3/31/08
Major US stock indexes seem end the downtrend which it started 3 days ago with Treasury Head
Paulson announced a New Reform for Federal banks to govern US banks and financial firms.
I want to address common mistakes that investors made. What is the purpose of Trading or Investing? The answer is very simple...to make money and keep it. Do anyone in your lifetime to know almost every mutual funds are copying what market performs?? When stock market is going up for years, so is your mutual funds performance. When stock market is going down for years, so is your mutual funds performance. Therefore, I personally suggest every investors need to learn how to trade properly in trending or consolidating market conditions. How to trade successfully? You need to learn Technical Analysis and hopefully you could find a mentor. You have to take action to change your life and you are the only one who control your vehicle, not your mutual fund manager.
I personally express my concern that US stock has been trading primarily in Bear market trend. US has already in recession no matter how you view. We have the worst housing burst in history, financial crisis since great depression. Do you think it only takes 3 months of stock correction to overcome this mess?? Do not be silly. Last housing downturn took 4 to 5 years to recover. This credit crunch has already posted the thread to our financial system that have not seen in US history. So, if you as investor do not know what to know. Then, I suggest to withdraw all your investment beside C.D. in banks. Cash is consider a trading position and the best I think in these market condition if you are not sure or do not know how to trade in downtrend or sideway market.
This friday market will show us what is next phase of this few months consolidation with downside bias since the most important economic data "non-farm payroll" will be announced.
Monday, March 31, 2008
Tuesday, March 25, 2008
Housing & Confidence deteriorate
3/25/08
Dow was closed on negative note while S&P, Nasdaq both posted slightly gain today as market absorbed two bad economic data. The Confidence index fell below expectation and reach year 1973 year lows while Housing sales up but with median prices posted signaificant down compare with last year. It gives us that there is long way to reach the bottom. If you are bulls, you might think what can be worst than that? Clearly, I would see three months average of each important economic data to make more reliable judgement call on if we reach the bottom or not. Coming this thursday, our Q4 of 2007 GDP data will be announced and we will see how the economy turned out in the past since this is lagging indicator and it should just give us past performance. The stock market will have limited effect base only on this data if it is much worst than estimate.
Technically, Dow was formed a spin wave candlestick pattern today after few day rally which it means there has some balance between bulls and bears. Tomorrow actor would determine if this rally has any legs to upside til next resistance area 12600 or above 12750.
How to see if market sentiment change, see if market recover intraday lows or gain despite bad ecnomica data and has propel higher if good news come. Or, if market go down even with good news and breakdown rapidly with bad cause. Especially when major indexes meets with important support or resistance level after period of up days or down trend.
Dow was closed on negative note while S&P, Nasdaq both posted slightly gain today as market absorbed two bad economic data. The Confidence index fell below expectation and reach year 1973 year lows while Housing sales up but with median prices posted signaificant down compare with last year. It gives us that there is long way to reach the bottom. If you are bulls, you might think what can be worst than that? Clearly, I would see three months average of each important economic data to make more reliable judgement call on if we reach the bottom or not. Coming this thursday, our Q4 of 2007 GDP data will be announced and we will see how the economy turned out in the past since this is lagging indicator and it should just give us past performance. The stock market will have limited effect base only on this data if it is much worst than estimate.
Technically, Dow was formed a spin wave candlestick pattern today after few day rally which it means there has some balance between bulls and bears. Tomorrow actor would determine if this rally has any legs to upside til next resistance area 12600 or above 12750.
How to see if market sentiment change, see if market recover intraday lows or gain despite bad ecnomica data and has propel higher if good news come. Or, if market go down even with good news and breakdown rapidly with bad cause. Especially when major indexes meets with important support or resistance level after period of up days or down trend.
Sunday, March 23, 2008
Sentiment Changing
3/23/2008
Dow index close higher on weekly basis first time for March. We have not seen problems associated with the financial system since the 1930's !! The FED has been working everyday to try to solve the financial crisis. As I mentioned on date 3/11/08, stock market has found the short term bottom. We could see it last Monday (3/17/08) the market gapped down amidst all the doom news and made new lows by mid day, but it rallied nicely to the end of day. This indicated the market sentiment has been changing to slightly bullish rather than too extreme bearish.
I want to point out that Dow has been formed short term triangle patterns ( +420pts on 3/18/08, -293 pts on 3/19/08, +262 pts on 3/20/08), also major indexes now seems appear to be bullish double inverse H&S patterns on 60mins charts. If the major indexes are able to breakout the necklines of these patterns, it would be bullish and begin a nice counter BEAR market rally!! Remember we are still in BEAR market. Our target for S&P would be in around 1345-1350 if it breaks necklines. Dow would be trading higher than the strong resistance 12750-13000 area.
Over the weekend, S&P has putting Lehman brother and Goldman Sachs in negative outlook mark. If these broker dealers can stay positive tomorrow, it prove sentiment is totally change and financial and bank stocks would be rebounded much higher compare with other sectors. And these two sectors would be very important to contribute the S&P index to breakout the patterns I mentioned above.
For short term bulls, S&P need to take out the resistance 1340-1345 area.
Dow index close higher on weekly basis first time for March. We have not seen problems associated with the financial system since the 1930's !! The FED has been working everyday to try to solve the financial crisis. As I mentioned on date 3/11/08, stock market has found the short term bottom. We could see it last Monday (3/17/08) the market gapped down amidst all the doom news and made new lows by mid day, but it rallied nicely to the end of day. This indicated the market sentiment has been changing to slightly bullish rather than too extreme bearish.
I want to point out that Dow has been formed short term triangle patterns ( +420pts on 3/18/08, -293 pts on 3/19/08, +262 pts on 3/20/08), also major indexes now seems appear to be bullish double inverse H&S patterns on 60mins charts. If the major indexes are able to breakout the necklines of these patterns, it would be bullish and begin a nice counter BEAR market rally!! Remember we are still in BEAR market. Our target for S&P would be in around 1345-1350 if it breaks necklines. Dow would be trading higher than the strong resistance 12750-13000 area.
Over the weekend, S&P has putting Lehman brother and Goldman Sachs in negative outlook mark. If these broker dealers can stay positive tomorrow, it prove sentiment is totally change and financial and bank stocks would be rebounded much higher compare with other sectors. And these two sectors would be very important to contribute the S&P index to breakout the patterns I mentioned above.
For short term bulls, S&P need to take out the resistance 1340-1345 area.
Tuesday, March 18, 2008
Second lowest yield Currency USD
3/18/08
The Federal under delivers. With just reduce .75%, Federal is playing dangerous game and do not expect the market strength to last too long. They are delaying the inevitable with a statement still concern about the downside risk of the economy. They have done a lot over last 30 days. Since February, they cut interest rates to 2.25%, brought the discount rate down to 2.50%, open up new lending facility to primary broker dealers, announced be auctioning up to 200 billion, expanded the collateral to take investment grade debt securities. In addition, the fed bail out Bear Stearns with lending 30 billion worth of Bear's less liquid assets to JP Morgan. I suspect the reason that Fed only make 75 basis point cut that they want to leave window open if they need to give another surprise rate cute before next schedule meeting ( April 29th & 30th) in case another big trouble come out.
Technically, Dow is closed above the 12250-12300 level which is very bullish. But, with VIX is going close to 22( Today VIX index is close at 26) and expect market would be top if up another 300 point( near 12750 +- 50 points). Financial and banking stocks are bouncing strong because they have been beaten too much in very short period of time. Also, traders want to build a good atmosphere for the biggest IPO in US history the Visa company debut tomorrow.
Final, I still remain bearish for the stock market as well as our economy. One big gain day do not solve the problem. Otherwise the Federal does not need to work everyday( even on weekend ) to eliminate the credit financial crisis. Let's see how market perform tomorrow.
The Federal under delivers. With just reduce .75%, Federal is playing dangerous game and do not expect the market strength to last too long. They are delaying the inevitable with a statement still concern about the downside risk of the economy. They have done a lot over last 30 days. Since February, they cut interest rates to 2.25%, brought the discount rate down to 2.50%, open up new lending facility to primary broker dealers, announced be auctioning up to 200 billion, expanded the collateral to take investment grade debt securities. In addition, the fed bail out Bear Stearns with lending 30 billion worth of Bear's less liquid assets to JP Morgan. I suspect the reason that Fed only make 75 basis point cut that they want to leave window open if they need to give another surprise rate cute before next schedule meeting ( April 29th & 30th) in case another big trouble come out.
Technically, Dow is closed above the 12250-12300 level which is very bullish. But, with VIX is going close to 22( Today VIX index is close at 26) and expect market would be top if up another 300 point( near 12750 +- 50 points). Financial and banking stocks are bouncing strong because they have been beaten too much in very short period of time. Also, traders want to build a good atmosphere for the biggest IPO in US history the Visa company debut tomorrow.
Final, I still remain bearish for the stock market as well as our economy. One big gain day do not solve the problem. Otherwise the Federal does not need to work everyday( even on weekend ) to eliminate the credit financial crisis. Let's see how market perform tomorrow.
Monday, March 17, 2008
Fed definitely in panic mode
3/17/08
With Fed announced new round of rescue plan to save financial crisis, market is tested the support area 11750 and close in Green territory to celebrate St. Patrick Day. But Nasdaq & S&P still close below water. Market is so nervous that Lehman brother would be next to fall(If you are big client of Lehman, would you like to withdraw whole account and get cash or still believe the Fed could inject enough money?) The new lending facility created by NY Fed to help primary investment banks(MER,LEH,MS,GS,STT,....etc) prove the Fed need to restore the balance of the credit market. But the time will tell if this act would really solve the issue or just another bandit to cover the wound. Expect tomorrow the Fed must reduce 100 basis point to restore confidence for the economy and market. If Fed does give surprise move of 125basis point( 1st time in 23 years to reduce interest rate more than 75 basis point), market would rally up or trade above 12300 level. Financial stocks probably would get the greatest benefit from the Fed move and market need it to give good mood for Visa IPO debut on Wednesday this week. Market is closed on friday(Good Friday). Let see how the Fed do more magic to bring back people confidence.
With Fed announced new round of rescue plan to save financial crisis, market is tested the support area 11750 and close in Green territory to celebrate St. Patrick Day. But Nasdaq & S&P still close below water. Market is so nervous that Lehman brother would be next to fall(If you are big client of Lehman, would you like to withdraw whole account and get cash or still believe the Fed could inject enough money?) The new lending facility created by NY Fed to help primary investment banks(MER,LEH,MS,GS,STT,....etc) prove the Fed need to restore the balance of the credit market. But the time will tell if this act would really solve the issue or just another bandit to cover the wound. Expect tomorrow the Fed must reduce 100 basis point to restore confidence for the economy and market. If Fed does give surprise move of 125basis point( 1st time in 23 years to reduce interest rate more than 75 basis point), market would rally up or trade above 12300 level. Financial stocks probably would get the greatest benefit from the Fed move and market need it to give good mood for Visa IPO debut on Wednesday this week. Market is closed on friday(Good Friday). Let see how the Fed do more magic to bring back people confidence.
Sunday, March 16, 2008
Bear Stearns Burst
3/16/08
Friday CPI data was inline with expectation and markets were performed good momentum before and shortly after market open. All of sudden, Bear stearns announced lack of liquidity and has asked help from federal bank of N.Y. It really means the credit market is in very very very deep trouble. If Bear stearns can bust, so can be washington mutual bank, Citibank, Lehman brothers.....etc. that all are holding the CDOs investment garbage(currently with people lack of confidence and do not know how to figure out the actual amount of the total asset) So, stock market has shifted again to downward right away when that news come out. Now, trend has resumed and will be retested the 11650 and I think it will not hold and the next support would be around 11000-11200. I have mentioned before do not buy or hold any banking and financial firm stocks because they are all in deep trouble.
Now, JPM will take over BSC with $2 a share(BSC last close price is $30) and with Japanese Yen and Euro both march to freshly new high, expect market will open low. Also, market has credited the Fed meeting surely reduce .75% interest rate.
Let discuss back with the problem how BSC got burst. I surely know government should not bail out those investment banking firm(they all doing speculative trading in most) but if Fed not step in to help(Fed bank is the last option), the whole credit/lending/banking are going to be dead. However, I still think the tsunami has finally come and not surprise to hear next victim would be one of the bigger banks or financial firms in coming days. Final, this act means Bear stearns is bankruptcy and we most likely would hear more to come. Good luck to everyone.
Friday CPI data was inline with expectation and markets were performed good momentum before and shortly after market open. All of sudden, Bear stearns announced lack of liquidity and has asked help from federal bank of N.Y. It really means the credit market is in very very very deep trouble. If Bear stearns can bust, so can be washington mutual bank, Citibank, Lehman brothers.....etc. that all are holding the CDOs investment garbage(currently with people lack of confidence and do not know how to figure out the actual amount of the total asset) So, stock market has shifted again to downward right away when that news come out. Now, trend has resumed and will be retested the 11650 and I think it will not hold and the next support would be around 11000-11200. I have mentioned before do not buy or hold any banking and financial firm stocks because they are all in deep trouble.
Now, JPM will take over BSC with $2 a share(BSC last close price is $30) and with Japanese Yen and Euro both march to freshly new high, expect market will open low. Also, market has credited the Fed meeting surely reduce .75% interest rate.
Let discuss back with the problem how BSC got burst. I surely know government should not bail out those investment banking firm(they all doing speculative trading in most) but if Fed not step in to help(Fed bank is the last option), the whole credit/lending/banking are going to be dead. However, I still think the tsunami has finally come and not surprise to hear next victim would be one of the bigger banks or financial firms in coming days. Final, this act means Bear stearns is bankruptcy and we most likely would hear more to come. Good luck to everyone.
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