Week in Review

Friday is the second day in a row the market started in red and finished in green. Nasdaq was up 0.5%, after Thursday's 0.9% gain. Am I wrong about the general market? I thought by this week, the market at least showed some weakness, but I could not find it. Other than overbought condition, seems there is nothing wrong with the market technically, specially considering the bad conditions around the economy.

1. Next week there are many earning news, plus CPI number. Even though I could not find many arguments technically, from economy perspective, I think there is great chance this is a market top.
2. Economy is slowing, from housing crash to subprime mortgage defaults; and it's in the 6th year of an expansion, which is tired and there are lot of excessive inventory to be worked out. Mobile phone inventory is one example, check MOT, NOK's earning reports.
3. And market and Fed already greatly discounted geopolitical risks, oil hike and commodities hike later this year, these will add inflationary pressure to limit the Fed's ability to add more liquidity to the market via rate cut.
4. And this is a time the profit margin for companies to shrink, not expand, as in the beginning of an economical cycle like 2002.
5. So I think my positions in QID and QQQQ puts are justified consider the macro market environment.
6. Since I sold many short ETF positions to buy URZ and EMU, now my portfolio is balanced.

URZ, EMU, RIMM, CFC and CNB:

1. Fortunately for me, I added URZ and EMU after I reduced my short ETF positions. And URZ was up 9% with EMU up 1.3% on Friday.
2. Long term, I like the uranium story. Short term, URZ is a stock that traders love, big swing, with sound fundamental potential. Just last week uranium price shot up to $113 from $95.
3. You can say anything about why URZ outperforms EMU, but I think unless the market has a sharp correction, URZ will continue to shoot up, like FRG did in 2006. URZ closed first time above $7.
4. Now URZ is 33% above its 50MA (ouch!). You may think it's time to bail. But from it's brief chart history, on Nov.24th and Feb.26th, URZ was 77% and 54% above its 50MA respectively. These two are previous peaks. So it may has some big 20-40% up side left.
5. On the other hand, EMU is far more valuable than URZ, and since it's traded on NYSE Arca, not many people know it, which is good, you can get in cheap.
6. RIMM finally started to correct itself. An article I found has an analysis about its lack of development for 3G and next generation of smartphone, if half of the arguments turn out to be true, RIMM will see at least a 30% price fall in 2007, if not more.
7. But RIMM has defied gravity before. And with ongoing formal SEC investigation, and potential OSC upgrade its investigation from informal to formal, there are lot of risks in RIMM. No wonder almost all analysts on wall street recommend people to buy the dip, because if all exits RIMM, it will be an ugly ending for the clients of the wall street firms. I don't believe all the analysts are for the interests of the investors, it's been proved again and again on wall street.
8. CFC and CNB are good 3-9 months play in my opinion on the short side, I suspect the housing will be in worse shape by then, and that will translate into a worse stock price for both of them, since that have very large mortgage exposure, specially CFC.

Plan next:

1. My plan is to manage two sets of positions:
2. Short ETFs and puts are for long term, since I still believe a down turn for the market.
3. URZ and EMU are for the short term, if the market continue to go up or side way, uranium should do better than PM shares, even than the strongest of the PM stocks, like SSRI. And it's an alternative energy play as well.