By Gabriel Gan

The “sell in May, go away” prophecy has been broken. If an investor had bought the index or its derivatives on the Dow, a 1,500-point gain would have been in the bag. That represents an estimated, ball-park gain of 6.4%!

DJIA chart

The US bellwether has been trading rangebound for quite some time; the period between the middle of March 2018 to end of May saw the Dow trading between 23,500-25,000. Boring market, but it was by no means lacking in news created mainly by the flamboyant US President Donald Trump resulting in the minor peaks and troughs within the period.

On 7 June, the Dow finally broke out of the trading range to close at 25,241 – a level not seen since March 2018. More importantly, this “breakout” – whether sustainable or not – sends a signal to investors that the Dow is trying to move higher and a clear rally above 25,000 is what we should be looking out for. As mentioned in my previous article on 6 June, I mentioned that the strength in in US economy will underpin the strength in the US stock market.

For those who are not convinced that the US stock market will rally, we should also be cautious by noting that 23,500 is a key support that must not give way. Unless a black swan event arrives, it is more likely that the Dow Jones Industrial Average will move higher.

Straits Times Index Going Nowhere?

Compared to the Dow and Hang Seng Index, which largely performed much better in May, the Straits Times Index corrected almost 200 points – from 3,641 to as low as 3,428 – yet the rebound so far have been unconvincing. The STI tried to touch 3,500 points but failed.

The oil & gas stocks are still licking its wounds; the property stocks have been hit quite badly since February; the conglomerates are trading sideways; and the telcos are being downgraded. Only the banks are getting the attention from investors.

In the midst of the uncertainties, investors have either chosen to go for the high-yielding stocks like the REITs or have decided that cash is king.

Still, investors with a longer term view should take note that once the STI can clear 3,700 points then we should expect 3,900 points by the end of the year. On a bearish note, 3,250 points must hold or else…..

Gabriel Gan was a Senior Vice President at AmFraser Securities. He left to join DMG Securities (now renamed as RHB Securities) to take on a similar role. During his stints at the stockbroking firms, he dealt in equities, performed advisory role and executed corporate finance deals for his clients.

Since 2001, he has been invited by the media (both Mediacorp and SPH) for his stock market opinions. On radio, he spoke on 95.8FM for more than a decade; he now speaks every Wednesday and Thursday mornings on SPH radio 96.3 FM, delivering his opinion in Mandarin. On TV, Gabriel appeared on Channel NewAsia, the former Channel U and various Channel 8 financial segments including Good Morning Singapore, Hello Singapore and MoneyWeek. On print media, he continues to give quotes and comments on the economy and stock market for Lianhe Zaobao, Lianhe Wanbao and Shinmin Daily. On top of that, Gabriel was a columnist for the now defunct My Paper.

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