Fed Numbers

Government job numbers just came out, dollar is rising, oil is dropping. For Perma Bears, this is just another fatal attack to them.

With so much pain and suffering to watch their portfolio and handle margin calls, they will quickly cover all their short positions. With this kind of bad experience staying in their minds, they probably won't short the US equity market for another 10 years!

Have you noticed that CNBC don't invite Heb Greenberg on their show any more, his favorite short recommendations are AAPL and RIMM, do you want to take his advice to manage your portfolio?

Fortunately, for all the friends following Swimmer and buying Chinese ADR's (Chinese Stocks Traded on U.S. Exchanges), you probably have made a fortune already. But it's still early in the game, we have a long way to go.

Introducing NTES, a Chinese internet company, PE of 14.34 (based on Fidelity). All the other Chinese ADRs have rallied recently, not this one. It's a coiled spring or loaded gun.

Enjoy,

Swimmer

China Syndrome 4

China has 1.3 billion people, the most populous country in the world. Every thing seems BIG, huge in proportion in China: The Great Wall -- the only man made object can be seen by naked eye from the Moon, Three Gorges Dam -- the largest hydroelectric river dam in the world, just name a few.

There are many astonishing stories related to it's biggest population, for instance, the biggest Holiday -- Chinese New Year, or "Spring Festival":

Every year on the second day of the second new moon after the winter solstice, a remarkable human migration takes place. It is the day when all Chinese travel home to share dinner with their families on the eve of the Chinese New Year. Every year, on the first day of the New Year’s holiday (also known as the Spring Festival), the Chinese government commands the attention of a vast percentage of those reunited family units for four solid hours, through its annual holiday telecast. While the three-hour Super Bowl is famous for drawing 80-90 million viewers in the United States, the Spring Festival Gala aired on CCTV draws 600-700 million viewers each year, about 30 million of whom are overseas Chinese viewing via satellite television or through the Internet.

The Spring Festival Gala is no ordinary variety show. It is rumored that planning for the next year’s show starts just days after the New Year, and casting changes are topics of gossip in the Style section of newspapers. The show’s live audience is a showcase of the Chinese elite: top government officials, Olympic medalists, generals, pop artists, and famous directors who chat gleefully with each other and smile approvingly at performances. The annual Gala commands huge sums from advertisers. Spots range from 3 million to 10 million RMB for expected total ad revenues of between 350 and 400 million RMB (dollars). A well-liked show will be a conversation starter for weeks; a badly staged or uncreative show will leave the Chinese critiquing it for the rest of the year.

RISING DRAGON:

The transformation undergoing in China’s economy can be seen in the country’s population demographic shift towards urbanization over the past two decades, with this trend projected to continue according to the United Nations. The chart below shows that the percentage of the Chinese population in rural areas is expected to decline from 80.4% in 1980 to 39.5% by 2030 and conversely, the percentage living in urban areas to triple from 19.6% in 1980 to 60.5% by 2030.



As this population shift has occurred, Chinese energy consumption has surged with the country playing a greater global importance by gobbling up incremental energy supply. The relative importance of China on world energy consumption growth this decade is clearly visible in the figure below.



China has represented a staggering 72.2% of the incremental consumption growth in coal since the start of this decade, nearly 36% of oil consumption, 16.7% of nuclear consumption (uranium), and 7.5% of natural gas consumption.

Not only has China represented the largest contribution to the growth in world incremental demand since the turn of the century, but the country has also risen in importance of aggregate world energy consumption.

In terms of total world primary energy consumption, China accounts for 38.6% of coal consumption, 8.9% of oil consumption, 2% of natural gas consumption, and 2% for uranium consumption. Though the country only accounts for 2% of natural gas and uranium consumption, the country’s share in total consumption is only going to increase as its growth rate of consumption of those energy sources is surging.



-- To be Cont.

Market View

Wednesday's trading felt worse than the final numbers, which show low volume and modestly negative breadth. So far this price action favors upside resolution. My short time frame Smart Money index shows a bullish trading days ahead. Look at my lists (Recent Performance), buy any kind dip and you will be rewarded.

Good luck,

Swimmer

Technical Master

** Stock-market indexes broke out, and rallied from their

recent consolidation areas. The Dow Jones and
Nasdaq 100 closed at new highs for the year, while
the S&P 500 is not too far behind. The Russell 2000
put in an impressive rally percentage wise (+2.39%),
but still has some ways to go before challenging its
2007-highs at approx. 855. (today's close: 827.74 )

The uptrend remains intact in the markets: here are
the new support levels:

SPX - 1530
RUT - 820 (82 on the IWM etf; which closed today at 82.03 )
NDX - 2100
INDU - 13900

Happy trading,

Mkt Swimmer

Two Winners of The Day

According to Yahoo Finance, the following stocks that I recommended had made the Winners of the Day:

CNTF - Today's performance 28% so far
CPSL - Today's performance 20%
CEA - A Chinese airlines, breakout on technical basis

Thank you for visiting my blog,

Have a profitable trading day!

Mkt Swimmer

Guru View

The market Guru has been checking the Smart Money flow for us:

** Crude Oil
Oil is setting new highs, after testing a support-level at
78-79. The trend continues to point up; but what I find
especially bullish about oil is its COT chart. Notice how
commercial selling has been marginal as crude rallied
from mid-August up to today. So from a COT perspective
this market continues to look very bullish. And trend looks
bullish as long as we remain above the 78-79 level.

** Stock market
There has been a huge decline of open interest in all of the
major stock-indexes. As a result there has been some big
developments in the COT charts. For the S&P 500, net-
commercial position has seen a huge increase to being just
shy of 70,000 contracts net-long. If net-commercial position
remains at this record-level, I can only conclude that this
is very bullish. Trend also remains bullish as we continue to
consolidate on the SPX and hold above 1500-support.
The Dow Jones COT chart is starting to perk up, but
is overall little changed. On the price-chart the Dow
is consolidating not too far from its record 14,000-level.
The Nasdaq 100 COT chart is like the inverse of the
S&P 500 chart. There has been a huge breakdown in
commercial net-position. If you look at the Nasdaq three
year chart, you can see that these break-downs in net-
position are typical for this index. And when they occur
you typically see the NDX correct or at least consolidate.
From the price-chart, the Nasdaq 100 index broke-out,
above its 2007 highs last week, leading the other indexes
in relative strength. So the COT chart is starting to look
bearish, but trend remains very bullish. In this scenario
we must be weary of the COT development while
respecting Nasdaq's uptrend. As long as we continue
to trade above support at around 2050, the path of least
resistance for the NDX remains UP.
The Russell 2000 has also seen a decline in its net-
commercial position. The RUT continues to be one of
my key indicators on the market. While we are holding
about critical support at 800, the market should be fine.
A bullish confirmation would come if we close above 820.
In conclusion, the message from the COT charts
warrants caution, while the TREND for the indexes
remains UP.

** VIX
The COT chart for the volatility index continues to decline:
forecasting a continuation in the current down-trend. A
continued decline in the VIX would be supportive of a rally
in the stock-market.

** Gold
Gold's price chart is similar to oil's. Both are breaking out
to record-levels. However, their COT charts are very much
different. While in crude, commercials have shown very
little willingness to sell, for gold on the other hand, net-
commercial position dropped to levels not seen since
2005. So the COT chart is bearish and the price chart
is bullish. In this scenario we respect the uptrend 100%
but look out for any breakdowns. Currently gold looks
like it is resuming its bullish uptrend after breaking out of a
bull-flag pattern. I would be cautious if gold closed below
746, and become short-term bearish if we broke below the
bull-flag's support line at 730.

** US Dollar
The USD continues to sell-off. The trend remains down so
this development is to some extent 'expected'. What I find
even more bearish is the fact that net-commercial position
did not rise to a new high. Maybe it will next week, or maybe
it won't. For the time being, commercials are not viewing the
current levels on the US dollar as 'bargain' prices. Overall, the
USD continues to paint a bearish picture.

Oh! I forgot to mention that there was (still is) a hole on the VIX index. For long term Swimmer followers, you know what I mean, the hole will be filled. The hole was caused by market rebounce and a sudden drop of fear!

But Swimmer believe there might be some selling off next week. Have you notice that last week was the end of quarter, a lot of hedge fund managers have a tendency to buy stocks and make market go higher in order to get their "fat" bonus. Hedge funds not only charge for managing fee, but also receive "performance" incentives, sometimes as high as 20%. But in order to get the latter, they have to reach certain "water mark". This is the reason for "window dressing".

Do you need any short candidates? Let me do a poll:

What kind of recommendations you want for this week?
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Short
Predeep
Contrarian
Warren Buffett
China


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China Syndrome 3

A wave of sub-prime mortgage crisis hit the financial market hard last month. The rising interest rates and looming recession reduced demand for new homes even worse than Wall Street analysts expected in August, recent government data indicated.

According to Bloomberg, the decline in housing market could cause 1.5 million families to lose their home this year. It also may lead to 100,000 people working in the housing industry to lose their jobs and many mortgage companies to close their doors. The list goes on and on ……

However, after hitting the bottom on August 16th and a surprise Fed rate cut announcement earlier this month, the stock market roars up and both Dow and NASDAQ indexes are getting close to the all time high again. So many of you would like to ask why? Many of the talking heads in the media can cite a number of reasons, but the smartest investing gurus would tell you that it’s because we are benefiting from a strong Global Economy.

US economy is probably slowing down but there is no sign of recession, but the world economy is at its best shape than ever. The US may be the locomotive of the world economy before, but in the new century the fastest growing BRIC countries (I don’t know who coined this term – please check with the dictionary on the left – it refers to the world largest developing countries: Brazil, Russia, India and China) are the economic hot zone in the new global economy environment. In the hot zone, the economy is growing fast, people in those regions are catching up with the way of our living in the US. Especially in China, the “de facto” manufacturer of the world, with the world largest population of 1.4 billion, its economy is growing at about 10% rate for the last 10 to 15 years. With the current pace, it will replace the US, emerging as the biggest economy on earth in the next 25 years.

China will host the Olympic Games in 2008, a lot of construction going on. Chinese stock market, ironically had 10 years of bear market from 1995 to 2005. However, after bottomed out in early 2006, it doubled, quadrupled in 2006 and 2007. Real estate value soared in Shanghai and Beijing. Many people believed that Chinese stock market was over ran, that’s why it crashed in late Feb. to early March. But that’s when Shanghai SSE Composite index was 3,000, now it’s in 5,500. So you do the math. But that’s for A-shares, A-shares are not tradable to foreigners for various reasons. In order to catch the moving train, the only way for you and me to invest in China is to buy the Chinese stocks listed in NYSE and NASD, which they call the N-shares. Like I said, although the Chinese index moved from – oh I have to check – maybe from 1,000 low in Dec. 2005 (see earlier posts China Syndrome published on September 13, 2007, where I plotted out SSE Composite index, the symbol is 000001.SS) to 5,500 now, but the N-shares have not moved that much. A few well known ones, like LFC, BIDU, moved a lot, but the big oil companies like PTR did not until I recommended.

Overall, the Chinese stocks are on fire. I don’t know how long they will last, but for now, buy-on-dip seems to be the right thing to do.

Recent Performance

Enjoy,

Swimmer