It is fairly common to observe a Christmas rally in the stock markets for the month of December. Does this apply to Malaysia?
A simple desktop analysis is performed to analyse whether the FBMKLCI will experience a Christmas rally in the month of December:
- Based on trading data of FBMKLCI for the month of December for year 2010 till 2015
- For consistency of data collection across the years, we will only extract up to maximum period of 21 trading days in the month of December for each year
- Using the first trading day for the month as base (i.e 100%), we track the day-to-day movement for the entire month. We average these movements for the past 5 years. The average 5Y movement graph (shown below) highlights the likelihood of a Christmas rally, commencing from the 12-13th trading day in the month of December.
Using the above derived average movements for the month of December, we project the FBMKLCI for the month of December 2016 in respect of the 6th trading day onwards. Based on this simple analysis (assuming the Christmas rally materialises), it appears that there is a potential likelihood of FBMKLCI reaching 1,658 points by end of the month.
Nevertheless, one should also consider the impacts arising from the upcoming FOMC meeting scheduled on 13-14 December 2016.
Book Corner: Investing In Knowledge
Jeffrey Hirsch discusses how to capture market-beating returns by following specific stock market cycles
While predicting the direction of the stock market at any given point is difficult, it’s a fact that the market exhibits well-defined and sometimes predictable patterns. While cycles do not repeat exactly all of the time, statistical evidence suggests that cyclical tendencies are very strong and should not be ignored by investors. Click here on the book image for further reference.
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