DJIM 50, 2009

Writing the weekend journal always gives us the "pleasure" of looking back the events that took place in the past week.  Unfortunately, not much on the trading front occurred, but eco' data continued to accelerate forward and that is more important for the longer term trade.   Sometimes, you can see that some trades have been spot on and some trades have been slightly off.    For us, we always take the weekend opportunity to review our trades in the past week and plan our trading strategy for the coming week.    Today, we can't help but notice that our trading strategy and expectation for next week is the exactly same from the past four weeks.    Why?  Perhaps we have been going sideways for just as long.

Is it a bit frustrating or is it a bit disappointing?    At times, we feel a little bit of both.    During the past couple of trading days, we haven't felt this frustrated and disappointed in a long time.    After all, we are human.    You can be in this business for a long time and it still affects you emotionally.

Market has basically been at a standstill for four weeks now.   We haven't been able to break out of the recent high in spite of a series of good Economic data.    However, this market isn't showing any sign of weakness either because there's clearly a strong underlying bid whenever the market seems in "trouble".    This year is coming to an end fast and most traders are definitely setting their eyes onto a 2010 trading plan.    So what does it take to break out of the long congestion?    Well, to us, it all comes down to whether people like to stay in this market or move their funds into somewhere else.    See, we always feel that the equity market is the "long haul" solution for most people.    Right now, earning a decent return from somewhere other than the equity market is simply out of the question for most funds and investors.   We just can't think of an alternative.    The economic recovery may take a long time and the road ahead may be bumpy,  but the most important aspect for us is that the recovery is in progress.    You just can't not afford to be on the sideline, but we may have to wait till 2010 to see the consequences.   We do see a continuation of this year's rally into 2010.

Small caps in the past week have not done anything for us.   Big caps, similarly, have not done much either.   In the coming week, we have a FOMC meeting that will give us a clue on how the Fed reacts to the recent stronger than expected Economic data.    This may potentially be a factor on deciding the fate of the recent market congestion.   Again, we don't expect the Fed to change its tone of language because one month of data does not change the big picture.    It will be important though, to see if there's any slight change in Fed's interpretation of the recent events.

As far as the technical trade,  the range remains and for the immediate the 1100+ close we were looking for heading into Thursday's trading should improve the tone.