FOMC Hawkish Interpretation, Yields Rise Amid Sector Shifts

This perception emerged despite the presenter's personal belief that the rate level was acceptable. The Fed did raise rates, with notable hawkish votes from Powell and Barr.

Forward guidance from the FOMC suggests an expectation of at least one more rate hike, likely in December, which contributed to the market's unfavorable, hawkish interpretation of the decision.

Treasury yields, particularly the 10-year Treasury yield, unexpectedly rose to 5%, creating a puzzle for market observers. This increase occurred despite the recent rate hike and a concurrent decline in oil prices, which typically would not support such upward movement in yields.

The presenter expressed confusion regarding this unusual market behavior, suspecting a potential lame-duck effect related to the Trump administration might be influencing the market dynamics.

SK Hynix's substantial shareholder return was critiqued as potentially misallocated, with the presenter arguing that alternative investments could have yielded greater corporate value. Instead of extensive payouts, the company could have explored opportunities for growth.

Reports of SK Hynix's collaboration with Intel emerged only after August, which was interpreted as a sign of accelerated pressure to invest in the U.S. The presenter believes that investments in U.S. facilities or stakes in leading AI companies like Anthropic or OpenAI would have been more beneficial for long-term corporate value.

Morning research reports indicated multiple target price upgrades across the semiconductor and energy sectors. Samsung Securities notably raised its target price for HS Silicon from its current 57,400 won to 75,000 won, a significant increase of approximately 30%.

Another notable upgrade included S International, whose target price was elevated to 58,000 won. These upgrades reflect a bullish sentiment from analysts on selected companies within these critical industries.

Ollix also saw positive sentiment, with expectations for strong Q4 results helping to dissipate earlier concerns about a lame-duck period effect. These analyst reports provide a snapshot of current market expectations and potential growth areas.

LG Energy Materials also received an upgrade, highlighting broader positive sentiment in the energy sector.

This move represents an increase from previous lower allocations.

A cash buffer of 20-30% is maintained within the portfolio to manage unforeseen risks effectively. The decision to raise stock allocation is primarily confirmed by the market index breaking through its 60-day moving average, a key technical indicator.

The current market strategy emphasizes specific sector rotation and stock picks, with robotics identified as a must-have sector, exemplified by Robotis. This sector recently underwent a correction, presenting a potential entry point.

Semiconductors and parts remain core holdings, including majors like Samsung Electronics and SK Hynix, alongside secondary picks such as Juwon Engineering, TFE, IEST, and Simtech. The 2nd battery and biotech sectors are also critical components of the portfolio strategy.

Aerospace, with mentions of Nara Space, HVM, and Spear, is another focus area. While acknowledging the rise of Isupetasis, the presenter expressed reluctance to trade it, highlighting a selective approach to stock picking.

Samsung Electronics and SK Hynix are projected to face struggles in Q3 and Q4 due to foreign exchange pressures and current market psychology. However, a significant breakout is anticipated in the first half of 2025, marking a transition point for these major semiconductor players.

The market is still navigating a shift from a price-dominant (P era) to a volume-dominant (Q era) phase in the semiconductor industry. This transition affects how earnings are perceived and valued. An FX headwind, particularly the weakening Korean Won against the U.S. Dollar following SK Hynix's ADR listing, is expected to result in a roughly 10% earnings drag.

Historical market psychology around semiconductors, marked by previous supply increases that crushed prices, makes the market skeptical of positive volume impacts. However, comparisons to Nvidia's success, where massive volume increases drove profit explosion despite price-per-unit declines, offer a contrasting view. Demand from AI, specifically from GPT-6 and Astra, is expected to prevent severe price erosion, with current company capacity expansions viewed as necessary growth rather than a supply glut.

This phase precedes the full entry into the Q cycle.

During this period, as production capacity ramps up, the demand for materials and components used in semiconductors naturally increases. This increase in demand translates into potential growth for supply chain companies, irrespective of the core company's stock price movement.

Entry timing for stock purchases should be determined by clear chart signals rather than merely buying when prices fall. The presenter advocates for a 'traffic light' system, where blue indicates a buy, yellow for hold, and red for sell, indicating specific points of action.

This approach discourages the common but flawed logic of continuously buying into falling stocks. Instead, investors should identify appropriate entry points even when a stock is rising, using the charts as a guide.

The 60-day moving average serves as a critical support level for making these decisions. The presenter also advises against following general advice like 'buy the dips' indiscriminately, suggesting a more disciplined '433 method' for splitting purchases into three portions (40%, 30%, 30%). A stop-loss should be set at 5-7% below the 60-day moving average.

Investors should avoid the temptation to maximize every single stock's performance, as this often leads to missed opportunities or greater losses.

Setting clear profit-taking targets and adhering to them allows for consistent gains. The strategy also includes the flexibility to re-enter positions at lower levels after taking profits, enabling continuous engagement with market signals.

The strategy involves initiating a new position using the '433 split method' for gradual entry.

This means buying an initial 40% at the current market level, followed by 30% if it experiences a slight pullback, and another 30% on further dips. A strict stop-loss is set, mandating an exit if the stock falls below the 60-day moving average.

Conversely, if the stock continues to rise, the position is held to capture further gains, emphasizing both disciplined entry and risk management.

This shift suggests that institutional investors may be selling off positions after the recent gains.

Despite the current decline, the underlying companies in the robotics sector are expected to begin showing real earnings, indicating long-term potential. For those without positions, the current dip might present an entry opportunity.

Existing holders are advised to set clear profit-taking targets and execute them, taking roughly half of their position off when the target is reached, given the sector's strong performance over time.

Current macroeconomic conditions indicate an improving environment that supports a 'buy on dips' strategy for investors. Nasdaq futures have shown a positive trend, rising by 0.7%, reflecting a generally optimistic outlook.

Simultaneously, U.S. Treasury yields are declining, falling below the 5% mark, which typically eases market anxieties and makes equities more attractive. Oil prices are also preparing to drop below $100, further reducing inflationary pressures and supporting economic stability.

This development suggests a possible de-escalation of tensions and a move towards concluding ongoing conflicts.

The presenter hinted that this could mark the 'end phase of the war,' implying a positive impact on global stability. Such geopolitical shifts can have widespread implications, including a potential positive influence on oil prices and overall market sentiment.

Investors often become too attached to their understanding of a company's fundamentals, making it difficult to sell even when market signals suggest otherwise.

The presenter cautions against this trap, emphasizing that investors should prioritize sector leaders and avoid holding onto 'good' stocks that are declining simply because they believe in the company's long-term value. This psychological bias can lead to significant losses.

Investors are advised to ignore overly complicated indicators and instead focus on the more straightforward 5, 20, and 60-day moving averages.

Specifically, the 60-day moving average acts as the main benchmark for stocks that are trending upwards. An example cited is Seongho Electronics, where a breakout above this line would signify a buy opportunity, reinforcing a rule-based approach to trading.

Using KOSDAQ intraday charts is recommended as the most convenient method to determine the overall strength or weakness of the market. The KOSPI index is considered less representative for general market analysis due to its heavy influence from major stocks like Samsung Electronics and SK Hynix.

While KOSPI's movements can still offer some synchronicity, it should be treated as a reference point only. Investors can gauge whether the day is bearish or bullish by observing if the KOSDAQ's minute chart remains above or below its 60-minute moving average.

If the market stays above this average, it signals a strong environment where maintaining or even adding to current holdings is advisable.

The approach advocates for monitoring the 60-day moving average as a key indicator for entry and exit points.

The strategy involves buying on dips when the 60-day moving average provides confirmed support. Crucially, investors are advised to establish clear stop-loss criteria, committing to selling if the stock breaches the 60-day line to manage downside risk effectively.

A methodical approach is recommended for reducing portfolio weight in underperforming stocks, emphasizing a systematic scaling out of losing positions. This strategy advises against the common practice of selling an entire position at once, which can often lead to suboptimal exits.

Instead, investors should pre-determine the exact number of shares to sell and then execute these sales in small, fixed daily increments. For instance, if one holds 100 shares and wishes to reduce the position by half, the recommendation is to sell five shares each day over ten days, mirroring the disciplined approach often used by institutional and foreign investors.

A 'hold' strategy is advocated for high-performing space and aerospace stocks, encouraging investors not to sell merely because a stock has risen. The expectation is that winning stocks will continue to climb, and premature selling can lead to missed further gains.

To protect accumulated profits, the recommendation is to implement a trailing stop-loss strategy. This involves setting profit-taking levels based on percentage drops from peak prices, allowing investors to lock in gains while still participating in upward momentum, especially as the market shows signs of turning around.

For instance, if a stock has risen less than 5%, a stop-loss can be set at the break-even point to protect the principal.

As profits increase, the stop-loss levels are adjusted upwards. If a stock gains 10%, the stop-loss might be set at 3% below the peak. For a 15% gain, it could be set at 7% below, and for a 20% gain, at 12% below.

This systematic approach, continuing to adjust for higher profits like a 30% gain with a 15% trailing stop-loss, aims to lock in a significant portion of the gains as the stock climbs.

This strategy suggests that despite any minor market pullbacks, present conditions represent a buying opportunity.

Investors are encouraged to maintain or even increase their stock holdings, viewing temporary declines as strategic entry points. The recommendation is to target a stock weight of 70% to 80% in portfolios, reflecting strong confidence in the market's upward trajectory.

A previous profitable trade in Kolon TissueGene was discussed as an example of a high-risk venture that paid off.

Despite this success and encouragement from acquaintances to re-enter, the advisor advises against it. The core principle emphasized is adhering to established trading rules and principles over succumbing to greed or external influence, highlighting the importance of disciplined decision-making in volatile markets.