DJIM #7 2009

What's next?    While traders are enjoying this long weekend in North America,  many probably hope that this long weekend can last just few more days.   There's definitely a sense of uncertainty among the traders, the analysts and perhaps the entire investment community.    In fact,  we feel that there's just as much uncertainty among the less than convincing policy makers as to what will happen next.     Sure, a stimulus package has been signed and a financial rescue plan is in the works,  but, it just doesn't give anyone any comfort that those plans will have any sort of short term positive effect.    Over the long run,  we feel market will eventually recover and things will pick up for the better as there are hints of things stabilizing from recent economic data.    Economy always comes back and this is just one of those cyclical things.    The question though, is how long the bad time will persist and how much worse we'd get before we get better.  This upcoming week has more important data and if it's good,  there is a chance the market will turn away from the policy initiatives in D.C and turn it's attention.   At least, that is the hope that may cause a decent move soon.

But, here's some more truth!   As of this moment,  we as traders sometimes have a tough vision seeing three or four trading days from now, let alone three weeks or three months out.    This market, as we know it, is turning into a giant bowl of uncertainty.    We had a lot of news last week, but we have just as many unanswered questions on the table compare to a week ago as D.C clearly did not deliver.    What sort of financial plan will help co's like Citi or BAC?    What will happen to GM or Chrysler when their reports are due at the end of this month?    How effective is the stimulus package going to be to stall the unemployment hike?   What are the corporate earnings going to be look like for next quarter?    Nobody, as we know, has an answer to any of the above questions, unfortunately.    This simply forces us to trade for "the moment"!

Market,  technically, we avoided a breakdown last week by hanging on to SPX 820 by it's fingernails!   Frankly, we don't know if the next push down, maybe even on Tuesday, will break it down for good.     If this market were to hold on to the recent low and move away from it,  you'd have to look for some positive development from Washington and/or investor shift to eco' activity if the data continues to show the consumer is stabilizing and inventories are rebuilding from the producer side of things.    Last week's announcement of a plan to help those that are in danger of foreclosure gave market a needed boost from the low.   If we can maintain some kind of news flow that provides similar calibre of effect,  it will begin to give enough confidence for market players to step back in a more meaningful way.    For now, we just have to take it one headline at a time and have patience.   As we said heading into the last trading day,  Thursday's wild shoot had no conviction buying.   Once again,  it proved to be nothing more than a short covering rebound as witnessed by Friday's closing prices.   The market just couldn't hold heading into afternoon.

Sectors,  we continue to make our trades in some commodity area where any potential news from Washinton won't affect them one way or the other.   In fact, we view weakness brought on by the market as opportunities in some of the commodity names.    They can be volatile to trade and that's why we are sticking to "buy on weakness, sell on strength" strategy.

This is a short week,  but we still have quite a few earning reports and those economic activity numbers to look after.   Every week is a new stock market adventure and this short week should be no exception.