Week in Review

Stock market rose fourth week in a row, Dow was up 1.2% to close at 13120, it took 6 months for Dow to gain 1000 points. S&P was up 0.7% for the week and that's the best monthly gain since 2003. Nasdaq shot up 1.2% and now it stood at the highest level since Feb. 2001.

I understand my expanding exposure on the short side, I added DIA puts and DXD since April 20th. I found that Dow was up 19 out of the last 21 sessions, gained 820 points. If you think that it's impressive that it took Dow 6 months to gain 1000 points, what do you think about the 820 points since March 29th?

1. Last week we have very weak GDP number and exiting home sales number. So the economic data again points to a further slow down.
2. On the other hand, we have good earning reports from AAPL, AMZN, MSFT, BIDU,XOM and AT&T. These good earnings override the bad earnings from the like of BRCM, and almost all home builders.
3. So it's not too bad a decision to add puts and short ETFs starting on April 20th, it's overbought and likely to have a pullback any time now. I misjudged the strength of the liquidity in the market.
4. My real mistake is to hold a big QID positions since Feb.27th, and most of my QQQQ puts and RIMM puts. These mistakes are severer than the mistake of adding DXD recently. For all recent positions, it's likely I can get the loss back, for QID, I don't know if I can hold them any longer.
5. The only good news to me is that the market is overbought and may pull back, but if it can go up four weeks in a row, what can prevent it to go for a fifth?
6. Next week we have some labor data and ISM data, I expect a tight labor market to come with weak ISM number, so this potentially can derail the market rally.
7. And we're in May next week, the old saying "Sell in May and go away" may be true this year since we have the best start for the year in S&P 500 since 1999. So it's expected to take and protect profit, specially for the funds that outperform the market so far. But you never know.
8. I'll continue to use the common sense approach to guide me for the next action: add short if the market go crazy again, and sell the short and put positions if there is a decent pull back. I put the rally as 2% and the pullback as 3%, these are my target to add short or sell existing positions.
9. Gold and PM stocks are in the middle of a pullback and consolidation, I'll wait for better entries.
10. Oil may head higher, the arrest of militants in Saudi Arabia is great news since another potential disaster is avoided, but the fact that Al-Qaida keeps its focus on the oil fields in Saudi Arabia is bad news. Usually they'll try again if they failed. So the premium in oil will likely to go up.
11. Another significant move last week is the continued downward movement in Dollar. I truly believe it may be a good news for big companies that get a big percentage of it's revenue from overseas, but it will be bad news for U.S. economy and debts, the interest rate in bonds have to go up in order to attract foreigners to buy our debts. So that will add more pressure on the already bad housing market.
12. So anyway you look at this market, the bullish factors are liquidity and good earnings, the bearish factors are slower economy, higher inflation, weak dollar. Let's see how it plays out next week.