Regional Correlates with JSX/IHSG
When I first studied how to analyse stock, I was told to see everything with helicopter view. Going from top to bottom. From the big pictures to the details. That advise seems to be working all the time (at least for me). I was once read a line from a great trader that goes like this:
When you’re seeing on a price of a stock, 40% was attributed to the index, 30% was attributed to the sector, and only 30% should be attributed to the company’s performance
If we are using the same logic, it’s just natural to speak that a price of an index can be attributed 40% to the global economy, 30% to its regional strength, and only 30% should be tied to national economy (things might differ alot with Dow Jones since it is the Mecca of financial market).
So today when the Dow Jones closed at minus 100+ (global economy), Nikkei225 opened at minus 300+, you could bet the house that JSX/IHSG/JCI (geez, indonesian index sure has alot of names) will also flunk at the opening (and it’s true, it’s down 13 points).
Bottom line, if you wanted to do a day trading or netting in which you have to have a decent risk control management, go only when the regional index goes positive. If it does, Indonesian index will usually go up or at least you can pull a break-even on your trade (depending on your open and exit strategy).
[...] I blogged earlier today about the negativity aura surrounding Indonesia’s Index (negative aura = negative regional indices). By the time of this writing, Jakarta Composite Index is down by 18 points (1.41%) and so does Nikkei 225 1.88%, Hang Seng 0.58%, and Dow Jones Industrial closed down 1.09%. [...]