Sunday, May 1, 2005

Weekly commentary

Last week we continued to be in a mini bear market. I continue to think cash or small short position should serve us well right now.

On the other hand, at end of the week I did see some early and tentative signs of a market bottom. Russell 2000 index and S&P 500 index both gave me very short term buy signals. That means early this week we might see some rally, which cooperates the continuing weak crude oil price. Falling price of oil would be the fuel for a major rally from here. Crude oil futures closed below $50 a barrel on Friday, for the first time in over two months. The price of oil on the commodity futures exchange fell a whopping 10% last week. Why? We learned last week that the U.S. supply of crude oil has reached its highest level since mid-2002.

In summary, there are early signs of a possible market bottom, but they are at this point highly tentative and suspect. I'm staying bearish for now, favoring cash. I am not saying that I will not play longs, just saying I will long less shares, less time, and i will not expect as much profit as a in a bull market.

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