Market Review for May 11

This week ends with a green gain on friday following its previous one day 148 points pullback, this kind of action still support the view that market is bullish. No doubt about that. However, the dillema we face can be described like this, our market momentum reading remains in the " sell " domain, not getting worse, but remains slightly into this domain. Meanwhile the stochastic reading remained in extremely "overbought " reading, and those previous leading sector as what we have described such as Transportation ease a little bit. All these signal us that market needs another healthy pullback. But on Friday, we have found that many hedges fund buy in such a market, together with few institution buying, will give us a hard time to decide what could be the best strategy to get into this market. In another word, at what point, what kind of pull back shall we get into? The hedge funds take every chance to buy into the market, though some are using the chance to cover their short position, an appearance that make us believe any pullback will be healthy, while any pullback will be in a short amonout of time. This means that if we don't react quickly, probably will lose the opportunity. Our previous rec strategy " buying around support " maybe need to revise a little bit. Maybe it should be changed like this :

1) whenever we see a big pull back in your favorite stocks, buy 1/3 of shares you want.
2) around support , buy another 1/3,
3) dipping 2 points, get in with full bullets.

From Economic side, GDP growth rate is around 2.3%, if not considering the inflation rate, we will see the economy will continue to slow down in the second quarter. More interesting is what we have seen in the FOMC statement that says economic activity slowed in the first part of the year but policymakers continue to expect a rebound to moderate growth during the rest of the year. You see that? it tells us that they believe the economy should be fine, as we always believe. The slow in the second quarter will help the inflation rate to get into FED's comfortable zoom 2%. At that time, a rate cut will be coming. These are all good or catalyst for a huge move in the market. And always remember, Hedge funds and few institution have already started to buy. That is the move of smart money.

From Sector side, leading sector , transportation sector, energy sector slow down their pace in advance. On thursday, energy sector pulled back around 2% , the biggest pull back in the past 3 weeks. Utility sector hasn't made their new move either. the increasing volatility associated with the advance in such sector should be a warning sign to us for risk management. Short-term or swing trading in this two sector could be better strategy. The gasoline price breakout , outpacing the crude oil price, proves that much speculative money have been into such a play. Normally as volatility increase, consumer stapler and consumer discretionary sector could outperform. Especially consumer discretionary hasn't made a new high, giving us a contrarian play chance. The consumer discretionary spending sector involves some interesting stock groups, and brand names and, in my view, some of the best opportunities to grow your personal wealth. This is a sector that most people can relate to.
The key stocks in this sector are Dow 30 components, Disney (DIS), General Motors (GM), Home Depot (HD) and McDonalds (MCD).
On friday, the money flow into Chipotle Mexican Grill (CMG) and Buffalo Wild Wings, (BWLD) two restaurant stocks may tell us this sector will start to play soon. This sector is a sector used to balance risk, similar function as MA, SBUX.

From Stock view, chinese related stock such as PTR,LFC, SNP benefits from the loose policy restrition on refined stocks. Meanwhile, we see that FFHL got slaughter too. It is not surprise to see that. After considering the tax benefit , FFHL acutally is losing money by 14%. and in the future, its losing taxt-exampt shield will get its earing worse and worse considering it slow growth rate and market share lost. Therefore don't touch this corp if you wanna invest. AAPL continues to advance on the view of mac tablet and its coming release of Iphone. I have been checked into local apple stocks three times in the past week for 1 hour pertime. During this one hour, an average 4 mac books plus 2 mac pro are sold, similar to what I got previously. However, not many people are buying ipod, could be attributed that people are waiting for the coming iphone.

In conclusion, market overbought with fast hedge fund action needs us to react quickly while patiently. Don't be forced to get in if not feel comfortable. However , market remain bullish, it is just a matter of cost that you got into the favorite stocks and your gain in 6 to 12 months.

Good luck !