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Greed and fear – which to choose this week?

Trading Room – 22 Oct 2018

The US corporate earnings season is off to a strong start. With more than 15 percent of S&P 500 companies having reported, 83 percent have topped analyst expectations, according to FactSet and reported by CNBC.

China said its economy grew by 6.5 percent in the third quarter last week, missing expectations. However, Chinese equities surged on last Friday as officials took steps to support the market, and that was helping sentiment in the US as well.

But what does the Dow closing and China surge on Friday tell traders? Is it time to go in as stock prices get quite cheap (greed) or wait for a lower bottom (fear)?

It’s quite easy to tell actually as the markets here will tip their hand once they rise or break their critical level on strength. Watch the critical levels highlighted in the mPower Algorithm report and act accordingly (fast).

On Bursa, there are two sectors which are worth watching, one being the Construction Sector and the other one is a sector which has also been sold down badly but could give supernormal gains if it rebound.

Focus on selected stocks in these sectors only as shown in the report rather than buying across the board (sector) as the market outlook favors the former strategy only. For example, one of the construction stocks highlighted rose 10% in two days and traders should take quick profit.

In this regard, there are around 26 consensus stocks out of the 300 stocks that are optimum to hold on to in the current market and bring likely out-performance whether you are an Institutional or retail trader. We have appended this select list of Model Portfolio (MP) stocks in the mPower Algorithm report today, of which selected MP stocks also form a portfolio we use for our mPower Trading program.