A fuzzy time requires fuzzy logic

We have S&P now breaking the 1395 resistance and possibly looking at 1450 which I have highlighted before. (see Gloom, Doom, Boom and Foom post) Most analysts prefer to look for testing of another high at 1410 though. Before I start off lamenting Yahoo's dilemma, I will like to add in an interesting view on rising food prices. I am pretty sure that not many people know the exact problem why we have rising food prices at such a booming rate.

Quote from my former team member - Mr. X
1. Hmmm.. I think food is going to get more and more expensive. It's the maize theory. People use maize to get ethanol which is used in engines. Since arable land is limited and more land is used to grow maize, other crops will get more expensive too.
2.Furthermore, as the whole world gets richer, they consume more meat. Loads of crops go into producing every lb of meat and this translates into an increase in the price of crops.
Well, the general idea for food is as such and the price of food has indeed been going up pretty crazily. But which company to get.. I am not too sure.

He is one of the smartest guys I met and is winning the investment game we have at the moment.

Also read http://www.cnbc.com/id/24296963 on Bob Pisani's view from CNBC.com.

Recap of this week

1. Microsoft was bad (Come on, buy yahoo at a higher price please). Apple was good because of strong Macintosh sales, which again should be attributed to the effect of Ipod. Yahoo was in line in my opinion but share price dipped quite a bit and is killing me in an investing game involving my former team members and me. Saturday is the deadline, if Yahoo rejects the bid then I think we should cover our losses - I made an all-in trade on Yahoo! I apologise for this call.

2. Economic data was pretty bad but I think everyone has seen it all. We know housing will be bad, consumer confidence will be bad, we are probably already in a recession but the future is bright, at least that is what most people are thinking right now. The market tanked the data and moved up slightly for the week.

3. Crude oil, as expected, dipped on inventories rise. Now do you agree with me that those analysts should just stay home and keep their mouth shut? I wonder how much they are paid to do this. Anyway, crude fell to about $115 before rallying back to $118 on friday. On hindsight, I was not complete about my analysis on oil. I failed to include the strength of dollar in my analysis but luckily things still went my way.

4. Stocks were only doing decent. Cosco was good, closing at 3.47 for the week. Intel was flat. Uob, to my surprise, was flat for the week. Phew, it actually went above $21 during the week. The only blemish was Yahoo, but I am standing firm right now. Saturday is the deadline and we will see how it goes, hopefully positive for us.

Looking ahead
We have our best friend Ben Bernanke and his co. deciding whether to cut interest rate or not. I think he will cut a quarter basis point. It is just quite extreme to cut 75 earlier on and cut nothing this time. Wonder how will the market react with a no cut. Does a no cut signify that the worst is over and that even if we are in a recession right now, it is only a short and shallow one? A no cut will have all the shorts covering their position on the dollar. But it may spark some inflation fears; in fact even a 25 basis point may indicate to most people that inflation is the focus right now, which may be getting out of hand. I just do not know how the market will go. Maybe it is because I am rather bearish with current situation. I think the interest rate outweighs everything so I will actually be standing on the sidelines and emphasize that you too hold your cash. I still believe that we are trending sideways and there is more to the downside. Also, I am stuck in the Yahoo dilemma, so until I am cleared from it, I do not think that I will be looking at any US stocks at the moment. However, I will give my picks on wed, after Fed's rate and after Microsoft-Yahoo saga.

A fuzzy time requires fuzzy logic
Whatever I say here is going to get real fuzzy. It has a lot of instincts involved and is... very fuzzy LOL. First, I think no matter what Big Ben does, the market will get negative because a small cut shows that we are getting to an end of rates cut. Remember long ago when Big Ben hinted at the first rates cut, the world market was in a bullish rampage mode. Bad news was treated as good news. So this time, everyone will be on the downside as there will be no more rate cut in the future. Because of this, dollar will probably strengthen more, leading to a fall in commodities prices in the short term. We will see a broad market sell off, probably using weak economic data as catalyst. Something interesting to note is that there aren't many short positions out there on the financials right now and short positions are important rally provider, which could be why the market did pretty well over last two weeks.

I have no basis for this but it is the fuzzy side of me and I am going to give another fuzzy story.

Focusing on Singapore stock market, the highlight of the week is definitely Keppel Corporation.

SINGAPORE: Keppel Corporation has recorded first quarter earnings of S$262 million, up just 4 percent compared to the same period a year ago.

Revenue during the quarter rose 9 percent on-year to S$2.21 billion. The results, which came in below analysts' forecast, had been hit by lower earnings from its core marine division and property business. Keppel's offshore and marine unit saw a 9 percent drop to S$1.4 billion in first quarter revenue over a year ago, due mainly to a time lag in recognising revenue for its projects. At the same time, earnings from its property division fell 6 percent to S$300 million on-year, hurt by the uncertain global economic outlook.

I got this from channel news asia. Honestly, Keppel is a stellar stock in Singapore market; anything that is related to oil and is government related will be strong fundamentally for quite a number of years to come. Time lag in recognising revenue for its projects? Admin problem? I do not understand this. Is this an industry problem? So will this thing affect similar companies like Sembawang Marine and Cosco? Between the two, I drop off Cosco because it is China related and the graph does not give a clear signal.



Sembawang Marine will post its earnings on wednesday. Take note that SPC was bad because of higher input cost, Keppel's marine and offshore was bad because of time lag issues. I suspect higher input cost will attribute to a small part of it.This is the weekly graph. If oil is to go down further, Sembawang Marine will be a nice shorting play. Remember Sembawang was faced with the trading fraud and had to sell off Cosco's stake? Cosco actually represented a bulk of its profit previously. Looking at the graph, we have a nice rally because of oil prices last week. However, the momentum cannot carry on for the week and we have a black star coming off a long white candle. Here, we are playing for the evening star (refer to the website posted in Mid-week Pit Stop Post). For those with keen eyes, it is the opposite of the Cosco play last week. So, I suggest shorting Sembawang marine at $4. Target will be $3.60. 10% shorting play because of weakness in industry and oil.

Latest Amendments: Apparently, the date for Sembawang Marine earnings has been changed. So price target will be different. I will make a short update again. Tentatively, it will be on 7th of May. Nonetheless, the view still stands that Sembawang Marine will be weak. Also, if there is nothing going on with Microsoft-Yahoo saga, then I suggest you take your loss on monday.

Look out for the wed/thurs post as I will provide a more thorough, certainly less fuzzy, view on the market and certain stocks.

The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you can familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements.
Jesse Livermore