Market Review for May 18

Not much surprise to see this week, Market continues to pull up whenever this is a pull back as we have anticipated. Just soon after the market gave up most of its gain on Tuesday for the weak retailer data ,it bounced back right away. This is a strong signal that market are so strong. We also witness that every dip got a buy to support the market. The new high is confirmed by the breakout again in Transportation and Energy sector. The new high therefore is regarded a valid high. Also the Policy from Chinese Government will continue to fuel the continuous growth of oversea market. The market relief a little bit from its extreme overbought situation after tuesday's distribution in NASDAQ, it is one way to reduce the cost for institution. The later market rally with higher volume signs the bullish anticipation. People may concern about that skew between NASDAQ and DOWS ,but in our view, this is acceptable because more liquidity is monitored in Energy Sector, Consumer Discretionary and Staple, and Transportation Sector. The skew actually will provide us the chance to buy sth relatively cheap.

From Economic View, The CPI came in at a “light” +0.2%. This benign number emerged with health care services and hotel rates surging attests to intense disinflation pressure elsewhere (air fares, clothing, autos). The year-to-year core inflation rate moved down to 2.3% for April from 2.5% in March. Such a reading would take the year-to-year pace to 2.07%, just slightly above the Central bank's comfort zone 2%. Therefore after this data, we can say in the future, market has no where to go but up because any news coming out will be positive surprise. The benigh number creates a good atomsphere that FED will take some action on their coming meeting at the end of JUNE. If the rate cut becomes true, Tech and Finance Sector will soon benefit from this loose control of monetary policy.

From Sector View, Transportation sector remains their market leader position. Recently the buyin from Warren Buffet into BNSF fuels a huge of money into such sector, signing a finance restructure in this area. This sector deserve further notice. Energy sector also advance their pace for the record high in Gas price. As we have pointed long time ago, hedging into this sector through the whole summer still be one of our strategies recommended. But one thing we noted is that VIX is turning high again. This will prompt the defensive sector especially healthcare and finance sector again. MA, NYX, JPM, GS are key stocks in this area. consumer discretionary sector also outperform after we pointed out last week when we see GM, MCD rally 8%. Restaurant chain Buffalo Wild Wings (BWLD) gapped up 14% to new highs on May 2 after its last rally.

From Stock View, AAPL advanced with another strong tech stock RIMM. Goog returned with one day strong step. MR rally 20% after strong earning. JADE, a hongkong based jewrey corp, breaks out their resistance and may go further. Priceline (PCLN) advanced with huge volume , further from their previously report positive surprise earning. CSUN, a solar company , starts with a big rally but followed by a profit taken action the second day. Several stocks show huge advance because of LBO include AQNT,OMR.

Our strategy remains the same, buy into several step whenever you see a pullback in your favorite stock. The current market rally is just the begining of another wave of huge rally. If Fed Cut rate in June, Imagine what could happen. Don't worry about any pull back because we view any pullback would be healthy for another market new high, any pull back will be short life.