Back To Take It All Back...

FUNDAMENTAL ANALYSIS
Disappointing is the word to use on retail investors these days. See what happened last Friday when retail investors are queuing in front of the marts instead of the exchanges and professional trading takes over? Yes, a huge up day! In fact, institution sentiments continue to be optimistic as indicated by my Institution Sentiment Index and many institutions are now seeing value acrossing the board! What happened when retail investors came back today? No wonder every academia is pushing for the institutionalization of investment! There are simply too much sentiment and too little intelligence in retail investors today! All these decline today were despite a huge Black Friday sales increase by retailers and the Saudis announcing a crude output increase in order to stem the high oil prices! Furthermore, the Fed is actively taking steps before the next meeting to inject liquidity into the banking system through a 8 billion dollars 45 days repo! Yes, 45 days! When was the last time the Fed did that? But what happened in the end? Investors still sold off like a scared bunny. Yes, bond yields are lower across the board as investors exit the equities market in favor of the treasury market but the gradient of the yield curve still suggests that investors continue to believe that inflation will be gradual and that the economy will develop normally! Recession? What recession? Such disgusting pessimism always prevail near market bottoms. Everyone cook up horror stories and then suddenly the market rallies and leaves everyone hanging. What we are seeing is a complete over reaction and over pessimism which is usually a contrarian indicator on itself. Tomorrow's Consumer Confidence numbers are not likely to do much for the market... we need to see whether the bulls or the bears are in control. As usual, I believe in keeping America great and I believe that open market capitalism is the best path to prosperity and someday, when the Dow is at a million, you want to pat yourself on the back knowing you believed in it this early. :)

TECHNICAL ANALYSIS
The Dow's trend line continues to get depressed today in a rare and brutal rough em up pattern that I have not seen since 2001. Analysts may argue that this is the lowest close since April but my take is still that the Low of August is still very much intact and that is the 12517 level. 2 most important words in technical analysis is "PRUDENCE" and "SIGNIFICANCE". We are not seeing a significant breach of the most prudent support level yet! I think we should get a reaction rally very soon as this market has gone too far down too fast and the quality and behavior of the reaction rally is going to be the most important indication of the primary trend.