In Nov Archives, I wrote a posting on How Conrad Alvin Lim who went through 3 major business/career failures and was declared a bankrupt in 2001, now makes US$5,000- US$7,000 a month trading in the US markets.

Well, I am really happy to report that his trading profits have been increasing dramatically since then. In fact, he made US$14,852.25 in the month of January alone! You can read all the winning trades he has posted on his BLOg site ‘http://patterntrader.proboards106.com’. Well done Conrad! By the way, Conrad just attended my Patterns of Excellence Program in Feb and has set his goals to make his first US$ million really soon. I believe at the rate his going, its sure gonna be no time at all

As many of you know, I have invited Conrad to be my co-trainer at the next Wealth Academy Training from 26-29 April 2007 . You can meet us at our next FREE INTRODUCTORY SEMINAR on 27 Feb at 7pm. Go to www.akltg.com to book your seat now.

Wow! Since my last posting on Conrad Alvin Lim’s story of ‘From Bankrupt to Bankroll’, his mail box has been jammed packed and his mobile phone ringing non-stop from people who want to learn the art of ‘trading for a living’.

For those of you who remember, I shared the story of Conrad who has been a bankrupt for the last 6 years (due to a past business failure in the media industry) who learnt the art of trading for consistent monthy profits. He traded himself out of bankruptcy and today makes a comfortable $5,000- $7,000/month trading stocks and options from his home. For your information, Conrad is also my company’s and my personal investment strategist who manages a large portion of my own personal money.

After much convincing, Conrad has agreed to conduct a mentorship and coaching program for a MAXIMUM OF 10 PEOPLE in a group. If you are serious about earning an additional stream of income through trading, I highly recommed you take up this very rare opportunity to be mentored by a professional trader.
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If you have been following the US market, you would know that it has been rallying like crazy for the last week, primarily driven by low oil prices and increase in consumer confidence. The Indices now sit on a 5-year high! What makes this amazing is that it is doing so in one of the worst months in history (Sept has been the worst month for the indices).

However, I still maintain my stance that it is due for a serious correction for the following reasons.

1) The S&P 500 (now at 1337) is now sitting very near on its upper trend line (resistance line in RED) of 1340, which means that if it maintains this trend, it will likely correct down to support line at 1300 or lower.

2) Although the S&P 500 & Dow are shooting up, the stocks that are increasing are not leading stocks (those with the highest EPS rating, Relative strength rating) as measure by the IBD 100 (investors.com), but are stocks coming from non-leading stocks like Property Stocks etc…

3) Those who are buying up the stocks tend to be more individual investors and not large buyers like institutions and mutual funds, which puts a big question mark on the sustainability of the buying

4) October is still coming up…And October has been historically the second worst month of the year where all the major crashed occur.

5) There is still a real concern that the US economy is slowing down. However the Euphoria of falling oil prices and the FED holding off any interest rate increases has blinded most bullish investors towards this fact.

Bearing this in mind, I am still holding on to my value stock portfolio as most of them are pretty undervalued and won’t be very much effected even with a much needed correction. However, I am maintaining a short position on the S&P 500 index until as least after 31 october

I must admit that I was expecting the US market to be down all the way to end October, only to make back its losses from the May-June sell off from the FED’s interest rate hikes from November onwards. Which is why I have been holding back putting in more money into US equities.

Afterall, September has historically been the worst month for stocks since 1956 in percentage terms! October and August are not too close behind as the down months of the indices. (most major market crashes/depressions in history have all occured in October i.e. 1929, 1987, 1997, 1978, 1979 and 1989).

In fact, From 1945 to 2006 the returns from being invested in the S&P 500 stocks came to an annualized 7.1% November to April. For May to October, the return is just 1.5%. (without dividends re-invested). The reason is because the summer months beginning in June lead to very low trading volumes in the US and this is coupled with the fact that most mutual fund managers tend to sell their losing stocks in order to minimize takes by uses the losses to square off the gains made in the last fiscal year. Since the mutual fund fiscal year ends on Oct 31st, this wave of selling traditionally leads to the markets being solf down to a bottom and then picking up only from November onwards.

However, because of the unexpected drop in oil prices from $75+ a barrel to $63+, the markets have been rallying to a 4 month high, wiping out all the losses sustained in May-June this year.

So, are we seeing a different trend this year? Or is this the calm before a later storm that will see the market crash in October? I am indeed keeping a very close watch. There are three reasons why I fear that may be another steep correction before the S&P500 starts to climb again. The first is that the US housing bubble has burst and more and more people are unable to finance their loans. The second is the very rare occurance of stagflation (which last appeared in the 1970s) where the US economy is showing signs of slowing down amidst rising inflation. The third reason is that the recent rally has not been supported by strong volume and also the fact that leading stocks (as screened on www.investors.com) has not been surging ahead as much as the broader market.

Usually, when leading stocks do not charge forward together with the overall market, the rally is usually unsustainable. So, while I am not selling my portfolio of vakue stocks, I am also not jumping in with more money until after the scray October season is over!

It has been quite a while since I wrote a post about updates on the US Markets.

This is because in the last couple of weeks, the US market as been moving more or less sideways with not much conviction on either side (bulls or bears). Once in a while, there was a brief rally after some good news here and there (e.g. Ben Bernake’s indication that interest rate rises will pause). However, volume was low as so there is nothing really significant to report. The market is still in a short term downtrend BUT we are in an overall long term uptrend (if you look at the S&P 500 1yr-3yr chart).

As a result, I have been focusing purely on value stocks and picking up some good deals along the way. I have liquidated ALL my momentum stocks (once they hit 8% below buy point) and taking very insignificant losses (only 10% of my total stock holdings are in momentum plays). I will resume the momentum hunt once the US market turns back into a confirmed uptrend. August-Oct have traditionally been lousy months for the US market so I don’t see any significant pick up until after October. Again, always remember that no one can really predict the market and it is just a hunch so I won’t bet anything on it. I am always on the constant watch every night to watch for price and volume turnarounds.

Anyway, I just did my usual Quarterly updates for the core Value stocks I am holding and made a few new purchases today…

Singapore Stocks
1) HTL’s 2006 half year report will be out 10 Aug so I will be keeping a watch on whether it is still maintaining its strong earnings and cash flow growth. As some of you would remember my earlier posts, I picked it up at about $1.09 and more at about $1.16. It is currently trading at $1.16 (Intrinsic value is about $2.34 based on 10% cash flow growth rate). If the report is shows earnings on track, I will probably pick up even more.

2) JEL Corp. As some of you may know, popular value investor Curtis Montgomery (wallstraits.com) has invested $1.9 million of his own money into JEL. This represents about 79% of his total portfolio. Now, when someone invests 98% of his portfolio into ONE STOCK. It either means that he is nuts or he knows something that the market doesn’t. Initially, I hesitated in buying a lot of JEL stock (I bought relatively little) as for the last 3 years, revenue has increased dramatically, but costs have been rising dramatically & margins have been dropping just as fast, and as a result profits hardly grew!

Now, usually this is BAD NEWS. However, management’s explanation was because in the last 3 years, they made a lot of new acquisitions and built lots of new offices and hired lots more staff. However, it takes at least a year for sales to kick in to their new outlets. Hence ,costs increased but new sales have not kicked in. Inside sources have hinted that 2006′ first half earnings have already shown a dramatic increase, which will be officially announced on 14 Aug. Since, Intrinsic value is roughly $0.90 and stock is trading at $0.26, I added more lots today on top of my initial purchase a few months ago at $0.22

3) My core holding Osim is still mainatining its growth forecast very well having risen to $1.70 since I re-bought it at $1.45 a few months back when the Singapore market had a bad knee jerk reaction to Wall Streets downtrend. I initially sold off all my OSIM stock at $1.80 after holding it for 4 years (at an average cost of $1.20).

US Stocks

All my main US holdings like AIG, BUD (Anheuser Busch), PFE (Pfizer) and BRK (Berkshire Hathway) have been rising amidst the screwed up US market though increase has been very little. The good news is that value stocks tend to hold up even during bad market conditions.

Only two of my holdings dropped slightly over the last few months. They are TYC (Tyco) and WMT (Wal-Mart). The very weird thing is that WMT’s earnings INCREASED by 14.67% and 8.62% in the last two quarters! Also, TYC’s last quarter results INCREASED by 444% (yes, there is no typo). Since both stocks are way below intrinsic value (I value TYC $36 at and WMT at $58) and growth is still on track based on cash flow forecast, I decided to take advantage of the market’s stupidity and increased my position in these two counters, buying TYC at $25.45+ and WMT at $44.61.

For those of you who have read my book ‘Secrets of Self Made Millionaires’, you would be familiar with my Value Investing Strategies (of which 90% of my investments are based). I only teach Momentum Investing at Wealth Academy. Momentum Investing is only used when the market is in confirmed rally and when you are looking at hot stocks that will jump 50%-300% within 6 months-year.

Note: This post merely reflects my own personal opinions and is NOT a recommendation to buy or sell any of the above mentioned securities.

MARKET IN CONFIRMED RALLY

Last night (Thursday), All 3 indexes followed through on their rally attempt as stocks increased ON HIGH VOLUME (26% above the average).

The Nasdaq increased 3%, The S&P 500 increased 2.2% (its biggest one day gain since Oct 23) and the Dow gained 2%. This marks a FOLLOW THROUGH for the market on Day 12 of a rally try started June 14. This is a sign that PROFESSIONAL INVESTORS are back in BUYING HEAVILY. On IBD’s ‘The Big Picture’, market outlook is back to ‘Confirmed Rally’. If you look at the S&P 500 chart (3 month), you can see last night that the index broke through the resistance line it has been forming over the last few days on high volume. The reason is because the FED increased rates by 0.25% to 5.25% as expected, thus clearing the uncertainty that has built up. The FED also hinted that growth is moderate and rates will remain put for now.

So what does all this mean?
1) A follow through does not guarantee a bull run. There have been times in the past when after follow through, the market eventually went nowhere. Having said that, a major bull run has always been preceded by a follow though after a downturn.

2) This does not mean that stocks & the index will not go down. Remember that stocks go up and down ALL THE TIME. A confirmed rally merely says that the index will trend upwards (each high will be higher, and each low will be lower)

=> This is the time to get ready to BUY those top rated momentum stocks that are ready to break out from their bases that have formed over the last 2 months!

Here are some of the purchases I made recently for your reference.

1) JEL (value stock on SGX) at $0.23
- This is a core holding on wallstraits.com. Curtis is betting the whole ranch on this one counter. I held it before and sold it at a nice profit at $0.29. Now it is back to $0.23, so I picked it up again. My only concern is that although sales and profits are surging, profit margins have been decling. Usually this is a bad sign as it shows that competitive advantage is being eroded. However, I believe that it is short term and margins will grow healthily this year. However, because of this one uncertainty, I am only placing a small investment in this.

2) HTL (value stock on SGX) at ) $1.10
I added a few more HTL lots to my present portfolio as I think the price at this level is pretty attractive . Way undervalued. In fact, last quarter, sales, profits and cash flow increased very well. So, there is no reason for this stock to be so undervalued.

3) Bought only a few lots of S&P 500 CFD’s at 1262.50 last night because I did not expect the index to take off so fast. Only caught it when it was halfway through the rally. Will consider buying some more when prices eases more down to 1240-1250 range. Remember that prices will always take a breather when market shoots up to fast because of profit taking and short tem consolidation.

Wow! Last night was an exciting night. I couldn’t help looking at the market until 4am (besides watching Golf’s US Open). The 3 US indices staged a sharp rally on mixed volume. The Nasdaq bolted 2.8%, its best day since March 25, 2004. The S&P 500 jumped 2.1%. Smaller stocks outshined as the small-cap S&P 600 and midcap S&P 400 galloped more than 3% each. This marks the SECOND STRAIGHT day of rallying since the S&P 500 hit a low of 1221.


Most market analysts, technical chartist and experts have predicted that the correction will be much more severe for much longer before the market rebounded (I said the same thing 4 days ago). So are we all wrong? Well, if we are then, again it proves that NOBODY can predict the market.

Does 2 straight rallying days signal a confirmation that the correction is over, bottom is hit and the S&P will continue its long long term bull phase? The ANSWER IS TOO EARLY TOO TELL. Usually, the market must rally AT LEAST 4 STRAIGHT DAYS on HIGH VOLUME before we can safely say that the corner has turned and market is back at ‘Confirmed rally’. This is when it is safe to jump back in to momentum stocks (if at buy point) or buying the S&P index.

Nonetheless, I bought a SMALL PROPORTION of S&P Index CFDs last night at an average of 1242.50. At the current price of 1255.40, I made some pocket money of US$645. However, I will re-buy back all my sold lots ONLY WHEN the market follows through on DAY FOUR (next Monday). We shall see….

On the Singapore front, I bought a couple more lots of Osim at $1.40 and HTL at $1.13. I still believe these are strong companies with lots of growth potential and at current prices, are worth it.

Those of you guys into Momentum stocks may want to key a sharp eye out on your watch list IF market follows through and gets back into CONFIRMED RALLY next week. Here are some potential A+ Stocks you can look at (wait till buy point):

1) First Marblehead (FMD)

2) Herbalife (HLF)

3) West Pharmaceutical Services (WST)

Have Fun…Make Money

Last night, the key US indices fell again on HIGH VOLUME. So many distribution days in a short period confirms that the US market is in a confirmed downtrend as it goes through a correction. The Singapore STI is following suit by shedding another 51 pts to be down to 2286+ ( as of 13 June 3pm)

The good news is that earnings and profit forecasts remains high, earnings are still strong. This over pessimism stems from a whole variety of factors like Interest rates, fear of growth slowing, Japan tightening their money supply etc.. ( read the full article ‘Don’t bet the ranch on a rebound’ by Jim Jubak on moneycentral.com for a full picture)

As you know, the market will ultimately recover and return to greater heights. These short term corrections are healthy in a sense that they clear lots of excesses and form solid bases for the next stage of the bull run. If you think about it, it is providing the PERFECT OPPORTUNITY to make lots of money once the market has bottomed out and starts to regain its strength.

Although the market will ultimately rebound even higher, take note that, Since the 1970s, Market corrections during Bull runs (which we are now in) HAVE AVERAGED 13% OFF THE PEAK.

Since this downturn began on May 10, the Dow Jones Industrial Average ($INDU) is down 7.3%, the S&P 500 ($INX) is down more than 6.5%, and the Nasdaq is down nearly 9.9%. That puts this market within striking distance of the traditional definition of a correction as a 10%-to-15% drop in the major stock market averages.

So, in other words, the market STILL COULD CORRECT ANOTHER 3-8% DOWNWARDS before the next uptrend. How long this will go on for could be 1-6 months???? As such, I am selling my S&P 500 CFD positions which I bought and waiting for the market to go down another 3-8%, before re-buying again and waiting for the next confirmed uptrend.

For those holding any momentum positions, it may be a good idea to sell even though it has not breached below 8% below purchase price. You will find the value stocks will still dip but not as severe as momentum stocks. Those holding on to value stocks also may want to cut loss 15% below purchase price and start to buy it back once market corrects even more. While you can STILL hold your value stocks and ride out this short storm, you could possibly make even higher profits if you re-buy at a greater discount.

Have Fun…Make Money