let the dust settle..

The premise that the recession, if there is a one, will be short and shallow suddenly looks so suspicious, that the euphoria the bull painstakingly build since the beginning of the new quarter got crashed by a single swipe.  Not so long ago, the market looked so promising with all major indexes seemed to break the downward trend, by Friday, in the dawn of a young earning season, it is, yet again, send back to the same spot where the quarter began.  Even though, it is too early to write the eulogy for the bull, the confidence is definitely shaken, and more and more people will take a “wait and see” approach in the coming days for sure.

 

Mind you though, such is not atypical for an earning season.  The mood could be changed from boom to gloom in a matter of nanoseconds as soon as an earning hit the news wire, especially from a so-called “Bellwether” company such as GE.   If you think this week is bad, wait for the next week, there will be barrage of earnings from such names as INTC, GOOG, and IBM. So, embrace yourself.

 

Technically, DJIA and SP500 are under 50 day MA again.  However, the VIX does not show any panic and the volume was moderate.  Furthermore, if we believe the market is in a trading range (12000-12800 for DJIA), then, the market is right in the middle of the range, reflecting a hesitation, a “watching from sideline” kind of attitude. 

 

So, what is our strategy for the next week then?  

 

First of all, let’s not kidding ourselves, we do not know what we do not know.  So, forget about betting on the earning surprises. That means we may have to react rather than act aggressively.   Trade less but trade quickly could be the slogan for the week J

 

Secondly, surprise could come both ways, so, be prepared go long or short as necessary.  From my perspective, we could find more upside from steel, coal, agriculture and more downside from financial (surprise!) and technology. 

 

One common mistake is the loss averse.   When the stock is up, it is easier to pull the trigger, but it is very hard when the stock is down. One has to realize that one cannot be right every time.  The trick is that take small loss if the stock does not behave the way you thought it should, and let the profit run when your bet is right.

 

Next week, it will be hard to focus on the work as well.  It is widely expected the layoff of our company will be coming on either Tuesday or Wednesday.  The details are sketch.   We even do not know what the severance package is this time.  And our director told us that the they do not take volunteers either. So, it will be interesting to see how the things play out.

 

Anyways, good luck in the new week