Singapore market ripe for short term correction with cautious mood ahead of FOMC Meeting to raise interest rates........

Singapore market open gap down today about 20 points......the feeling is that "Oh no, are we going to see another sharp correction lasting several weeks again?"

I think the correction this time round may not be as bad as the last correction, especially for small-mid cap stocks.

To begin with, this correction is not entirely surprising since market mood is still cautious ahead of the FOMC meeting to raise interest rates (hopefully 0.25% only la).

Plus small-mid cap has rebounded quite strongly over the past few days, with some eg luzhou, celestial and ferrochina rising between 20-50% in just a few days. Technically speaking, many of this hot smll-mid cap stocks have actually move into overbought levels, at least this is what Mr Stochastics is telling me.

One more point to take note of course is that world cup (WC) is still not over yet. People who believe that WC can negatively affect the stock market will still stay away either to bet on WC or just do nothing. People who DO NOT believe in the WC effect may ALSO stay away since they may act in anticipation of those who believe the WC effect haha. The net result is that most people will choose to stay away still.

So a short term correction today is quite normal. As long as the volume is thin and the dip is not severe, I think selective stocks, especially small-mid caps which are in strong growth mode in 2006 still have good potential upside after WC and after FOMC make thier minds tomorrow.....at least the next time FOMC meet again is in august.

Some tech space growth stocks in 2006 (based on last available results)
UTAC
Memtech
Eucon
Norelco
Multichem
Longcheer

Is there a connection between, Worldcup, European cup and the Singapore stock market?
How accurate is the saying Sell in May and Go Away?

The facts speak for itself……….

I did a quick check on historical data back from 1990 till 2006 for the Singapore Straits Times Index movement in the month of May ie the month before world cup and European cup which normally start in June during even years (eg 1990, 1992, 1994 etc).

The data showed that with the exception of 1990 and 1992, from May 1994 till May 2006, STI fell in ALL the even years. This is pretty convincing numbers if you do not believe it’s a coincidence.

One likely explanation for the weak performance in the month of May is that punters, dealers and fund managers have shifted their interests to football. And over the years, as this trend became more apparent, it also turned into a self fulfilling prophesy as more and more people act in anticipation of this trend.

So far, the saying Sell in May and Go Away is absolutely spot on during even years, especially since 1994 till 2006.

Let’s see if this trend will repeat again in May 2008 before the European Cup.

How bout odd year for May?
I will have to do some homework on that later on.