DJIM #14 2009

Here at the official start of the Q2 2009 with Q1 EPS reporting season upon us,  you can’t help but notice, " we've come a long way in a short period of time (as in a month from what we appropriately named,"Mark of the Beast 666" after the close March 9th)....."Usually,  we have a case of mouths calling the market bottoms, nobody is doing that now at this level and instead calls for 500-600 gravity pulls are all over the place.    We like this as well for a better chance to get a meaningful bounce from the 'Mark of the Beast' 666 level....".   As sentiment fell to depressed levels and no bottom calls evident at those current levels,  began a devil of a rally.

A lot of things have changed!    Most important change of them all, is that the investor's sentiment toward this market has changed dramatically as conditions are falling into place for a 2H09 recovery.   We can still have all kinds of bad news that point to a deep recession, such as the awful Friday Job losses,  but if all investors are looking at is the potential recovery, why argue against them?

Over the last few trading days,  we have sensed bullishness not seen since last September, we even ticked to day highs at Fridays close.     Yes, there's a big fear among the market participants.    The fear is that the market will continue to go higher and not being positioned enough to take advantage of this run-up.     Quite interesting, isn't it?    Basically, what's happening right now is despite the 25% run- up from the March low,  many if not most of the investors/traders are still way "UNDER INVESTED" in this market.    When this market shows no sign of pulling back, whether on bad economic number or GM's potential bankruptcy news or whatever,  there's only one thing on trader's mind.    We got to get on this bull jet with all of it's tailwinds!!    Right now, da'bears are using all kinds of fancy technical jargon to conclude "the end of this run-up must be near".     What we think is that all of us,  Bulls & Bears, are way under estimating the power of "sideline cash"!     We admit, even as bullish as we've been, we've hardly tapped more than enough of our cash.    We can only imagine how many other individuals/ especially institutions are caught in this run-up WITHOUT a good chunk of merchandise.     The more it goes up, on good news or bad news, the more it makes people/ managers feel that we have to buy stuff!     The end result is that dips are being bought aggressively ( the underlying bid is prevailing as discussed more than a week ago ) and there just doesn't seem to be enough selling to satisfy the buyers' appetite.     We feel that the only reason we aren't higher right now is still the cautious nature of the majority of long investors/traders.

The coming week is a relatively quiet week with only AA and MOS  as notable names to report earning.   They shouldn't cause a big ripple in this market one way or the other.    Being also a short trading week, we feel traders would like to position themselves for the earning season.    We saw what RIMM  can do with a promising report.     The one very positive thing going for this earning season so far  is that nobody really expected any company to post decent earning/guidance.    Therefore,  there's a tremendous opportunity for upside surprise here.    If any company, a leader in its sector hopefully, showed signs that the worst is behind us, then you almost have to buy the stuff for the inevitable, which is the recovery process.    Of course,  what we like to see may not turn out to be what we'd actually see.    Market sentiment can and definitely will change throughout this earning season.    However, for now, the trend continues to run with a positive bias!

Commodity- linked stocks

We still feel this is a lagging group as the inflation- linked trade will only pick up in the future.   It is very possible that inflation expectations could lead the consumer to buy now before prices go up and we’d like to be there early.    Still,  these stocks have a lot of catch up to do compared to some of the other groups.    We are still sticking to our usual favourite including X  CLF  OIH  MOS  POT etc.

Financials- linked stocks

Out of all the groups, this one gets the most attention and it's definitely a market mover.   We like some names such as GS, ICE  STT V MA  etc.    You just can't move this market higher without this group's participation.

Technology- linked stocks

RIMM  set the tone for the techs and we will monitor those names that have "high growth" associated with them.    Not all techs get the love,  so we have to be very discriminating with our plays.

Bottom line,  hope and promise can drive this market much higher than we all can anticipate,  just as fear can drive the market much lower than we'd ever thought possible.    Sentiment is extremely good right now and we have to use it to our advantage.   A shortened week and little newsflow catalysts should be a positive for the broad market.

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