Whistle passing the graveyard

The earning season is like the ceremony of unveiling of the bride in traditional Chinese wedding, mostly it is predicative, grand mothers, sisters-in-law and the groom all know what the face will be after the veil is lifted. But when it is a surprise, it could impact the life of human beings. If you do not believe it, just read the classic of “Dream in Red Mansions”, when Ling MM turned out to be Bao JJ, one is dead, another is insane. 

 

Fortunately, in market, the surprise is a double edged sword, not all surprise ended in the tragedy, as a matter of fact, the late surge of the market should thank the surprise from earning front, the positive surprise, of course. 

 

For the time being, the market has reached top end of the trading range and appeared to be in the state to break the resistance and entered into a whole new territory.  Whether the market can race higher from here depends on many factors, including more good earnings, good economic data and financial sectors, but it is probably safe to say that we have whistled passing graveyard, and the worst is over. 

 

From a technical point of view, the trend has been reversed.  If the market can break current level (DJIA 13800) with good catalyst (say good forecast from MSFT), more buying is called for.  Or wait the market back trace to the previous resistance (DJIA 13500), buy on the dip. 

 

At least, that is the plan, however, one has always had to have a safe exit if the market turned against our assumptions. One of the dark spot is so called “LIBOR rate”, it has been the talk of the news media for the last several days, it is suspected that the actual borrowing rate between banks are higher than it appeared.   Another problem could be the crude price.  It is now 116 now(?) So, be diligent.

 

The myth of decoupling of US economy with rest of the world is busted in this crisis as well.  When US market was down, the world sank with it. Now that, the US climb back, the world rose too.  FXI, EWT, EWZ, EWC, RSX are all trading on the top the trading band.   If you want to get aggressive, some of Chinese stocks could be considered especially now that Chinese domestic market are down half.

 

In the internet booms, there was a consensus that infra-structure companies will perform better than those companies with a front store selling stuff.  In current commodities boom, the same probably could be applied.  For example, those companies help to grow crops will perform better than companies actually grow crops.   So far, this has been true, all the fertilizer, farm machinery performed really well.  If you apply the same logic, the same can be extended to those help mining and making steel.  And with the perception that the recession is short and shallow, those stocks may have a more rooms to grow.

 

Good luck in the new week