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!