLA as an example & assume that the real stock value of TSLA is $950-$1050 & assume that one bought TSLA at $950.

➡️ If every investor in TSLA truly believes that the real stock value of TSLA is in this range & refuses to sell at any value below $950 & no buyers are willing to bid above $1050, all transactions will be at $950-$1050 & this will be the stable stock price of TSLA.

➡️ 🧐 If one’s POV is that the real stock value of TSLA is $950-$1050, then why would one sell it at $700 even if there’s inflation, rate hikes, & risk of recession, shortages etc ⁉️ because…even with these factors involved, people still need to buy cars & TSLA is still going to making cars to be sold 😅 It’s just a matter of whether more 🚗🚙 are sold this year or next year or the year after next because the banks will still lend us money to buy cars during inflation/recession & we will still take a loan to buy a 🚘 if we need one despite higher interests (the only difference is that we have to take a longer time to pay up our loan or pay more each month), shortages will eventually be resolved, & recession will eventually become a boom (because it’s the typical financial cycle of up & down), so that’s no actual reason to sell TSLA at $700 🤔🤔🤔?

➡️ 🎯🎯🎯 Therefore…the only reason why one would sell TSLA at $700 instead of $950-1050 is because deep down…one’s true POV is that TSLA is actually worthed less than $700 & WE FEAR that OTHER PEOPLE will sell TSLA lower than $700, & in them doing so, it will bring down the stock price of TSLA to a loss which we can’t accept…So…in order to minimise one’s loss, one will sell the stock at $700-$949. We sell the stock at a particular price NOT BECAUSE of the current circumstances BUT we sell because of our POV of the current circumstances + our POV of the real value of the stock💡

➡️ 🤓 Therefore, our POV determines our ACTIONS of holding-buying-selling, which in turn determines whether the stock market rises/🚀/declines/💥!

➡️ Most retail investors like you & me will hold stocks across different markets. When we see that 1 market is trending down, it creates fear in us & most of us will try to safe-guard our monies by selling our holdings in other markets as well. The idea is that “Oh the US market is down, so the ASX/SGX/other stock markets will be down as well, so it’s better that I sell now to take profit/cut my losses. End Result ➡️ all markets will somewhat drop at the same time because we the investors, ARE SELLING STOCKS AT A LOWER PRICE ACROSS ALL MARKETS & not just selling stocks of the market that’s actually/most affected by the recession (unless in special circumstances).

So…at the end of the day, the real (& probably only 😅) reason why stock prices go up & down wildly is because of us the investors (💡 moment)‼️ Investors here in my article includes the companies’ insiders, institutions like banks & other companies, investment firms like Goldman Sachs, & last but not least-us the retail investors.

According to Morgan Stanley chief U.S. equity strategist, “The bear market will not be over until recession arrives or the risk of one is extinguished,” & a full-on recession could push the S&P 500 to bottom near 2900, which is 600 points lower than previous prediction of 3500. Is this 👍 or 👎 for us as investors? The 🥃 is half-full & half-empty at the same time-it depends on what your POV is 😉🙂🙃

Until my next post 🤓…the 🔑 takeaway is that: (1) the US stock market will remain a bull trap at leasttt until end July & it’s not the ultimate 🪨🪨🪨 bottom; & (2) our POV determines our ACTIONS of holding-buying-selling, which in turn determines whether the stock market rises/🚀/declines/💥! So…at any given point in time when you’re deciding to hold/buy/sell a particular stock, ask yourself what’s the POV of investors (companies’ insiders + institutions + investment firms + us-retail investors) at this moment & with this POV, what actions will they take?

Here’s wishing my 🐯 Friends A Very Happy July ⛈☀️🌈🤗 May we continue to accumulate wealth together 🥳

@TigerStars