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.
Systematic Option Trading!
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.
Systematic Option Trading!
Labels: fundamental analysis, investment, share market, stock market, stocks, technical analysis
posted by Jason Ng at 6:18 PM
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