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!!