DJIM #45, 2007

Ok, there's no fooling ourselves here, we have gone through one of the toughest week that we can remember.    The past week has to be ranked up there as one of the most memorable.    No, it's probably not the week that has seen the biggest drop nor it is the week that has the most negative news.     It is, however, one of the most psychologically devastating week for traders, in our opinion.     Yes, big or small, most traders we know have taken some hits last week.   

What was a most devastating week wasn't the fact financials kept on finding newer bottom every hour.   It was the fact that most of the stocks which we considered as safe heaven were taken down hard, and in a matter of 3 days worth of trading.    There was a time we thought by staying in some of the growth oriented technology stocks and alike would carry us through this financial crisis, but as we noted before Thursday's open, CSCO might be the straw to break the group carrying the market.    Well, how's 10 to 20 percent haircut from the likes of AAPL GOOG BIDU RIMM... sound to you?     What is ironic about this action is that the market leaders were taken down at the same time where there's an apparent reversal in some of the financial stocks.     Toward the end of the week, there's an apparent feeling of end of the world is coming for this market.  The fear mongers are busy.  There is thinking that now it's apparent that the financial crisis is going to last longer than anticipated, and also the market leaders from the growth sector are deteriorating technically, what's there left to do other than bailing everything out?   So many traders did just that!    Traders have the right to be emotional and act accordingly.   Most of us don't have the luxury of owning a fancy black box that does all the trading for us.    We do things based on what we feel others would do and try to jump ahead of the pack.   If everyone is doing the exact same thing out there, there's simply no out thinking them and you just better hope you get out before the real rush has started.

We all took some losses!  Now lets move on with our lives...

What is next then?   Some of us are hoping that market can tank another 10 to 20 percent so we can get into some of the plays cheaper.   The question is, do we really want that and more importantly will it happen that way?    We are sure at the end of the trading on Friday, most of us will feel it's not just a matter of question of if but when.     Ok, so be it that way.     Wait a minute here, that just sounded too simple right?   Here are  few facts we have to consider here.     First of all, we have quite a few companies here that are enjoying some tremendous growth with their business and earnings, still.    Unless we can see a recession on the way which can definitely hamper the growth of some of these companies, only then we should really start to worry.   At this point, it's still a big if.   Second, we are begging to see some of the financials stocks to act in a "bottom is near" kind of way toward the last couple of days of trading last week.    This may not mean much but it's definitely a start.   Third, the coming quarter, both in terms of historical trading and business perspective, have always been strong for this market.   We simply just can not ignore this important statistics and write it off.    Fourth, market doesn't go straight down.    We think as emotional as it was, it will take more than what we have to take us down much further.    So, a rebound scenario is much likely in the works sooner than later.

The bottom line, we just can't write this market off, yet.   We may have some more shaky movement in the coming days if not weeks but once dust settles, we have to be right there to clean it up.     What we mean is that we'd be right there to clean up opportunities when they present themselves to us.   Many of the recent Chinese IPOs are releasing earning(many for the first time) in the coming week or two.   We have to keep an eye on those and to see how investors react to their reports.    It's irrelevant how "good' the report is but we'd have to pay attention to the reaction.  Best not to chase now as we pointed out last week.   We have many plays that are either broken or severely damaged technically.    We aren't removing them from our watchlist yet, but we'll treat them like fresh plays starting this week.    Right now, we should not be attached, either emotionally or in terms of capital to some of our favourite past plays.   If market rebounds, we have to be indiscriminate about our selection and play those based on what we see, not what we feel.

We are looking forward to trading next week, the bull will have some fight in it.