Market Outlook Commencing 2 June 2008


This was a short trading week and the bulls were happy to take control for the entire week. Overall, 1.3% rise for INDU, 3.2% rise for COMPQ - thanks for DELL (see below). SPX was up by 1.8% and RUT was up by 3.3%.

I would like to deal with Eng Huat's trade and my comments relating thereto. RUT - the small cap index showed some buying interest recently. According to sector rotation theory, we are now in an environment where the interest rate appeared to have bottomed. Together with the speculation that Uncle Ben will raise interest rate in the next FOMC meeting, Conrad's students know where the hot money will flow - one of them is small cap (RUT). So, if this sector rotation theory holds, no matter how bearish the technical outlook for RUT may be, I will not be bearish on that. If I am bearish on the market overall, I will choose the bigger cap to play. I hope I can clarify this and thanks Eng Huat's sharing with us in this board.

The bulls took advantage of lower oil prices, some good economic data and of course good earnings on a few big names to push this market.

Oil is heavily speculated. The speculators obviously had taken advantage this week to take profit. There is not really any buying interest in oil. Hm .... so even though the chart still looks bullish, I won't go in to chase for any upward move at this point.

According to briefing.com, it was stated that the Americans have been altering their driving patterns in time of facing rising gas prices. This is a pleasant news because Americans can be flexible and adaptive. Americans should be proud of themselves.

Personal income rose 0.2% in April while spending was flat versus March on an inflation-adjusted basis. But the annual spending rate in April is still above Q1 average. Take a look of the GDP number for Q1 - who said the economy is in a recession? 0.9% to be is a relief number to prove to the bears that the US economy is still growing albeit very slow. It's ok. There is no recession.

The Fed is concerned with the inflation. Core-PCE was reported to have risen 0.1% in April, leaving the YOY rate unchanged at 2.1%. This number is important because it is still below Fed's forecasted range of 2.2% to 2.4% for 2008.

Perhaps with these good economic numbers people are not fearful in participating in the market. The movement in the Big 4 can substantiate this point. Also, MA, COST, DELL and TIF and BIG made buyers happy with their positive earnings news.

Coming to this point of the economy, I will start going for slightly longer term buy on value stock in line with the sector rotation theory. Also, I declare that I am looking for buys in Financial and Housing sectors wherever opportunity arises. I was debating with my friends last night on the property sector. My friends' view was that the property sector is dropping. I told them however the sector is going to rise but the stock market must go up first. I am not so pessimistic like them. So, wait for me to say a few names in the housing sectors.

I was glad to meet with Dr. Lim Ming Soon of FX1 Academy this week too. This guy is amazing because his trading knowledge and his passion has proven to me that a medical doctor can also be a good trader. He taught us this week FX 103 and FX 104 systems. A few people out there complained about paying $4,000 to learn the basic trading system FX1 offers. I can tell you that the meat of this $4,000 is not the system you learnt in 2-day course. Look at my debut record on my FX 104 trade - are you impressed with chalking up 180 pips in a day with only 5 mins' work. People are interesting creature. They like to hear say and have limited beliefs. Forex lost money and thus, it is risky to trade forex. This course is expensive and that one too. You can learn forex by reading the book. As I was sharing with some students last night at AKLTG, it's not the course sucks. It is not the trainer's sucks. It is ourselves. We need to acquire traders' mindset and have the right psychology. That way, no matter what you do, you are giving yourself a chance to succeed.

I will be heading to OASIS on 4 June and due to my return flight from SFO to HK, I will be in the air over the next weekend. So, there is no market update next week and I hope you understand that. I will only switch on my PC upon touching down in HK on 9 Jun evening.

Till then, take care and to those who are going to OASIS, let's have fun and drink with happiness!!

The Power of the Dream

Deep within each heart 
There lies a magic spark 
That lights the fire of our imagination 
And since the dawn of man 
The strenght of just "I can" 
Has brought together people of all nations 

There’s nothing ordinary 
In the living of each day 
There’s a special part 
Every one of us will play 

Feel the flame forever burn 
Teaching lessons we must learn 
To bring us closer to the power of the dream 
As the world gives us its best 
To stand apart from all the rest 
It is the power of the dream that brings us here 

Your mind will take you far 
The rest is just pure heart 
You’ll find your fate is all your own creation 
Every boy and girl 
As they come into this world 
They bring the gift of hope and inspiration 

Feel the flame forever burn 
Teaching lessons we must learn 
To bring us closer to the power of the dream 
The world unites in hope and peace 
We pray that it will always be 
It is the power of the dream that brings us here 

There’s so much strength in all of us 
Every woman child and man 
It’s the moment that you think you can’t 
You’ll discover that you can 

Feel the flame forever burn 
Teaching lessons we must learn 
To bring us closer to the power of the dream 
The world unites in hope and peace 
We pray that it will always be 
It is the power of the dream that brings us here 

Feel the flame forever burn 
Teaching lessons we must learn 
To bring us closer to the power of the dream 
The world unites in hope and peace 
We pray that it will always be 
It is the power of the dream that brings us here 

The power of the dream 
The faith in things unseen 
The courage to embrace your fear 
No matter where you are 
To reach for your own star 
To realize the power of the dream

Market Outlook Commencing 27 May 2008

Wow, whatever bulls have made eventually have to be returned to the market. The bears took complete control this week. INDU dropped by 3.9%. COMPQ was down by 3.3%. SPX dropped by 3.5% and RUT dropped by 2.3%. From a sector rotation perspective, something I like from Conrad last week in Wealth Academy, the drop this week was not surprising to me at all. RUT is still the strongest amongst the Big Four and thus was not the worst performer amongst them. Go figure.

The Big Fou remained below 200 SMA respectively. VIX found the support and rebound, sending the indices down in this manner. The volume this week was up on the extremely down day. NYSE registered two consecutive distribution days and NASQ had a distribution day too. The distribution day on Thurs for both NYSE and NASQ was quite ugly.

Of course the big news this week is again oil. Oil registered a record high of $135.09 and closed at $131.82 this week. When I was at WAT on Friday, Conrad and his students discussed where the oil could possibly go. The number looks big but it is no big deal to me. Why? Because I don't care. What you can do is to get this number by drawing some Fibo extension. If you don't know how to do it, then it is something you must learn. The number at XXOP level is an interesting number.

Now, the financial sector is back to limelight after FOMC minutes were released on Wed section. Stocks did not like the minutes because it signals the end of the rate cut.

"...risks to growth were now thought to be more closely balanced by the risks to inflation... [and that] several members noted it was unlikely to be appropriate to ease policy in response to information suggesting that the economy was slowing further or even contracting slightly in the near term, unless economic and financial developments indicated a significant weakening of the economic outlook."

Inflation pressure has revived and the market obviously did not like the news. If the market is still expecting a rate cut but the Fed minutes was a disapointment, bad news in short-term right? This signals that the interest rate could have found a bottom and Fed won't be cutting interest rate at least for the time being because this will just mean pushing inflation rate up where Fed has been trying hard to control the inflation rate.

Rising oil prices hurt consumer? It depends on how you see it. AMR announced that it would be cutting 11 to 12% capacity and instituting a $15 fee for the first checked bad on its flights to combat rising oil prices. F announced a cut in production of full-size SUVs and trucks in the US because the customers demand would likely be shifted to more fuel efficient vehicles. So, corporations are changing their strategies as a result of rising oil prices. It does not mean consumers must suffer. Again, it depends on how you see it.

HD and LOW issued cautious outlook but to me, it is not new. Why? The market has already expected a not-so-good outlook. The reaction on these stocks is short-term in my opinion.

Existing home sales in April fell 1% from March to annualised rate of 4.89m units. In fact, it is better than expected, and is important. Why? the market can only recover by taking the first step of registering a slowing rate of decline. Yes, there is still a decline but at a reducing rate. Is the worst over?

Market Outlook Commencing 27 May 2008

Overall, the short-term speculators took opportunity to push the market down because the economic data were not disappointing. Remember the market in the short-term is irrational and if you use logic to read the market, it won't work at all.

From a sector perspective, the energy sector still outperformed the rest. The financial sector plummeted 6.1% this week. Is the worst over yet or not for financial sector. The technical outlook is at this point a mess. The transports sector was another suffering party, dragged down by AMR and surge in oil price. So, the Dow Jones Transportation Average declined 4.2% and from its Monday high, 7.1%.

So, from a sector rotation perspective, I will patiently wait for entry signal for housing market and financial market. I have no established position at this point. Wait for the technical outlook. I won't be chasing for oil stocks aggressively because it has gone up so much and so fast. Patience and trade defensively is something I learnt so much from Conrad. And yes, it is perfectly fine not to trade when there is simply just one reason to trade.

OASIS is less than 2 weeks to go. I am looking forward to it.

WEALTH ACADEMY 15-18 May 2008

My mind was completely blown away after completing Wealth Academy at AKLTG over the weekend. It's a solid 3.5 days workshop and each full day started from 9am to midnight.

Thanks Adam and Conrad, and of course all the coaches for these 3.5 days hardwork, sharing with us various insights about the secrets of success of the millionaires. In one way, I was inspired by all the folks in AKLTG because they are so energetic and look at Adam himself. His almost lost his voice on the second day but yet he continued to speak with inspiration and conviction. After seeing Adam's a few times, now I fully understand why he has been so successful in building his empire of businesses and networth.

I was also grateful to Conrad not only because he is a good friend of mine, he has taught me a lot in terms of his super technical analysis. This guy probably is the best trader in Singapore, and perhaps in this region. His candlestick analysis is the sharpest I have ever seen in my life. Of course, in this workshop, I also learnt from Conrad how he worked himself out of bankruptcy and realised his dream(ok, I better stop him or else Con-man will xxxx me).


Although I met Conrad a few times, this picture was our very first picture taking together. I am sure his students in WAT will be successful because they have a very good "si-fu" and this si-fu is no non-sense guy. While some may say traders are all like that, Conrad being Conrad convinced his students that in order to trade profitably and consistently, always look at defense as the starting point. And you know what, in manging my own trading business, I have switched my mindset from Brazil to Italy. I have in fact written article for Optionetics on this topic because that article was dedicated to Conrad's defensive trading technique and this is why I am now able to achieve my trading results profitably and consistently.





Finally, in this 3.5 days' training, we all had to fork out $200 real cash to play a millionaire challenge. The game is about real life simulation in handling our financial by increasing our income and reducing our expenses, and building our networth by using leveraging and investing techniques. The top 8 students would be able to have a bite of the total pool of cash contributions. I did not gamble in casino (there was one in this game), and I also did not borrow money from loan sharks. I used my prudent financial management primarily based on what I learnt from another good friend of mine, Dennis Ng. So, I managed to snatch the 8th place amongst some 90 to 100 students and won a prize of S$1,180. The tactics I have used, as I mentioned to my team-mates, are what I am using in real life. So, they are not new to me. But after this game, I realized that I still need to improve further in scrutinizing my income and expenses. So, I said to myself from June onwards I will become the senior Minister of Finance in my home to watch closely my income and expenses.

If you haven't been to Wealth Academy, I would encourage you to think about going for it. It will be a mind-blowing experience and the amount you paid will be quite value for money. Trust me, you shall not regret!

MARKET OUTLOOK FOR MAY 19, 2008

Don't say I haven't told you so. 80% of the chance the market will be bullish on the expiration week. Again, this is proven right for May expiration. Overall, INDU rose 1.9% this week. COMPQ rose 3.4% this week and is the best performer. SPX rose 2.7% while RUT was up 2.9% this week.

Although we are in 20 week bearish phase right now, it also appears that the Presidential Election Cycle is pushing the market higher. Again, it is historical pattern. Don't ask me why this is so.

I enjoyed my stay in Hong Kong as I was able to see my parents and my grandmum. Of course, I also met with a couple of my old time trading buddies. But I would like to mention specifically my encounter with Mr. Peter Lui. Peter was a market maker for almost 20 years and was a legend in the history of HK's warrants markets. His market making insight has inspired me that if you want to do something good, you can even beat the market (of course I mean the HK market). The stock exchange has to do something in order to prevent from these folks to whack the market so that the "house" will lose money. It can happen in markets such as Hong Kong because it is small compared to the US. Having said that, it also means that it makes perfect sense to trade the US market as a retailed trader because we won't get hurt so badly as it is liquid enough and also not so much to be subject to manipulation.

I was half way with my Wealth Academy Workshop. So, before I am going for my third day (each day is from 9am to midnight - and it requires determination and commitment on our parts - we got only a few hours sleep each day and then have to start the hardwork again the next day), let me finish this market commentary so as not to disappoint my readers.

The major new this week of course is the oil price - almost almost $128 per barrel. Other than this, there was so other not so good news. Industrial production declined 0.7% last month. Uncle Ben expressed concern that the financial market conditions are still far from normal. WMT issued a very conservative guidance for the current quarter. With that - the market went up. Why? Perhaps the bulls are glad to hear that the market is not so bad now after BSC's collapse in March. The worries about US recession appear to be unfounded. Participants are dared to enter into the stock market again. Wait. Hang on for a second. The volume in NYSE and NASD was extremely low throughout the week. So, I am not quite sure whether it is a retail investors/ traders participation at this point. The numbers are telling me so. Sorry, I am not so excited until I see some strong volume going back to the market. Otherwise, I am only cautiously optimistic that the bad news have been forgotten.

Some good news were announced this week too. Retail sales, weekly initial claims, CPI and Apr housing better than expected - all are good news to the market. Retail sales report was up 0.5% in April. Excluding autos and gasoline, it was 0.6%. It suggested that there is a trend in consumer spending. Housing starts also rose 8.2% in April and surprised the market. The annualised rate of 1.032m units is almost the average level of 1.031m for the past 4 months. Although it does not mean the housing recession is over, it provides stability (notice the key word - stability in the housing market) and this is exactly what the bulls are looking for.

The NY Empire State Index and Phila Fed Index were negative which signaled a contraction in manufacturing activity. However, like I said in the above, the worse is over and the bulls have no reasons not to push the market.

Not much news on the earnings front this week. WMT beat quarterly expectation and this gives INDU and SPX a booster of course. No, due to the conservative guidance, WMT was pretty much flat for the week.

So, which sector should you go? To be frank, it would appear that the commodity sector is making a coming back. Look at oil and gold. Ha, not so. Actually May is a month which to me is boring as there is no particularly strong sector for which I can ride on a trend. Yeah, you can chase for oil and it is entirely up to you.

For this month, essentially I don't have any particular strong play. Premium collection remains my key focus. Yup, I did position in solar stocks. Maybe you should look at this sector - Sunpower, FSLR, JASO etc.

As a professional trader, it is perfectly fine to say "there is no reason to trade". If there isn't, then just don't trade. There is nothing wrong not to trade, isn't it?

Have a good weekend!