Market commentary

 Last week the market staged a nice rally and it briefly poked
above the 100-day moving average--remarkably finding the silver lining in every
dismal economic report.

The Fed, Treasury, FASB and SEC have all been busy in the last month. Traders do not
want to go home short because they don't know what news might change the landscape
when they turn on their computers Monday morning. They didn't go home short today
and this rally lasted right into the close.

The Fed has lowered the Fed Funds Rate to zero and it plans to keep interest rates
low even if it means buying US Treasuries. The Treasury Department has been busy
with bailouts and stimulus plans of all sorts. Recently, they devised a plan to
purchase toxic assets from banks to free up capital. FASB relaxed mark to market
regulations and that instantly improved bank balance sheets. This week the SEC
reinstated the uptick rule and is considering other short-selling circuit breakers.

From the 12-year lows made a month ago, the market has rebounded sharply. In today's
chart you can see that it is above horizontal support and it has moved above the
100-day moving average. A new relative high has been established and each of the
pullbacks has been very short-lived. Bears are running for cover and a major short
squeeze is underway.

This rally will likely continue next week. Today, Wells Fargo surprised the everyone
by pre-announcing excellent earnings. The company estimated a $3 billion profit
during the first quarter of this year and it expects EPS of $.55. Next week, we will
hear from the strongest of financial stocks. Goldman Sachs, J.P. Morgan and General
Electric will release earnings. Goldman Sachs has a history of surprising to the
upside. J.P. Morgan has weathered the financial crisis better than any of the other
major banks. GE stated two weeks ago that if the Fed's 2009 economic forecast holds
true, GE Capital will make money this year. Any sustained rally must start with the
financial stocks.

The spread between borrowing and lending rates has never been better and banks
should be making money hand over fist. Before we get too excited, it's important to
remember that massive write-downs lie ahead. It will take many years of
profitability to overcome the toxic assets they have created. Nevertheless, signs of
improvement are showing up and they are critical to the economy. Businesses might
finally regain much needed lines of credit.

Today's rally should continue right into the closing bell. This is clearly good news
and shorts are covering. The market is near a one-month high and option expiration
buy programs will add a bullish bias to the market next week. Bears don't dare to
short financial stocks ahead of earnings releases after Wells Fargo's announcement
today. If the momentum establishes itself early next week, I believe we could rally
up to SPY 92.

We will also hear from Intel, Google and Johnson & Johnson next week. Dismal
earnings are already factored into Intel's number and if anything, we could see a
rally in the stock on positive guidance. Google has been able to post good numbers
and we expect the same next week. Johnson & Johnson has been profitable, but shares
have been beaten down on concerns that healthcare reform will impact future income.
The actual release should be positive for the stock.

Next week is littered with economic releases. We don't want to downplay them, but
the market has been able to rally in the face of dire news. This morning, initial
jobless claims dropped 20,000 from last week's number. The unemployment rate
continues to climb and 5.83 million Americans continue to draw unemployment
benefits. This is the highest number ever. The market shrugged off weak durable
goods orders, a decline in GDP and a horrible Unemployment Report. There's no reason
to think that CPI, PPI, the Beige Book or the Philly Fed will be able to suppress
this rally next week.

This morning, retail sales also added fuel to the rally which is surprising because
there isn't much to cheer about. Many stores beat lowered estimates but the results
are still very weak.

This rally has legs and retail, restaurant and commodity stocks all look good.
However remember that this is a bear market rally and that you need to temper your
optimism. Our government is $11 trillion in debt and it has not started financing
the trillions of dollars it needs for the proposed bailouts and stimulus plans. The
unemployment rate continues to surge and we are not out of the woods. Trade this
rally, but be cautious and take profits!

To your success
Andy Huang