Daily US Market Comments 29 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets closed marginally lower yesterday even though investors were treated to a barrage of positive news releases. With consumer confidence and Chicago PMI checking in stronger than before, investors in the Inflation Fear camp started to worry that the Fed will not be cutting interest rates anytime soon. Volume in the markets continue to be very thin as most investors choose to sit on the sidelines, enjoy the holidays, before coming back next year to see if there is any change in market sentiments.

TECHNICALS
Markets continued to move sideways yesterday on a very thinly traded market. The NASDAQ composite continues to display more bearishness as the QQQQ continues to lead the composite index to downside. When the NASDAQ composite rose 0.73% the day before, QQQQ rose a mere 0.51% but when the NASDAQ composite fell 0.23% yesterday, QQQQ fell by 0.48%. The QQQQ is a good sentiment indicator of the NASDAQ composite because it is traded by more small and medium investors that formed the majority of the pool of investors. The resultant move in the QQQQ can therefore be interpreted as the collective sentiment of small and medium investors toward the NASDAQ composite. Investors should cover shorts on technical stocks by now.


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Daily US Market Comments 27 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets staged a mini rally yesterday as oil prices ditched more than $1 in one day on dropping demand due to the warm winter. Oil dropped a huge 2.1% in one day, injecting optimism in the hearts of traders in the Inflation Fear camp. Oil price plays a big part in determining the capital cost of industries. With a higher cost of capital comes higher production prices and consequently, higher retail prices. (not to mention a higher cost of living with every gallon of gas you pump into your car) Oil price is therefore a significant factor contributing to inflation. The Energy sector surprisingly stood resiliently against the drop in oil price this time round, allowing the markets to rise successfully. All that being said, trading volume has been light whole day and that gave little credibility to the rally. Will Santa Claus come back this time round?

TECHNICALS
The Dow closed significantly higher yesterday recovering much of the loss last week, thereby closing it sideways. This close has helped the Dow complete yet another step in the staircase formation and looked good to go up further. The NASDAQ Composite, however, closed a small inside day with a slighly lower low, failing to erase the previous bearish inclination. There are a few common ways such a formation can develop into; 1. This is a bullish harami candlestick formation which is a bullish reversal signal. If it follows up with another higher close today, the formation will be completed and more upside can be expected. 2. This is an inside day which usually paves the way for a bearish trend to go down further. No stocks move straight up or down. In between the big moves, we usually see these small candlesticks going in the opposite direction indicating some bargain hunting against the trend. 3. This is the beginning of a staircase formation going downwards. Again, no stocks go straight up or down. In between the big moves, sometimes we get small consolidations made up of a series of 3 to 5 small candlesticks. This is similar to the upwards staircase that the Dow has been forming so far. 4. This is the beginning of a sideways trend. So, what is it going to be? It is up to the markets to decide. As a trader, your task is to decide how to handle each and every of these possible scenarios.


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Daily US Market Comments 26 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Today marks the start of the traditional "Santa Claus Rally". There is a better than 2 to 1 chance over the last 50 years that the Dow rise on Christmas week. This is usually led by the retail sector as post-christmas sales take center stage. This year, will Santa Claus beat recessionary fears? One census showed that only about 24% of investors are confident of a Santa Claus Rally this year. With bonds at skyhigh levels and a ton of weak economic news, a recession does seem to be just round the corner. Let's see if the ton of new releases this week can create a change in sentiments. In my opinion, investors are once again divided into 2 camps... the Inflation Fear camp and the Recession Fear camp. Traders in the Inflation fear camp interprets all strong economic numbers as inflationary pressure while traders in the Recession fear camp will interpret the same numbers as an economy that is still growing and alive. Until the market sentiments flow in one direction, markets might be moved in the direction of the stronger camp.


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Daily US Market Comments 23 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
The traditional Pre-Christmas weakness hit the markets yesterday as markets take a dip. Concerns over a slowing US economy is starting to overshadow the concerns over inflation. As we have explained yesterday, the problems facing the US economy is a very complex one. Layers of potential concern overlap each other so tightly that with the removal of one area of concern, another immediately surfaces. A strong economy is still the primary mover for the markets at the end of the day. Oil price continue to move lower yesterday with lower demands on heating oil this warm winter. Notice that recently, drops in oil price no longer serve as a booster for the equity markets. This may mean that a $60 - $65 oil price is a reasonable one, one that do not put further capital pressure on industries. Hence, from this level, any further drop will only serve to bring down the energy sector and therefore put pressure on the overall market. Well, with the end of 2006 just days away, I suddenly remembered predictions made by high-salaried "analysts", claiming that oil prices will hit over $90 by the end of 2006... well, are they still worth their salary or their place on TV?


TECHNICALS
The Dow begun yet another step in its staircase formation yesterday. It should be safe as long as it's 30SMA is not broken. Looking at NASDAQ, the composite index moved lower as expected, its short term bear trend developing steadily and without surprise. If we see a break below the 2400 level, we could see a testing of the 2350 level soon. Looking at the QQQQ, it seems to have moved slightly ahead of the NASDAQ composite index by breaking its 50SMA and breaking the $43 level. The QQQQs have traditionally moved slightly ahead of the NASDAQ composite index and serves as a kind of leading indicator of investor sentiments on the composite index. So, I would be more inclined to stick with the bearish trend and cover my shorts by now, so should you.

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Daily US Market Comments 22 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets took a turn to downside yesterday on concerns over a slowing economy and the energy sector turning down along with falling oil prices. The problems in the US economy is not a simple one and one that will eventually show up in the stock markets. With very little positive developments in the economy and mounting pressure from a rising China, US is quickly losing its global competitiveness. This showed up as a 5.8 points decline in the business index for December at a negative 4.3 versus a positive 5.1 in November. With a national debt that is 4 times national GDP, there is no way debts can be repaid with the baby boomers retiring from 2008 onwards. Like a person deep in debt and forced to repay very soon, this giant's financial picture is not an optimistic one.

TECHNICALS
Sadly, the "Black & White Brothers" failed to lift the NASDAQ Composite index. Ending the day in a 0.48% drop, all trend indicators are pointing to a short term bearish trend for the first time since the same indications showed up on 10 July 2006. We saw the same example of such a behavior in the indicators on 11 May 2006. The Dow is displaying a completely different sentiment, however, as it continues to form yet another plateau of its staircase formation with no indications of coming to a halt. Eventhough all major indices tend to move in the same direction under the same market undercurrent, there are times when they are different. On such time is the tech crash of 2000 - 2001. By 2002, however, the Dow yielded to the falling tech sector and fell in tandem for a year. Oil prices have lasped back into range trading within its neutral channel of $60 - $63 once again. Looks like it is going to stay neutral for a while here.


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Daily US Market Comments 21 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
The Dow closed down marginally on profit taking and FEDEX's $2.15 drop. With almost no more news release or economic news, markets remain lacklustre. The Energy sector also failed to follow up on its rebound as Crude oil fell from its 3 weeks high to close at $63.19. A warmer winter is expected to cut demand for heating oil thereby relieving the pressure on oil inventory. At this point of time, many analysts are quick to agree that this is no longer a fundamental driven market.

TECHNICALS
Markets continued to move sideways yesterday as the Dow continues a series of doji like candles and the NASDAQ Composite forming a doji with a higher high and a higher low. The candlestick formation we see on NASDAQ today is very interesting. Even though it dropped 0.08% yesterday, it formed a formation I call the "Black & White Brothers". It is a formation consisting of 2 candles (one open candle and the other a close candle) with relatively small candle bodies, lined up horizontally side by side. There are many names given to this kind of formation addressing the specific arrangement of these 2 candles, but the effects to be expected are the same. That is why I gave it a different name, encompassing all the variants. It doesn't matter which candle comes first; The black candle can come before the white candle or the white candle before the black candle. This formation occurs commonly after a big down or a big up day and usually signals a reversal. We saw a similar formation in BBBY on 3 Nov 2006, lifting BBBY up by more than $2 after a $1.01 drop on 1 Nov. With the Black & White Brothers knocking in after NASDAQ's 0.88% ditch 3 days ago, it may signal a rebound back up into its neutral channel. This is a very fast formation. If it should be accurate, we should see the action by today.


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Daily US Market Comments 20 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets closed mixed after spending most of the day deep under water. The early drop in oil prices caused an immediate ditching reaction in the sensitive energy sector bringing the markets down hard. However, as oil prices recovered later in the day to close up by another 1.5%, the energy sector rebounded, lifting the Dow to close up 0.24% for the day. It sure looks like crude oil price, whose ditch supported the recent rally, needs to remain strong in order to boost the energy sector and consequently, the market. PPI numbers will rise with rising oil prices and that could give rise to renewed inflationary fears. Crude oil closed $63.15 per barrel with Exxon Mobil up another 2.1% to close at $77.06. From the recent market actions, it now seems like the only sector left that could still move is the energy sector. The rest of the market seems almost powerless to give lift to the markets. However, if the energy sector continues to rise on rising oil price, the rest of the markets will very soon come to yield under rising inflationary pressure. Unless the markets see some new strength and reason for optimism across the board very soon, there could only be one direction left for it soon.

TECHNICALS
Markets closed sideways yesterday after a scary opening. NASDAQ is the focus of attention here today. NASDAQ has rallied on its 30 SMA steadily since August. Yesterday, the NASDAQ composite index broke below its 30 SMA line and its rising trendline for the first time since August. This is a trendline break on above average volume.... meaning, bad news. NASDAQ seemed to have missed out on the strength in the Dow so far and with the Dow also slowing down, the NASDAQ composite could win this tug of war to downside along with major indices soon. All short term trend indicators are showing a bearish trend developing on NASDAQ for the first time since the rally begun in August. The only consolation is that it managed to close somewhat at the 30SMA line by the end of the day. Today will be a critical day, if NASDAQ get back up today, it could negate yesterday's action as a false ditch. If NASDAQ continues lower today, I will have to announce that we are at the beginning of the Bear trend for the NASDAQ composite index.


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Daily US Market Comments 19 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets suffered the first setback in 4 days as crude oil prices plummetted by more than a dollar within a day. The already weak and sensitive energy sector brought NASDAQ down by 0.88% as the Dow followed it down by a marginal 0.03%. Crude oil sent shares of Dow component ExxonMobil down $1.79, or 2.3 percent, to $75.51. Rival Chevron Corp. shed $2.05, or 2.7 percent, to $73.33. British Petroleum PLC declined $1.13 to $66.75. Other giants affected by the year end sell off are Google and Yahoo, both dropping by 3.65% and 2.23% respectively. All eyes continue to be on crude oil action with the complete lack of any major release anytime soon. It will certainly be of benefit to the market in the mid term should oil price remain constant within a $60 - $63 range.

TECHNICALS
A sideways day at the markets yesterday despite great drops in NASDAQ. The Dow closed a completely neutral day while NASDAQ fell back down into its sideways movement. NASDAQ has remained neutral since 27 Nov and still do not look like it's mustering the strength needed to go further up. Unlike the Dow, NASDAQ has failed to complete its staircase formation and is now forming a flat top neutral trend. Such a neutral trend usually spells the end for a rally as it needs to make a new decision soon whether to go up or down or simply stay sideways like it did during the first 5 months of the year. The Dow continues to look strong and if it continues its bullishness, it can also help NASDAQ break to upside. Oil slipped back down into its neutral $60 - $63 channel yesterday surprisingly. Let's see if it follows up today.

Daily US Market Comments 18 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets gained last Friday on favorable November CPI numbers. The CPI numbers continued to point towards a controlled inflation as both total and core CPI remains unchanged. The bullishness didn't last throughout the trading day as a sudden surge in oil price put renewed pressure on the markets and brought the markets back down to closing near the day's low. The ISM national survey of manufacturing conditions also ditched below 50 for the first time since 2003, showing a contraction in the manufacturing sector. Even though it does put pressure on the manufacturing sector, we all know that manufacturing cannot always be on the top of the list for a matured economy. I will be watching oil price very closely now as it is showing sure signs of recovery with the surge last Friday. The market's bullishness so far will certainly end if oil should rally from here.

TECHNICALS
The Dow has regained it's uptrend condition last Friday since it laspe into a short term neutral trend towards the end of November. NASDAQ continued to struggle with a neutral trend as it continues to go sideways. Well, this is an interesting juncture here as all major indices eventually affect each other. If one rallies strongly, it will lift the other indices too and if one ditches strongly, it will pull the others down too. So, we will have to see if NASDAQ follows the Dow back into an uptrend soon or have the Dow laspe back into a neutral trend along with it. Oil remains the focus of concern here as it breaks the $63 psychological resistance level last Friday to close at $63.40. Even though right now oil prices have retreated back down a little in asian trading, it is still holding well above $63. Short term stochastics on USO is showing a recovery from the oversold position indicating strong possibility of more upside to come. As we can see, the rally so far has been the result of an inverse movement against oil prices. If oil should take a turn around, the possibility will be high that the markets will also be affected.


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Daily US Market Comments 15 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets rallied yesterday led by the energy sector. The energy sector rose 1.81% overall with OPEC's decision to cut production by another 500K barrels per day starting on 1 Feb. This has led oil to break above the $63 for the first time since November. If oil prices continue to move up due to a drop in production, that can spell higher capital cost for industries and put some pressure on earnings.

TECHNICALS
Surprisingly, the Dow found enough energy to break the 12340 resistance level yesterday as it ended up 0.81% for the day to close at 12416.76! This is an extremely important move as it completes the staircase formation that the Dow has been stepping up on since August and spell more upside for the market. All we need to see is some significant follow up today to seal in the deal.


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Daily US Market Comments 14 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Oil took a boost yesterday as oil inventories dropped for a 3rd straight week which resulted in a marginal gain in stocks. OPEC will be meeting today again to discuss if further production cuts are necessary. Their decision will have a definite effect on the lukewarm oil price and the US economy at large. Analysts speculate that OPEC will not agree on further production cut this time round given that the effects of the last production cut has already held oil prices up from further drops. For me, I would say, "You'll never know".

TECHNICALS
Markets continued sideways exactly the same way it did for the whole of the week. It is obvious by now that major indices are up against their respective resistance levels and if they do not make a definite break to upside soon, we could really see a correction. This is the first time we are witnessing such a strong resistance level and weakness in the market since the rally begun. The only consolation is the all trendlines remain intact.



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Daily US Market Comments 13 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
The Feds left a trail of disappointed traders yesterday as there were no indications as to when a rate cut might take place. Markets ended flat on mixed sentiments as to the sustainability of the current rally. With no real indications of a rate cut coming up, there is therefore no real cause for optimism.

TECHNICALS
Markets continued to move sideways on rising volume yesterday. This is a stalemate situation where more participation did not result in a significant change in direction. Major indices are once again near their respective trendlines, especially NASDAQ, and would have to muster the strength to bounce from this level in order to sustain the rally. Failing which, we could see a correction, testing the 50SMAs. All momentum indicators are showing definite signs of fatigue to this rally and is commonly a point from which the markets turn around to the opposite direction. We saw a similar example in the August 2004 rally where a complete turnaround to downside occurred in December 2004 with similar signs of lose of momentum. Let's get ready to cover longs.


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Daily US Market Comments 12 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets rose slightly yesterday in range bound trading yesterday. Volume was also significantly lower than the 15 days average. Traders are sitting on the sidelines yesterday while waiting for the Fed release today. Although it is almost 100% sure that it is going to be an interest rate pause with a dovish promise to lower interest rates in the future, it is still customary for investors to feel edgey about it. Institutes will also be covering their positions for the year this month and will probably do it some time after the Fed release. Such a move will definitely give a definite tone to the market.

TECHNICALS
Markets continued sideways yesterday with no surprises. The Dow remains overbought throughout this consolidation, which is very different from its previous behavior. However, being overbought does not necessarily mean there are no further upside to come. Trendlines and support levels remain intact, showing no signs of a correction in the making...yet. Oil continued to correct as it fall down another step to $61.20. That drop also took it out of the short term overbought condition made by the end of November rally while still maintaining a strong support level at $61. This may give it a reason to go up sometime in the near future.



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Daily US Market Comments 11 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Hourly earnings rose just 0.2%, which is 0.1% short of expectation. That proved that the Feds are right on track and that we can expect no further rate increase when the Feds meet this coming Tuesday. That gave the market a very slight boost as it gained marginally last Friday. With the Fed meeting just round the corner, market action is expected to be slow until then. We all know by now that the Feds are looking to cut rates by March 2007... will it happen during this meeting?

TECHNICALS
Markets continue to move sideways with no surprises. It is really going to take a lot of strength to break the 12340 resistance level. Oil price seems to also be failing at its resistance level of $63. Oil gained strongly last Friday with an intraday high of about $62.70, looking strong to challenge the $63 level but failed by the end of the day and now, it is trading at a mere $61.70. Looks like it is going to take more action from OPEC and some significant impact on oil inventory numbers before it can work its way up beyond $63.



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Daily US Market Comments 08 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets fell yesterday as investors eagerly await the coming job reports. The tech sector fell the most as NASDAQ fell to a 3 days low. The rebound in oil price to $62.78 also put additional pressure on a market that has seen historical highs. What the market needs right now is a good dose of strong data in order to fuel further advances. A favorable job report would certainly be the first thing the market would like to see as that is what the Feds will be paying a lot of attention to right now.

TECHNICALS
Markets continue its path sideways as it closed down for the day. The major indices have been moving in a horizontal line for the past half a month and that is not typical of the staircase formation. The staircase formation should take them to new highs before going sideways. This behavior tells me that the markets are up against their first real resistance level since the raly begun. The Dow seemed stuck against the 12315 level and the NASDAQ composite looks up against a wall of metal at the 2450 level. These levels have been tested and failed twice over the last 2 weeks forming a strong technical resistance level. Even though the major indices are off their short term overbought condition, they remain severely overbought on a long term scale. If we do not see a clear break to upside soon, this market may continue to go neutral and then into a correction.


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Daily US Market Comments 7 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
A lack of any real market moving data and a sideways moving oil resulted in a market with decreasing level of participation, closing marginally lower yesterday.

TECHNICALS
A lacklustre day at the markets yesterday as major indices closed sideways again. Major indices still look good to complete its staircase formation and all trendlines remain intact.




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Daily US Market Comments 06 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
While there are no economic data of significant impact, markets rose marginally on data that were of lesser significance like the ISM index and a slowing in labor cost. Oil remained stagnant yesterday too. All in all, a day ending in kind of a draw.

TECHNICALS
Markets followed up on its rise yesterday completing the staircase formation that it has been forming so far. This could mean new highs to come soon especially when stochastics of major indices are rebounding from a short term oversold position. Oil remained sideways and could do all of us good by staying sideways. The $63 level proved to be a very strong resistance level. Failing which, we could see oil sink back down to test the $61 region once again.


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Daily US Market Comments 5 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Stocks staged a small rally yesterday with oil price falling by almost a dollar. OPEC is about to convene another meeting in order to discuss the cutting of yet another more than a million barrel per day, giving a strong dose of optimism to oil and crude traders. Of course, the more optimistic the oil traders are, the more pessimistic the equity traders become. Oil also benefits from a drastically falling US Dollar. The lower the dollar, the more oil will cost per dollar henceforth. All the factors seems in place for a rebound in oil price.

TECHNICALS
Markets continue to move sideways yesterday with no significant break to upside. The continuation of the staircase formation will depend largely on how the markets behave today. If we see a significant break to upside, the staircase is complete and the market continues togo up. If not, the markets will continue to move sideways in consolidation until another testing of the 30MA. Oil seems to be up against a short term resistance level of about $63. It should consolidate at this level for a while before deciding to break upwards or correct back down. There are plenty of room to upside for oil and an extremely strong support level from where it bounced, so I am personally bullish on oil.


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Daily US Market Comments 4 Dec 2006 by MastersoEquity.com

FUNDAMENTALS
Markets closed lower last Friday amidst the effects of unfavorable economic data on Thursday. The good news is that Fed fund futures are pricing in a 100% chance of a rate cut by next March and that could form a little bullish undercurrent. Oil price continue to trade higher as it breaks above $63 last Friday. Even though this surge in oil price has given a good boost to the energy sector, a sustained rally could hurt business fundamentals and therefore the stock markets.

TECHNICALS
Markets closed sideways last Friday as it laspe into another consolidation much like the kind we saw in October. Oil continue to follow up strongly on its rally to break above $63 and that could be a very dangerous sign as the market rally so far has been inversely proportionate to the drop in oil price. We see the crude oil ETF, USO, display a shift in short term trend to an uptrend on ADX for the first time since late June. In my opinion, if oil continue to move strongly, we might see the major indices break the 30MA and test the 50MA.



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