Smart Investing/Trading for the week ending May 9 2008

US Markets Update and Outlook

Stocks head for troubled waters as oil surges

Consumer-price index, retail sales on tap as oil trades at $126 a barrel

MarketWatch- With the first-quarter earnings season almost past, investors will continue to face mounting concerns about consumption and the U.S. economy next week, with retail sales and consumer-price data likely to reflect the impact of surging energy and food prices. Crude for June delivery rose as high as $126.25 a barrel on the New York Mercantile Exchange Friday, before closing at $125.96, up $2.27 on the session. Highlighting the woes of a weak U.S. economy and surging prices, retailers reported April sales over the past week, with mostly discounters such as Wal-Mart Stores inc. and Costco Wholesale Corp. coming out ahead as shoppers loaded up on necessities. Another victim of surging crude prices, FedEx Corp. often a barometer of economic activity, warned Friday after the close that its earnings would come short of expectations.

The Dow Jones Industrial Average fell 120 points, or 0.9%, on Friday, hit by resurging woes from the financial sector, as American International Group Inc. posted a staggering loss. For the week, the Dow lost more than 300 points, or 2.4%. The S&P 500 Index fell 9.4 points to 1,388 on Friday, for a weekly loss of 1.8%. The Nasdaq Composite Index dropped 5 points to 2,445 Friday and lost 1.3% over the week. Oil prices, along with forecasts of a continuing surge in the price of grain and other soft commodities, didn't help. "Headline inflation is poised to pop further," according to Doug Porter, economist at BMO Capital Markets. "Globally soaring energy prices could put further upward pressure on food costs, aggravating an already dire set of circumstances. "Global growth may take a hit, with the United States, Europe and Japan particularly at risk," he wrote in a note. That might spell bad news for multinationals' overseas sales, one of the last bastion of hopes for corporate earnings.

With 422 of the S&P 500's companies having reported so far, earnings are expected to have fallen 17.4% from the year ago, according to Thomson Financial. Most of the problems lie with the ailing financial sector, where results remain crushed by write-downs linked to bad home loans. "This season was a tale of two earnings: which came from overseas and which came from the financial sector and the U.S.," Hinsdale's Nolte said.

Consumers and oil

Consumers and inflation also will remain in the spotlight. On Tuesday, the Commerce Department will release April retail-sales numbers and import-prices data. Wednesday will bring the April consumer-price index, along with weekly data on petroleum inventories. "The CPI will be very important," said Sam Stovall, market strategist at Standard & Poor's. "That's what everyone is focusing on. If we get higher than expected numbers, it could be that it's the '70s all over again -- stagnant growth together with surging inflation.

KLSE CI Technical Update and Outlook

ICap on KLSE Daily Index. The Index looks like turning sideways on consolidation, after recovering sharply on surging CPO price and also the brighter outlook for the US economy with the lowered federal fund rates. The daily MACD is struggling to stay bullish, which indicates a weakening of the bullish momentum. On top of this, the weekly indicators still remain in bearish territory. However, no sharp correction is seen as its long-term uptrend of the KLSE CI is still intact.

* Happy Mother's Day to all mommies! Thanks for all your sacrifices, encouragement and extraordinary effort to make us a better person today.

* China's April CPI is expected to be released tomorrow. It is widely expected that the data coming in would be a rise of 8.1% due to reduction in agriculture prices. This data if correct would marked the second month in a row CPI has dropped since February's high. (so far the CPI data are as follow: January 7.1%, February 8.7% and March 8.3%). Would this encourage money to flow back to the stock exchange since it could marked the change in monetary policy in China soon?