Smart Investing/Trading for the week ending August 8 2008

US Markets Update and Outlook

Stocks look to build on oil, dollar-induced gains

Dollar surge, oil slide could provide needed fuel for August rally

Marketwatch: Stocks will attempt next week to build on strong gains, with an eye on economic, inflation and retail sales data that might further boost the dollar and pressure oil and commodities.The past week saw "a virtuous cycle playing out, with the dollar rally and oil sliding," said Alec Young, equity market strategist at Standard & Poor's. "We can tack on more gains next week, especially if we get good news on the economic front." Of particular interest will be the U.S. retail sales figures for July and weekly crude oil inventories data due out Wednesday. On Thursday, investors will key in on consumer price figures from both the U.S. and the eurozone. On Thursday, retailer Wal-Mart Stores is scheduled to report earnings. Stocks rallied Friday with the Dow Jones Industrial Average gaining 302 points to 11,734. The S&P 500 index rose 30 points to 1,296, while the Nasdaq Composite added 58 points to 2,414. For the week, the Dow added 3.6%, the S&P 500 rose 2.9%, while the Nasdaq gained 4.5%.

Slowing global growth = a dollar rally, sliding oil

In a delayed reaction to the credit crisis and the weakening U.S. economy, signs of slowing global growth, from Japan to Europe, have accumulated recently. While the dollar had taken the brunt of the pain since the credit crisis started just about a year ago, the U.S. currency has already begun to shown timid signs of stabilizing and even firming. The euro, however, had continued to advance amid expectations that the European Central Bank might further hike interest rates to contain inflation. Over the past week, however, currency markets had their chance to adjust after the ECB left interest rates unchanged Thursday and signs that Italy might be near recession. The euro plunged and the dollar rallied sharply, fueling expectations that the U.S. currency might be on the rebound for good this time.

Another bear-market rally?

A rallying dollar and sliding crude oil could almost make investors forget the year-long credit crisis, the U.S. housing slump and concerns that the economy might be in or near recession. But some strategists believe that the feel-good factor, along with temporary regulations to protect the battered stocks of key financial firms, might be enough to propel the market higher through August.

Weekly KLSE CI Technical Update and Outlook

I Capital on Demand Index. This powerful technical indicator has formed a bullish divergence with the KLCI. The last time this happened was in the bearish days of 1998 and during the depths of the SARS crisis in 2003. As we all know, the KLCI staged powerful rallies after the Demand Index became bullishly divergent in those 2 times. With the global stock market bottoming out, I Capital believes there is a good chance the KLCI will perform the same again this time.


* Still the same after 50 years of independence. On Bar Council's forum "Conversion To Islam" generated very Racist remarks.....sigh!

* Alliance Research- KLSE market capitalisation is almost 1.7X of GDP against the average of 1.54X, indicating the stock market is expanding faster than GDP. Also, based on current money supply M1/M3, it can support the market at 1,100 points.