Saturday, November 8, 2008

Novemeber 1st Week Transaction
















As October was a bad month, I was waiting for a re-entry. US elections was round the corner, and US market will rally with any moderate move.

On Tuesday, US market rally with anticipation of Obama winning. I entered at 996.75....yes lousy again. I also use this opportunity to close my Soyabean futures 972.( buy at 970 and went down as low as 933). I also sold SCI at 230.4

Why I entered Soyabeans ? China is a top importer of soyabeans, and last week commodity prices was rising. With the milk scare in China, it could possible create demand for soyabean products. However, I was wrong as usual, with deleveraging still going on. The BDI index was also plunging from 9000+ to 1000+ in a matter of 3 months. Better keep my commodity speculation to a minimum first. maybe wait for it to stabilise within a ban +-10% in 2/3 months before making my move.

I also closed my US futures on Friday. Wednesday+Thursday plunged by about 10% to 905. With good money, better zao. Dun be greedy. Friday may be a bounce even though the work employment numbers are coming out and GM + Ford reporting as well. STI bucked the trend and stayed flat ! Astonishingly.

Weekly Recap - Week ending 07-Nov-08
It was a tremendous week in our country's political and social history, even if it wasn't a tremendous week for the stock market.

On Tuesday the United States made history, electing its first African-American president in Barack Obama while holding true to the longstanding, democratic principle of a peaceful transition of power.

As remarkable as that proud fact is, it unfortunately doesn't change the fact that the U.S. economy is in a slump that is pressuring earnings prospects and stock prices. Accordingly, the stock market didn't spend any time basking in the monumental history that was made Tuesday, which also included the biggest Election Day rally ever in the stock market when the S&P 500 surged 4.1%.

It became evident in no time at all that the market's economic concerns weren't assuaged in the voting booth. Over the course of the two trading sessions on Wednesday and Thursday the S&P 500 dropped 10.0%.

The decline followed an 18% gain over the preceding six sessions, so it was understandable that there would be some retracement of those gains. However, the scope of the pullback made it clear that there was more behind the selling than simple profit taking.
The item that got the market's attention turned back so quickly to the ailing economy was Wednesday's ADP employment report, which estimated 157,000 jobs were lost in the private sector in October, the largest decline since November 2002.

This report followed some dismal auto sales reports for October on Monday and set a very nervous tone ahead of the government's employment report for October on Friday.
Several other economic reports compounded the selling pressure in the middle of the week. In particular, September factory orders declined 2.5%, the October ISM Services Index at 44.4 slipped below 50.0, which is viewed as the dividing line between expansion and contraction, Q3 productivity slowed to a 1.1% growth rate from 3.6%, and continued jobless claims of 3.843 million were at their highest level since 1983.

The disappointments weren't confined solely to economic news either. Another wave of cautious-sounding guidance from corporate America also factored heavily in the action.
Tech bellwether Cisco (CSCO) led the pack of disappointments with a warning that its fiscal second quarter revenues were expected to decline 5% to 10% as most enterprise customers across all industries it serves are facing a very challenging business environment.

Separately, influential banking analyst Meredith Whitney of Oppenheimer & Co. suggested in a CNBC interview Wednesday that she felt big banks were going to be in the position of having to complete more capital raises in coming months and that she felt many of their stocks still had a lot more downside risk in them. She feels that Citigroup (C), for one, could trade into the single digits.

On the heels of her bleak assessment, retailers on Thursday posted some lousy same-store sales results for October, with the exception of price leader Wal-Mart (WMT), which reported a 2.4% gain. Overall, same-store sales declined 0.9% (and 4.2% excluding Wal-Mart), according to the International Council of Shopping Centers.

In the midst of the reports from the retailers, it was learned that the European Central Bank cut its key borrowing rate 50 basis points to 3.25%, as expected, but that the Bank of England stunned everyone by cutting its key rate 150 basis points to 3.00%.

The move by the Bank of England was so aggressive that it was scary. Central banks simply don't cut rates in this fashion, unless they feel they are way behind the curve with the appropriate monetary policy as it relates to economic prospects.

The Bank of England for its part said there has been a marked deterioration in the outlook for economic activity at home and abroad and that it took the action it did to guard against inflation undershooting its 2.00% target.

It deserves pointing out that the annual rate of consumer price inflation in the U.K. was 5.2% in September or just ahead of the 4.9% growth rate in the U.S. where the fed funds rate is now 1.00%. From the market's vantage point then, the Bank of England, as well as the ECB, still hasn't cut rates enough to help forestall a protracted, global economic slowdown.

This brings us to Friday's employment report, which didn't contain any good economic news.
Nonfarm payrolls declined 240,000 (consensus -200,000) and the prior month was revised to show a decline of 284,000 positions versus an originally reported loss of 159,000. Job losses were seen in all areas in October, with the exception of modest gains in education and health services and government.

The unemployment rate rose from 6.1% to 6.5% (consensus 6.3%). Hourly earnings were in line with expectations, up 0.2%, as was the average workweek at 33.6 hours.
1.2 million jobs have been lost over the first 10 months of 2008, but tellingly, over half of those losses have occurred in just the past three months.

Ironically, in the wake of the worst economic news of the week, the stock market rallied on Friday, jumping 2.9% in a broad-based effort. The upside move was even more striking considering Disney (DIS) had disappointing earnings, Qualcomm (QCOM) provided fiscal first quarter revenue and earnings guidance well below current consensus estimates, and both Ford (F) and General Motors (GM) posted massive third quarter losses while showing they were burning through their cash.

Ford used $7.7 billion in cash in the quarter while GM used $6.9 billion. GM went on to say that, looking into the first two quarters of 2009, the company will fall short in capital unless economic conditions improve, it can gain access to capital markets, can sell assets, or can secure government funding.

That the market would rally on this battery of bad news indicated it had already accounted for it in the prior two sessions when it fell 10%.

It would be remiss not to add that President-Elect Obama gave his first press conference during afternoon trading Friday in which he summarized a discussion he had with his economic advisory team. He mentioned four initiatives he would pursue immediately upon entering office in January: (1) a rescue plan for the middle class that would include a new fiscal stimulus package, which will be his first priority (2) working to stem the spread of the impact of the crisis on other sectors of the economy (3) reviewing the current administration's implementation of the financial program and (4) laying out policies that grow the middle class and strengthen the economy for the long term.

When Obama acknowledged that he doesn't officially take over until January and will stand by to let the current administration see things through to the end of its term, the stock market gave back over half of the day's gains. However, the session ended on a positive note as a late rush of buying interest left the indices near their highs for the day, which were seen just before President-Elect Obama started his press conference.

So, while President-Elect Obama has made it clear that he wants to bring change for the country, it was clear that things remained the same for the stock market, which had another volatile week of trading.

The volatility is a by-product of the uncertainty about the timing of an economic recovery and a nettlesome belief that consensus earnings estimates for the fourth quarter and 2009 still haven't been lowered enough to reflect the economic deterioration.

In brief, there was a lot of emotion during this historic week, yet it was fundamentals -- or the perception at least that fundamentals are weakening -- that seemed to be driving the market.

--Patrick J. O'Hare, Briefing.com

**For interested readers, the S&P 400 Midcap Index, which isn't included in the table below, declined 5.1% for the week and is down 37.1% year-to-date.

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