Weekly Review (4/3/06 - 4/7/06)

Wait for News

When the market stopped dancing with the weather on Friday, its weak balance was crushed by the selling power.

On Friday morning, the NASDAQ had a years’ new high at 2375.45. (It tried to reach that 53. Ha-ha!) It did not stay there for too long, and then slipped down almost 40 from the top to the bottom.

Even though it was caused by news, but I rather translate it in this way: There are someone believes the market has potential to growth; there are someone else are anxious about the current market position and are afraid the market going down. The first group is the potential buyer; the second is the potential seller. From Friday’s result, we know the second group is more powerful then the first one.

The situation is always changing dynamically. When the market is down too much, someone in the second group would think to buy something for cheap, and then join the first group. When the market is up a lot, someone in the first group would like to take profit and leave, then join the second group. Besides, any group will stop or slow down its action if the opposite seems too strong. For example, if the potential buyer sees the market is going down, he probably will stop buying and wait for a lower price.

The market is driven by the two dynamic groups. If the first group, the buyer, stronger, then the market will go up; else, it will going down.

Because of Friday’s down, the buying power stronger and the selling power weaker then before, but the buying power is not strong enough to advance the market! The current balance level is just at 11195 (Dow). Apparently, for next week, the market needs some external force to lead its direction.

If the weather is good, --- woops! I am sorry, a typo! --- If there is good news, the market will move up. If it is up too much, it will be pushed down again. If there is bad news, then another way around. The both parties are waiting for news, to give them a reason, to go forward.

The most possible scenario for next week is: Up in Monday and Tuesday; down in Wednesday. How will be Thursday? Not sure.

Our strategy of this week is still the same: Don’t run after the up, but buy at the low.

*****

The Friday’s down is a good examiner for a stock. Please review your holdings.

If a stock was strong on Friday, you should see an up, or a jump, during this week.

If a stock was down more than the market percentage wise, you should double check its reason. If you cannot find a good explanation, you should reduce your position when the market back. If that stock is sensitive (when market up, it up more; when market down, it down more) to the market, you should sell it first when the market up, or use it as a market index.

If a stock was down about the same as the market, you don’t need to pay attention to it.

If a stock was down at the beginning and keep flat in the afternoon, probably it got some support at that price level. You should consider buy a little.

Today I don’t have much to say about the suggestion list:
1. SUNW.
You need increase your holding. I feel the next up is on the way.

2. CSCO
A sector bad news made it very disappointed for this week. I think it will back to $21 this week. Its chart does not look good. You should pay attention on it this week.

If you are a short term player, there are opportunities in the coming week; if you are a mid or long term investor, I suggest you hold your stocks and enjoy the spring.

I am still optimistic about the market.