A relieved rally - Fed action seems to work?

STI closed at 3171 today. This week continue to be a relieve rally week. After hitting the lowest point two weeks ago, market rebounded. Stocks that were unloved and unwanted, are back in favourite now.

Look at share price of Synear as follow. You would have made 38.7% of profit.
25 Mar 0.49
03 Apr 0.68

Ben Bernanke hinted the worst could be over, there is unlikely a second Bear Sterns. Is the worst really over? We can ask two questions.

1. Would there be further write down or huge losses?
No one is sure actually. We are entering Q1 reporting season and shall know shortly. I suspect the write down would even stretch to Q2

2. Economy is going to be good after next 6 months?
The outlook is still uncertain. As stock market is the forecasting machine, unless the outlook is bright, we are not able to see a big rally. Because there is really no reason to be optimistic.

The steep fall of share price should be contributed by temporary drying up of liquidity across the globe. Fund redemption and losses in developed market cause the fund manager to pull out from Asia market. As the survey has shown, fund manager has increased the cash holding. They are unlikely to return so fast and retail investor else where need sometime to cool down before putting fresh money back into equity.

So, now is time to be pessimistic and defensive? I think not. The only way to make big money is to buy when no one else wants to buy. When you bought it dirt cheap, your risk is limited but upside is huge. This is on the basis of buying strong and growing company that would ride through this storm. I am hoping it would drop again, so that I can start buying cheaply. I am planning to purchase slowly when the stock suffer significant drop.