DJIM #33

Last week, we've witnessed some of the most intense and volatile sessions we can recall.    At the end of the week, we are still left with as many questions as answers.     

First, in terms of answers, we know that the subprime woe is affecting not only the domestic lenders and some of the financial institutions but overseas as well.   We also know that most of the central banks around world is recognizing the situation and they are doing what they can(by pumping liquidity into the short term market) to ease the crunch.    Lastly, we know for fact that some of the market neutral funds have been liquidating alot of their assets due to the recent turmoil in the equity and as well as the debt market.     Things are definitely unfolding, and in a way, progressing toward resolving the current situation caused by the subprime market.   

Second, in terms of questions, we still have many questions we'd like to have a satisfying answer with.   Will the central banks have enough power or will they do more than enough to ensure the stability of our financial market?    How much more damage is there from the financial institutions that have yet to admit the kind of losses they've taken so far?    What about the repricing of those structured debts?    There's still billions of debts out there that have yet to be written off and the resulting ripple effect could be catastrophic.     There are tons of topics that can stem from the questions above which are making alot of us to wonder about.

So what about now? 

 For many market participants, as long as they can assess the damage that's being done to the financial market, and knowing that things are being done to alleviate the pressure of affected entities, those things will calm them down.    Like we said before, fear is the most troublesome thing that can destroy an orderly market.   What we were witnessing last week isn't exactly an orderly market and the pure point gyration is enough to keep many market participants at bay.   We definitely wanted to see an end to that.     Once the market returns to a somewhat normal trading fashion, we as traders can also return to our normal routine and game plan to do what we can to make a living.     As of right now, we think we are getting close but we still need to see some proof in the stability in the trading.      August is usually a non performing month and frankly we'd be glad to see a market correction this time of the year as opposed to occurring at latter part of the year.

And what can we do as traders?

Sticking to 52 week highs!   Seeing is believing and there's nothing that can convince us other than the stocks popping up on the new 52 week high list.     We try not to speculate which group of stocks may get there but rather, we'd try to work with the current group of 52 week high stocks.   Stocks are at 52 week high for a reason and they are there to remind us that it's our obligation as traders to discover them and play them.   During the next few weeks, we'd be concentrating mostly on the new 52 week high stuff and hopefully come up with a group of stocks that can weather the volatility of this spectacular market.