In other words, Happy New Year to our Asian friends. I hope you are celebrating with your families and still eating!
As the Year of the Snake takes over from the year of the Dragon, we wonder what might be in store. To be more specific, it is the year of the black water snake and we will have to wait and see whether she has any major surprises in store for us. As if that is anything new - surprises are the norm for the financial markets.
Some Chinese base their future and fortunes on the Lunar Calendar and Feng Shui, traditions that date back thousands of years. That these fortunes have been documented through the annals of time suggest there could be more to it than mere mythology. The Snake is associated with the elements of water and fire, which are supposed to bring conflict between fear and joy. Time will tell!
Previous Years of the Snake have been marked by some catastrophic events, including 9/11 (2001) and the 1929 stock market crash.
You should consult your own fortune teller but the general outlook is for a benign - even prosperous - first half in equity markets. However, it may be prudent to beware of the month of the Snake (5 May to 6 June). This could actually turn out to be a self-fulfilling prophesy as Asian markets may be affected by those who follow such things. Further, this period will coincide with the well-known northern hemisphere adage ‘sell in May and go away’, when Europeans and North Americans generally tidy up their books in preparation for the summer downtime.
This combination of Asian caution and a northern hemisphere spring clean out could mean a quiet time for equities and you may also want to clean up your book ahead of this.
You may recall the daily chart of two weeks ago:
click to enlarge
This was suggesting a Wave Four easing about March, which could be deferred out to April, or even May, to line up with the month of the Snake.
We are seeing a number of other factors that point to a need for caution. It is also very likely that institutions will conduct some profit taking following the big run up of the last few weeks. Perhaps this could trigger further ‘self-fulfillment’.
It will be a brave soul who is out there buying in the coming weeks. This is a time to exercise risk management.
The Year of the Snake offers the prospect of a potentially wild ride in the second half if the spirits of May remain subdued.
Having said all that, stick to your tried and tested technical analysis!
Enjoy the ride