Stocks Rallied On Optimistic Fed Statement... As Expected.

FUNDAMENTAL ANALYSIS
Interest Rates remained unchanged (as expected) yesterday as the Feds paused rates for a fifth straight time. Even though this has been largely expected, markets still rallied right from the moment the Feds released their extremely optimistic statement underlying a "moderate growth" in the economy and the success of a "soft landing". It is probably this optimism that resulted in the surge yesterday. Investors live in fear of rate hikes and such a statement clearly eases such fears. Oil continued to climb yesterday as it posted a largest 2 days combined gain in 6 months. Clearly the bullishness has returned in oil price as oil lingered around the $58 level. So far, an optimistic Fed statement has been all it takes to ensure that the markets resume its bullishness... only one question remains, what will happen after the ecstasy is over and oil prices continue to climb to new highs?

TECHNICALS ANALYSIS
Even though yesterday's market actions were surprising to many market analysts, it is hardly surprising for technical analysts. In fact, everything that happened yesterday were largely expected and explained in my post yesterday. The Dow surged 0.79% to form yet another step in its staircase formation as expected and the Nasdaq composite rebounded off its 50 days moving average support level on a "Black & White Brothers" candlestick formation... again, largely as expected. Even though not much of a surprise in the Dow front, the Nasdaq composite still needs a good follow up today and get above the 2570 level to seal in a change in sentiments. For 3 days have the Nasdaq composite failed to break the 2570 level and breaking that level would certain boost the confidence of technical analysts everywhere. Overall, all technical indicators are showing a rising in upside momentum and a reversal from a short term oversold condition. Along with the rebound from critical support levels and a healthy chart pattern, I would say the bulls are back... at least for now, until we meet the next matador. :)




.

Stocks Show Bullishness Ahead of FOMC Release! Oil Price Up!

FUNDAMENTAL ANALYSIS
Markets were up marginally yesterday as investors show slight signs of bullishness ahead of the FOMC release today along with a 5% spike in oil prices lifting the energy sector. The oil rally yesterday has been the combined effect of the cold weather returning and OPEC returning to talks on further production cuts. The recent drop in oil price has been the direct result of lower demands due to a warm winter. With the chill returning and lifting demand, it is certainly not strange to see oil prices getting back up to where it was before the drop early this month. Analyst continue to suggest that oil prices should stablise between $55 and $60 and frankly, that is my take on oil too as OPEC simply cannot stand watching oil prices go down below $50. Consumer confidence index released yesterday also edged up from 110.0 to 110.3, showing a marginal increase in consumer confidence in January. This is also the highest level in 5 years suggesting that consumers are driving the economy and should continue to do so in the coming months. Consumer spending makes up about two thirds of the US economy and that makes the consumer confidence index an important economic indicator. Well, so far, before the FOMC release today, everything looks rosy and pretty. The next few days will reveal the true effects of today's FOMC release.

TECHNICAL ANALYSIS
Oil price formed and completed a cup and handle formation at last. I have suggested in my post on 23 Jan 07 that oil prices might not go straight up but would form a cup and handle formation before going up and yesterday, we witnessed that coming to be. We should see a testing of the $60 psychological resistance level soon and with oil prices showing a short term overbought condition, that resistance level might be a tough one to break. Both the Dow and Nasdaq continued to trade and close sideways yesterday as everyone awaits the FOMC release and its effects. Yes, we all know what the release will most probably going to be but we cannot predict its effects. I noticed the Nasdaq composite made a small but important move yesterday and that was, its closing above its 50 days moving average at last. Yesterday, I was concerned that the 50 days moving average is subtly turning into a resistance level instead of a support level as it has traded below it for 5 of the past 6 trading days. Today it seems like it no longer the case and with short term stochastics in oversold condition and turning upwards, there is strong potential energy in the Nasdaq composite to stage a rebound. Looks like the "Black & White Brothers" formation is working this time round. The Dow still looks healthy and ordinary as before, waiting to make yet another new step in its staircase formation to a new historical high.




.

Markets Remain Stagnant as FOMC Looms Ahead!

FUNDAMENTAL ANALYSIS
Markets closed marginally up as investors sit on the only day of the week without any critical economic releases. Such is the typical behavior just days before every FOMC releases. Even though it is almost certain that interest rates are going to stay stagnant, investors are expecting the Feds to put on a hawkish stand about future interest rate movements, leaving a lot of investors on the fence, waiting to see the initial reactions to the release. Yesterday's trading volume is the lowest so far for 2007 and CBOE's equity put call ratio remained relatively stagnant. Is this the fabled calm before the storm?

TECHNICAL ANALYSIS
Markets closed sideways yesterday as both the Dow and the Nasdaq composite struggled to stage a rebound. The Dow closed sideways but traded above its 30 days moving average support level for whole of the day to close right on top of it again. This is again a healthy sign that the support level for the Dow is strong and investor sentiments remain bullish inclined. This gave the Dow a high chance of rebounding off this level to form yet another step in its staircase formation and therefore yet another historical high. This little consolidation has also helped the Dow get off its short term overbought condition, thereby giving it more headroom for growth in the short term. The Nasdaq composite is, again, slightly more shaky. Even though it has been trading sideways these 2 trading days, it has closed right below its 50 days moving average support level in a fashion which almost transforms the support level into a resistance level which is hard to break upwards from. Over the last 6 trading days, the Nasdaq composite has closed just slightly below its 50 days moving average for 5 of these days. Even though support and resistance level analysis is not a precise science and such situations are common, it still does cast a hawkish shadow. One reassurance at this point is that the Nasdaq composite is forming yet another "Black & White Brothers" candlestick formation. (Please read my post on 21 Dec 2006 for explanations... http://sharemarketcomments.blogspot.com/2006/12/daily-us-market-comments-21-dec-2006-by.html ) This is a high probability bullish formation, even though it failed to effect a rebound on 21 Dec, it still does have a large string of successes going back.

So, it seems like the week has just begun today! Traders, take your positions, and....

Yet Another Critical Week For The Nasdaq Composite!

Last week was an extremely turbulent week with the indices going up and down like rouge waves. Major indices were down for the week and the Nasdaq composite index is back down where we started last Monday. Like I said last week, it is again going to be a very critical week for the Nasdaq Composite as the index is again at a very dangerous position, a position that can decompose into a downwards, bear trend if it's 50 days moving average and the 2400 psychological support level do not hold. If that happens, it will not be long before the Dow follow suit.

This week is again going to be a stormy week for the US markets. There will be major "weather systems" formed by important economic releases such as the GDP numbers, FOMC release, oil inventories, jobless rate, chicago PMI...etc. (For a full list of the releases this week, please visit Option Trader HQ )Again, the markets will be torn apart by the inflation worries and depression worries camp. Too much good news activates the inflation worries camp and too much bad news activates the depression worries camp. Who wil reign supreme this week?





.

Roller Coaster Week! Stock Market Down For The Week!

It has been a roller coaster week in the stock markets this whole week. Starting from the severe drop on Monday (Dow -0.7%, Nasd -0.83%), to the false hope on Tuesday and Wednesday (Dow +1.16%, Nasd +1.45%)and finally the dashing of all hopes again on Thursday and Friday (Dow -1.07%, Nasd -1.25%). Overall, the Dow has lost 0.62% and the Nasdaq composite has lost 0.65% this week. Such a sideways, whipsaw market has made it extremely difficult for swing traders to take positions and has kept fundamentalists guessing all week. It was clear this whole week that news have almost no authority in predicting where the market might go in the short term at all. However, technical analysis on the markets still tell a more congruent tale. The Dow and the Nasdaq composite was bouncing atop their respective 30 days and 50 days moving average support level whole week, wearing off short term overbought sentiments and poising for a rebound. Technicals remain healthy for a rebound next week with both the Dow and Nasdaq closing with a long tail bullish harami on their support levels. However, let us not make our move before the market moves its move.




.

US Stocks Crumbles On Renewed Inflation Worries!

FUNDAMENTAL ANALYSIS
The stock market took all of us by surprise yesterday. It felt like our travel bus has just been car-jacked just a stop from our travel destination. Just when the market is picking up on all the fantastic earnings coming in these 2 days and the great economic data, existing home sales reported a "larger than expected" decline. This, again sparked new worries on whether the housing sector is indeed coming to a soft landing as billions of dollars are at stake there along with billions in mortgage and whether the Feds would cut interest rates soon. The US treasury's benchmark 10 years note also rose to 5 months high, breaking the 4.8% barrier. This further encouraged exit from the equity market in favor of the bonds market. Yesterday saw the hardest one day fall of 2007 so far and it all happened so fast that it caught all of us by surprise. So, if this is happening despite as the great releases so far, then there is little fundamentals we can fall back on to look into the future... let's go technical...

TECHNICAL ANALYSIS
Talking about a hard hard fall. My mentor used to tell me that the bulls take the stairs and the bears jump off the windows... that was what we witnessed yesterday. The Bears took out in one day what the bulls built in 2 days. Both the Dow and the Nasdaq composite are back down to their respective 30 days MA and 50days MA support level. The candlesticks are showing a bearish engulf formation which indicates a strong and sudden shift of investor sentiment from bullish to bearish. All momentum indicators also showed a sharp reversal of momentum to downside. So, are we still safe? Yes, but we are certainly at the edge of the cliff once again. The Dow is still riding above its strong 30 days MA support level and many times, it has bounced off this level after strong sell-offs like we saw yesterday. One example would be the 1.29% sell-off on 27 Nov 2006. In the same way, it took the Dow back down to its 30 days MA and then bounced off nicely to new highs. We have yet to see a breach in the 30 days MA and a testing of the 50 days MA yet, but if it happens, it might be a prelude to something less pleasant. For the Nasdaq Composite, we are back where we started last week... if the 50 days MA fails, we should see a testing of the 2400 level, failing which, the Nasdaq Composite would go into a bear trend like the one we saw in May 2006 when it failed its 2300 support level. Yesterday's action took both indices back down from an uptrend classification to a neutral trend classification. Traders need to be wary. It seems like January has always been a rather turbulent month over the past few years and yesterday's market action took me totally by surprise. Again, the adage goes "The market has a mind of its own"... it does not necessarily follow the expectations of mere mortals.

Techs Wake Up From Winter Slumber! Stocks Up!

FUNDAMENTAL ANALYSIS
The Techs has been in a slumber whole winter with lacklustre performance and earnings expectations, however, with Yahoo and Sun Microsystems inc. released favorable earnings report, investor confidence in the techs returned and lifted the markets broadly as a result. Ebay also rallied 4.85% in a day, Xilinx up 4.32%, Intel up 1.41%, Marvell Tech up 5.45%, Broadcom corp up 4.18% and Microsoft up 1.14%. It was as though the flood gates are suddenly opened and a rush of optimism flooded the markets. Even the "Sell-The-Tech" Cramer with his pessimism about the Tech sector, gave 2 tech picks today. There are no new economic data to support this sudden optimism and oil was up another $0.33 on unfavorable oil inventory numbers, so it seems like investors are indeed waiting for some great earnings release from the tech front before committing to the markets.

TECHNICAL ANALYSIS
Well well, just when we are about to lose hope in the Nasdaq composite, it rebounded off its 50 days moving average support level at last! This move alone totally negated the short term ditch that we have witnessed last week and, as I have said a few days ago, a rebound off this level could mean more upside to come. But didn't the index close marginally below the 50 days MA twice? Well, that is a common behavior of all support levels. Prices don't just rebound right off a support level, although sometimes they do. Most of the time, prices go slightly below it, bobbing up and down the surface very slightly before bouncing off. When we see such a slight breaching of a support level, we need to see a follow up on that breach the next day and then identify the next support level instead of falling into a panic. As it turned out, there was no follow up on the breach in this case and the Nasdaq composite rebounded nicely after accumulating some potential energy. The Dow continued to move according to plan, making yet another historical high, with no surprises at all. The Dow continues to be in a bull trend while the Nasdaq composite needs to break the 2500 to return to a bull trend from the current neutral channel. There is an obvious channel formed between the 2500 and 2450 level right now.




.

Rising Oil Prices Pressures Market As Winter Arrives!

FUNDAMENTALS
Winter is here at last, raising oil prices as heating oil demand is expected to rise. Oil price picked up by $1.20 to close up at $53.78 and has clearly added pressure on the market despite a rush of great earnings release by giants like Yahoo and UTX. If oil inventory numbers come in unfavorable tomorrow, oil could stage a rebound and rally as this ditch in oil price has been caused by a severe drop in heating oil demand so far due to a warm winter. Oil inventories will be announced tomorrow at 10:30am EST. As we have witnessed today, rising oil prices had a definite effect on investor sentiments as major indices fell from the skies as oil prices rose in the afternoon. We will be watching oil prices very closely.

TECHNICALS
Markets are mixed today as oil staged a come back. The Dow was not affected as it moved on to completing yet another step in its staircase formation. Nothing that happened to the Nasdaq composite seems to have affected the Dow in any ways and from its chart action today, we should see a new high coming up either late this week or early next week. The Nasdaq composite closed sideways yet again after struggling aainst a 2450 psychological resistance level for half a day. This is the second day the index has closed marginally below its 50 days moving average as downside momentum indicators continue to look strong. As I have said before, if it fails at this level, it would not be surprising to see a testing of the 2400 support level soon. Breaching that level would qualify the Nasdaq composite for a bear trend. So, make sure your tech longs are already out and have your tech put options ready. Oil seems to be waking up right now as it forms a rounded bottom formation off its $50 support level. A full scale rebound off such a formation is not common as this kind of formation do not show a strong conviction to upside. It usually laspe into a cup and handle formation before rallying, that is, if it survives long enough to form the handle part of the formation. Overall, oil is still in a full scale bear trend with a short term pullup being witnessed right now, until we see more evidence of a rally, oil remains bearish.




.

Stocks Avalanched Across The Board On Q2 Earnings Concerns!

FUNDAMENTALS
Stocks avalanched downhills as it seems more and more certain that Q2 earnings will not meet expectations. The Techs continued their way down across the board with giants like Microsoft (- $0.39)and Apple (-$1.71) leading the way. The Dow followed the trend at last with industrials leading the way down with giants like Boeing (-$3.09) and Caterpillar (-$1.16). Internals are clear as decliners lead advancers by 2 to 1. It seems like the markets is hit by a sudden wave of negativity after one weekend with little fundamental reasons.

TECHNICALS
Even though yesterday's market action was well within our predictions again, the intensity of it still shocked us. The Dow completed another level of its staircase formation as it corrects down to its 30 days moving average as we have predicted a few days ago. Volume was typical of such a move and do not show any signs of abnormality. We have seen similar moves in the Dow throughout this rally on 5 Jan 07, 22 Dec 06, 27 Nov 06 and 9 Aug 06. All displayed similar characteristics and volume profile. This move has helped the Dow get off its short term overbought condition and should pave the way for further upside. Nasdaq opened up as expected but immediately collasped back down to close sideways on its 30 days moving average once again. The Nasdaq composite's short term stochastics is almost at the oversold region and that could allow the index to go higher if it rebounds off this level or its psychological support level at 2400. This week continues to be an important week for the Nasdaq composite. Oil has found a support level at $52 and has started to trade sideways. Such a slight pullback is completely expected but it also seems to be putting some pressure on the markets. This week's oil inventory numbers should be an important determinant on the next direction for oil.





.

An Important Week For The Nasdaq Composite!

Last week has been a bullish continuation for the Dow but a terrible week for the Nasdaq Composite as it corrected back down to its 50 days moving average support level on lacklustre Q2 earnings performance outlook by tech giants. Oil also staged a slight rebound late last week as it landed on a strong $50 support level.

This week is going to be a very critical one for the Nasdaq Composite. If it drop below its 50 days moving average, it could go all the way down to test the 2400 level and failing which, it could laspe into a full scale bear trend. With people like Cramer shouting "SELL THE TECHS" everyday, its little wonder why everyone is panicking despite good Q1 earnings.




.

Techs Halt Decline As Oil Recovers!

FUNDAMENTALS
Oil rallied almost $2 in a day closing up $51.99 yesterday. That gave the Tech sector a slight boost as the Nasdaq Composite closed up slightly by 0.33%. The Dow continue to display slight weakness, which was expectedly in our technical analysis, with the lacklustre earning seasons so far and closed down marginally by 0.02%. So far, this has been a week that surprised many investors. While most investors expect bullishness to prevail as Q1 earnings are expected to be strong, the reverse happened. The markets always have its way of teaching us not to be over confident. Next week shall be another week of high level of uncertainty. With the mixed sentiments created by the earnings seasons so far, this is the time investors turn to more technical analysis for guidance.

TECHNICALS
Hardly surprising move in the markets as both the Nasdaq composite and the Dow played out EXACTLY as we have expected them to. The Dow continued to close sideways in order to form its staircase formation with no surprise and the Nasdaq composite rebounded off its 50 days moving average as we have predicted it to. The 50 days moving average once again proved itself to be a strong support level as investors rallied about that point to give support to the index. The Nasdaq composite has once again formed a bullish harami candlestick formation comprising of one big down day and one small up day near the bottom of the down candle. This is an extremely bullish formation which has helped the index stage numerous turnabouts. I suspect that the Nasdaq composite would go into a new neutral channel bordered by its 50 days moving average and the 2500 level. The Dow's chart pattern continues to be very healthy and is not even surprising should it test the 12500 level soon before moving up to greater heights. This will certainly help it wear off some short term overbought sentiments.


WANT THE BEST OPTION TRADING BOOKS?

Tech Giants Collasped Across The Board, Nasdaq Down!

FUNDAMENTALS
Tech giants continued to disappoint across the board no matte how their earnings turned in, resulting in a 1.5% drop in the Nasdaq composite in a single day, the greatest single day drop in 2 months! Cramer continues to call a sell on the tech sector as giants like IBM (-0.57%), Apple (-6.19%), CISCO (-1.96%), Qlogic (-0.78%), INTC (-1.85%), NVDA (-8.28%) all collasped no matter how well their earnings turned in. Surprisingly, there seems to be no real reason for this huge correction in the tech sector except for the loud calls to sell by analysts. It sure seems like only the tech sector is hit this time round as the Dow didn't look like it is affected in anyways as it closed marginally lower by 0.07%. Oil continued to drop as we have expected yesterday after a slight bargain hunting. Overall, the tech sector seems to be hit by a strong tsunami of pessimism and traders should be careful to enforce stop losses.

TECHNICALS
The Nasdaq composite corrected sharply back down below its 2450 resistance level and onto its 50 days moving average support level once again. It did so on extremely heavy volume, with all short term momentum indicators showing strong downside momentum building up. The testing of the 50 days moving average is extremely critical at this point. If the 50 days moving average fails to hold up today, we should be seeing a testing of the bottom of its previous neutral channel at the 2400 level next. Overall, all indicators points downside for Nasdaq and traders should exit tech longs by now. The Dow on the other hand looks extremely healthy as it closed sideways, forming yet another step in its staircase formation as we have expected. It is not even strange to see the Dow pullback down slightly for a day from this point before rebounding to new heights. The oil chart is an unmistakable down down down, so, oil traders should have cleared all long positions by now.


Free Weekly Stock Market Calendar Here!

Tech Hit As Earnings Season Continues To Disappoint.

FUNDAMENTALS
Markets were down yesterday as the earnings season continues to disappoint investors across the board, especially in the Tech sector. December PPI numbers released yesterday also showed a slight rise and along with a small rally in oil price, it is certainly not surprising to see more investors taking profits off the table. There is a saying in the chinese market for a phenomenal like this called, "Shaking The Board" and is a way of driving uncommitted investors off the markets before the rally continues for those determined enough to stay with it. Well, that's from a market that's still in its infancy anyways. :) Does this mean that we have just experienced a false rally? I don't think so. A slightly pull up in oil price and a slight rise in the volatile PPI is hardly surprising. We definitely need to see more convincing evidence than these. Apple released Q1 earnings yesterday, beating estimates by a mile, however, AAPL fell on a Q2 outlook that failed estimates, sparking a small sell off to close down by 2.21%. Apple, however, continues to be Cramer's no.2 tech choice of the year and I personally see AAPL going further on the mid term as long as the lawsuit against CISCO doesn't come in the way too much.

TECHNICALS
The Dow closed sideways yesterday as Nasdaq closed down significantly. As I have mentioned in yesterday's comments, I suspected that the Dow should be forming yet another step in its staircase formation within these couple of days and yes, we saw it begin yesterday as it closed marginally lower. I see a testing of the 12500 level before rising yet to another high. Upside momentum continue to be strong in the Dow and with its strong 30 days moving average support level rising along steadily, there is again no reason to say that this rally is over, yet. Nasdaq closed down by 0.74% yesterday, showing a definite lost of short term upside momentum in our indicators and a sharp turn down from a short term overbought position. This could be a slight pull back before going any higher as mid term indicators continue to point strongly to more upside. We saw the same behavior back in 17 October 2006 where after another 15 days of going sideways, Nasdaq staged a rally. Nasdaq seems to hit a psychological resistance level every 50 points or so and 2480 seems like one of these. Unlike Cramer, I would still say that the Tech is still a buy until we see definite evidence of the end of its rally. Oil staged a small rally yesterday but not without making a new intraday low. This showed that bearishness still persists in oil and that it is most likely a false rally.

Oil Plunges Further, Energy Sector Hit, Stocks Mixed!

FUNDAMENTALS
Oil plunges further into the ditch to close at $51.40 putting severe pressure on the Energy sector as markets closed mixed. Surprisingly, OPEC still look like they don't care at all and stated that there are no need to cut production further in order to support crude oil prices. They are probably looking at the current high oil inventory level due to the warm winter as a temporary situation. Nasdaq was further hit by a lacklustre earning season and caused some investors to take some quick profits off the table. Giants like CISCO, KLA-Tenor and NOVELLUS were downgraded yesterday on valuation concerns. Even though there are some profit taking yesterday, the internals still tell us that the bull trend is still intact as advancers par decliners even on a day like this. Apple will release Q1 earnings tomorrow and will definitely be something to watch.

TECHNICALS
Markets closed mixed yesterday as the Dow continued its uptrend and Nasdaq closed marginally lower, sideways, I would say. The Dow made yet another historical high yesterday and sure looks like it should be forming another step of its staircase formation within these few days. Nasdaq closed sideways but still made a higher high which preserves its bullishness. Nasdaq is in a short term overbought position and is not strange at all to see some form of slight pullback. Such a pullback is extremely healthy as long as Nasdaq closes up tomorrow. All in all, the bull trend has just started and with upside momentum still strong, there are no signs nor reasons yet to think that the rally is over. I would see the next resistance level for Nasdaq at the 2710 level.

Bullishness Rages Across Global Markets!

Bullishness spreads across global markets yesterday when US Markets were closed for Martin Luther King day. In many ways, this is also a sign that expectations are for the US Markets to continue its bullishness as it has been known for decades that many asian markets like the Singapore markets rise and fall according to the expectations in the US Markets. Let's see what happens today when market opens.

Last week was an important week for the markets technically as it was a week where all major indices made committed breaks to upside and out of their neutral channels. With short term market momentum turning to upside, we can expect the bullishness to rage on through the week this week.

Martin Luther King Holiday!

Market Holiday!

Click here for a free weekly stock market calendar!

The Bull Rampage Starts In The US Markets!

FUNDAMENTALS
Markets continue to storm ahead yesterday with the Dow making yet another historical high and the Nasdaq composite making a new 6 years high! Slight profit taking was witnessed early in the first trading hour, leaving profit takers deep in regret as the markets rallied for the rest of the day.

Great December retail sales due to the holiday seasons (the biggest gain since July 2006) added fuel to the optimism that are already in the markets. The numbers showed that consumers are still able and willing to spend money and that is a sign of a healthy economy. Oil also showed more weakness as it fell to a low of $52 intraday with OPEC announcing that they will not be convening an emergency meeting as yet.

With the bull already out of the gates, retail sales up, oil price down and no signs of any action to lift oil prices, we can only imagine how far this bull can go.

Apple drops for a second consecutive day as a barrage of negative news pertaining to CEO Steve Job hit the markets. Well, that's probably why the Chinese Proverb says, "When the tree grows big, it catches more wind". Nothing yet about its lawsuit with CISCO. The big event for AAPL is its earnings release next Wednesday. We will be staying tuned.


TECHNICALS
Markets closed higher again yesterday with definite signs of a developing bull trend.

The Dow resumed its staircase like formation of moving up, retreating a little and moving up. This is definitely another moving up phase supported agin by its 30 days simple moving average. Back at 9, 10 and 11 Jan 2007, we saw a nice bounce off its 30 days simple moving average as well as another instance back at 27 Nov 2006 to 4 Dec 2006. This shows yet again that as long as the 30 days simple moving average holds, the Dow will continue to move up. With momentum indicators showing an increased momentum to upside and short term stochastics still a little distance from being overbought, it is safe to say that the Dow wil continue its bullishness next week.

The Nasdaq Composite completed its neutral channel break on 11 Jan 07 and followed up with another strong up day yesterday. Yesterday's move completed a classic channel break with strong volume, definitely an unmistakable bull sign. With momentum indicators increasing to upside and short term stochastics slightly in the overbought region, the Nasdaq composite still looks bullish. The Nasdaq Composite also formed a "Shaven Head" candlestick signal, which means that it closed right at the high of the day. This is an extremely bullish candlestick signal that signals that the next trading day is most likely going to be bullish too. Nasdaq's near 2 months neutral trend also showed us that its 30 and 50 days simple moving average are like the 2 security gates in a high security facility. Even if it breaks the first security gate (30 day simple moving average), the second security gate (50 days simple moving average) will stop its decline dead in its tracks and bounce it right back up.

Overall, the all major indices are bullish right now and it a good time to put on some longs or to go long on the indices.

Bullishness Returns As Oil Quakes! Dow At Historical High!

FUNDAMENTALS
Crude oil price continued to drop yesterday by more than $1! The Dow closed a new historical high as bullishness returns. Crude oil has been dropping by about $1 every day since 3 Jan and gave the markets a new lease of life and a strong reason to be optimistic about. To augment this optimism, weekly jobless claim also fell larger than expected, indicating a growing economy. Earning releases yesterday were also surprisingly good. Good news seems to be flooding the markets right now and is a sure sign that the bull is back and the bear is out of the window. Cisco & Apple continues their court room drama as Cisco demands Apple to pay Cisco's legal fees and relinquish all profits eventually made on the iPhone. Cisco also demands Apple destroy all labels, signs, packaging and other promotional material that includes the word "iPhone," a product it cost Apple millions to develop. Apple closed down 1.24% yesterday. I will be following this closely.

TECHNICALS
The bulls has definitely returned as all major indices broke their resistance levels to close new highs. Undoubtedly, this rally is still the result of a dropping oil price. Since July 2006, the market has moved in the exact inverse of oil price; Market rallied when oil price dropped starting from 17 July 2006. Then went into a neutral trend when oil stalemated for a month from 4 Dec 2006, finally, spurring the market into a new bull trend with its recent decline from 4 Jan 2007. So, I am comfortable to say that as long as oil continues to drop, this rally would have more upside to go. The Dow is showing a lot of potential to upside as it curls up from a short term oversold position. Nasdaq followed up on the resistance level break yesterday and closed up significantly higher. The sky is the limit now for both indices and I will be monitoring their upwards momentum daily for any indications of weakness.


Best Option Trading Books!

Oil Sinks & Lifts Markets!

FUNDAMENTALS
Oil prices closed below $55 for the first time since June 2005! At the time of this writing, it is trading at only $53.60! This gave lift to a market that is thirsty for some kind of optimism. Looking at the internals, however, showed that advancers still par decliners across the board with no clear leadership. AAPL was up more than 13% in 2 days due to the successful launch of its iPhone and that gave the Nasdaq composite a more significant rise against the Dow. AAPL will once again be the focus this season as CISCO sued Apple over the use of the brand "iPhone" as that is a trademark owned by CISCO. If CISCO wins this lawsuit, it could put some short term pressure on AAPL. I will be following this story closely. Overall, as long as oil price continues to move down, capital costs and cost of living will too and that will definitely help the stock markets.

TECHNICALS
Markets continued to move sideways with major indices closing higher. The Dow's gain was marginal at best and continued to reinforce its neutral trend. Nasdaq Composite however, broke the 2450 resistance level after half a day in the trenches. This is an extremely bullish move on high volume. Does this mean that Nasdaq is ready to end its neutral trend to go back into a bullish trend? Maybe, but not yet. We need to see a follow up today which hopefully 2470 to be sure. The markets has always surprised us with a complete, catastrophic reversal just when we are too sure. That is why we always look for clear follow up to a one or two day formation before coming to a conclusion. Looking back at 18 April 2006, we saw a single day 1.95% rise in the Nasdaq composite, however, after failing to break the 7 April high, it collasped into a catastrophic decline. That is what we want to be sure to avoid. In this neutral trend so far, we see strong support from the 30 and 50 days moving average from both the Dow and Nasdaq and that gave them a strong bullish undercurrent. A break below the 50 days moving average will sink them into a bear trend immediately, so that is a level all short term traders want to watch and that is a level index players probably want to set stop loss at.

Lacklustre Earnings Season Left Stocks Mixed - MastersoEquity.com

FUNDAMENTALS
Yesterday's earnings seasons kicked off with a lacklustre Alcoa Q4 earnings release along with worries that the rest of the earnings may also be less optimistic. This left the markets mixed whole day even though oil prices continue to make encouraging drops to new 18 months low and Apple gaining over 7% in one day. Advancers and Decliners are almost evenly matched yesterday showing a cautious and mixed sentiment in the markets. The property sector is still a concern as rising mortgage rates and a dropping property price means that real estate investors are having a very hard time. When real estate investors do not make money, their money do not come into the markets and that means a lot of money off the table.

TECHNICALS
Markets closed sideways once again yesterday with the Dow in the red. The Nasdaq composite, however, continues to be led higher as the QQQQ continues to lead the way. The QQQQ told us that investors are bullish on the Nasdaq composite as it was in positive territory the bulk of the time that the Nasdaq composite was negative. Both the Dow and NASDAQ formed long tailed dojis which tells us again that uncertainty prevails in the markets and that the market can still go anywhere. The Nasdaq Composite continued to fail at the 2450 resistance level while the Dow seems to be comfortably settling into its neutral trend. No technical indications seems to hint at where the market will go next from this neutral trend and short term traders should continue to stay out of the markets.


Everything An Option Trader Needs In A Day On ONE PAGE!

.

Daily US Market Comments 09 Jan 2007 by MastersoEquity.com

Cautiousness Surrounds Coming Earnings Season. Stocks Up Marginally.

FUNDAMENTALS
Markets closed marginally higher yesterday on cautiousness surrounging the coming earnings season. Earning seasons officially starts today and nobody really knows what to expect. The market could definitely benefit from a good earnings season but a cooller than expected earnings season could be the catalyst needed to put the market down into a bear trend from its current shaky position high up on the fence. On the brighter side of things, the Feds remarked that the housing sector is coming to a soft landing with limited ill effects and that inflation seems to be easing. This means that whatever has been done to rescue the economy continues to show up positively. Only one question remains, when will the Feds cut interest rates?

TECHNICALS
Markets closed sideways yesterday. Such marginal gains are not to be considered a gain in context of a technical chart pattern. The Dow continues to form a lower low and a lower high for a 3rd straight day, making this sideways close a slightly bearish one. The Dow has also been trading right on top of its 30 days moving average and that has proved to be an important support level for the Dow throughout this rally. As long as this level is not breached, the Dow will continue to be in a short term neutral trend supported by a long term up trend, which still makes it a bullish market. The Nasdaq Composite formed another spinning top candlestick formation yesterday. Such a formation shouts one word, "Uncertainty". The bulls and bears each won half of the day, eventually to close almost where it started in a tie. Another concern here is that short term momentum indicators has almost moved the whole length up for the Nasdaq composite so far but we have not yet seen a significant move upwards in the index. This shows that there is a strong resistance level here wearing out the buying momentum. Indeed, as we can see, the Nasdaq composite has been failing at the 2450 level over the past few days. Overall, this is still a very mixed market with plenty of indications to support both a bullish and bearish outlook. Traders are advised to continue to be cautious at this point.

Daily US Market Comments 08 Jan 2006 by MastersoEquity.com

This is the beginning of a brand new week in the markets once again. Always feels good to be back in the action.

Last week has been a lacklustre week in the markets. The show of strong bullishness that all traders hoped for did not happen and was replaced by a strong display of profit taking. The Fed continued to hint at not cutting interest rates soon, housing price looked like it has yet to find a bottom and all major indices lasped into a neutral trend from a bull trend.

This week will continue to be a week of important releases like the Trade Deficit, oil inventory and Wholesale inventories numbers on Wednesday, jobless claim on Thursday and retail sales on Friday. These numbers will continue to answer bits and pieces of the question of, "Is the US economy slowing down into a recession or Is the US economy still under inflationary pressure?" and continue to leave traders of different beliefs to walk their beliefs in the markets. This is the exactly where the alluring beauty of the US stock markets lies.

Daily US Market Comments 06 Jan 2006 by MastersoEquity.com

Hopes Of Fed Rate Cut Diminishes As Jobs Grow. Stocks Down!

FUNDAMENTALS
Stocks took a hit across the board as hopes of a Fed rate cut continue to diminish further into the horizon. Investors were expecting the Fed to cut rates no later than March but all the clues along the way going into January continue to hint towards not cutting rates. Unemployment rate was held steady at a low 4.5 percent as payroll was increased by 167,000 and hourly wages increased by 0.5 percent in December. These numbers paints the picture of a growing economy but it sure tells the Feds that further rate cuts are unnecessary. Motorola also took a plunge yesterday after they cut 4Q outlook. Shares of Motorola closed down a huge 7.83% in a single day following numerous downgrades after the outlook release. Overall, this rally looked extremely worn out and sensitive to every single hint of possible bad news.

TECHNICALS
Markets betrayed the one day rally of 2 days ago and almost completely erased those gains in a single day yesterday. Overall, the Nasdaq composite failed to follow up with another up day yesterday and continued its neutral trend. The Dow is also officially into a short term neutral trend now as it showed no signs of forming another step in its staircase formation. Volume these 3 days have been higher than average but has failed to lift the markets. That goes to show that this is a point where many traders are beginning to bid down instead of up, forming a growing selling sentiment. In a healthy bull trend, we should see the market rally, then go into a correction by pulling back into a sharp, short term decline and then up again to new highs. This kind of chart pattern shows that even though there is a strong short term profit taking (probably by institutes causing a quick decline.), the "herd" is bullish enough to bring the market back up and then into new heights. What we are seeing here is a very unhealthy chart pattern which goes up and then laspe into a significant neutral trend. What usually follows after such a neutral trend is the markets turning down into a bear trend forming what we call a "flat top" or "tower" formation. This kind of formation shows that the "herd" is losing bullishness, bring the rally to a slow standstill and into a neutral trend. When the "herd" loses bullishness, the sentiment goes around very quickly and soon bearishness begin to set in. In the US Markets, the "Herd" is still the main moving force unlike in lesser developed markets where a few institutes form the main moving force. The only consolation so far is that major indices are still trading above their 50 day moving averages, this shows that markets are still in a long term uptrend even though they are now in a short term neutral trend. The Nasdaq Composite is in fact literally trading right on the 50 days moving average line right now. We will be watching the 50 days moving average intently from this point forward as a breach of this level will position the markets into a long term neutral trend and a possible test of the 100 days moving average.


Best Option Trading Books!

Daily US Market Comments 05 Jan 2006 by MastersoEquity.com

Crude Oil Prices Collasped Below $56 Spurring Tech Up!

FUNDAMENTALS
Crude oil prices collasped further into the ditch as it closed below $56 yesterday! That spurred the tech sector up significantly as cheaper crude oil means cheaper capital cost. The Dow, on the other hand, was up marginally as it comes under pressure from falling share prices of oil giants like Exxon. This is a market that will readily respond to every bit of positive news like a thristy desert traveller will readily drink every drop of water in an oasis, however, the bigger picture still tells a different story... with the economy slowing down faster than expected and the housing sector uncertain of a soft landing, this is still a very dangerous place to be in. You are still in a desert even though you are standing beside an oasis.

TECHNICALS
Crude oil is once again in a full blown down trend. After spending about 3 months in neutral trend, crude oil has decided to move lower and has helped the market move up significantly. This rally has been the direct inverse of crude oil price so far since August 2006 and should continue to show promise as crude oil price move further down. The Dow closed sideways as it continue to trade in a tight range in a fashion that almost qualifies as a neutral trend. Yesterday's surge also brought the NASDAQ composite back up into its neutral channel. So, to summarise, yesterday's surge has resulted in the Dow and NASDAQ going into a neutral trend with slight bearish inclination. This kind of market can still go anywhere.


Probably The Most Accurate Stock Picks... EVER!

Daily US Market Comments 04 Jan 2007 by MastersoEquity.com

FUNDAMENTALS
Markets disappointed traders in the Bull camp yesterday as what was building up to become a great way to start 2007, collasped mid day after the Feds raised concerns over the severity of the pullback in the housing sector. In fact, the Dow went from a high of 12580.03 to a low of 12405.14, a huge 174.89 points chasm in between! We usually see this kind of points difference on very pessimistic, negative days. Even though the Dow rebounded slightly to close 11 points up by the end of the day, it does not change the fact that a great amount of pessimism exist yesterday, the first trading day of 2007. All these while, the Feds has continuously fed (no pun intended.) investors with small doses of negative sentiments almost on a daily basis over housing and inflation concerns. It is almost like they are trying to prepare investors for "what is to come". Is the "soft landing" in the housing sector only an illusion? Is a coming recession cleverly disguised as trying to bring inflation down so as to prevent an all out panic? Only time will tell. Tis the season to be cautious...

TECHNICALS
Markets closed sideways yesterday, forming a huge spinning top candlestick formation. Such a formation indicates a strong sense of uncertainty, especially one with such long top and bottom wicks. Such a formation is more common in the Dow but is not something common in the NASDAQ composite index. This sense of uncertainty means that the markets can still go anywhere from this point forward with a slight bearish inclination. Crude Oil broke below its neutral $60 channel yesterday and is looking to trade lower.

US Market Summary 2006 & Our Stock Market Wish List 2007

HAPPY & PROSPEROUS 2007 EVERYONE!

2006 has come to an end and with a surprise market close on Tuesday, all traders can enjoy a 4 days market holiday and party into 2007.

2006 has been the year that all equity traders has been waiting for for years. After almost 6 sideways years, the Dow and Nasdaq broke to upside in 2006 to close up by 15.44% and 8.36% respectively. The main mover for the year of 2006 has definitely been the continued interest rate pause by the Feds and the crude oil correction. These 2 factors, along with measures to bring about a soft landing in housing prices, led to a full scale rally since August 2006.

2006 hasn't been a year of all ups and no downs. May 2006 has been a pretty scary month as the markets went into a slight correction on uncertain geopolitical situation. That correction continued into the surprising rally in August. Well, that is how the market tend to behave over the past hundreds of years; Against All Expectations. When you think it is thinking one way, it suddenly behaves in another.

2006 has also been a year that challenged the US Economy; Challenging crude oil situation, widening national debt, widening trade deficit, uncertainty in the middle east... etc. Through it all, investors all over the world continued to believe in the future of the US markets, which showed up in the August rally.

2007 to 2008 will be very important years for the US markets. The first of the baby boomers will start to withdraw their 104K from their funds, thus the equity markets, from the end of 2007 and going into full scale from 2008 onwards. These money pooled by the most significant post war population formed an important source of liquidity for the US markets. We can all imagine what will happen when such a full scale withdrawal happens. I do not think the SEC and the Fed will allow something so powerful to happen all at once. Let's see what new policies will come onto the table in 2007 pertaining to this issue.

When the markets open on Wednesday, there is a high chance that we should see a change in sentiment in the US markets. Over the past 10 years, there were 5 years where the Dow ended higher on December. 3 out of that 5 years see a drop on the following January and 1 out of that 5 years see a small gain on January and then going into slight correction. With the Dow and Nasdaq composite showing signs of fatigue towards the end of December 2006, it does seem like a pretty uncertain opening for the markets on Wednesday. Even though the short term outlook may be pretty uncertain at this point, the long term outlook looks a lot more promise. With the Dow bouncing from the correction on 2003, it has been moving up and up for the last 4 years. As the saying goes, "The Trend Is Your Friend", it certainly makes no sense to say that the locomotive will suddenly scratch to a stop this year. Nasdaq is also making the great climb up the Himalayans in order to recover from the 2000 Tech crash. With still no bubbling evident in the tech sector, the rally since 2003 is a healthy one and one which should be expected to continue.

With interest rates and oil prices remaining stable, we should see another 3.5 to 4% growth in the US economy in 2007 and even though a great economy is no promise of a great stock market, a sour economy is certainly promise for a sour stock market.

So, our wish list for the year 2007 would be:

1. To see policies made and executed to prevent the baby boomer crash.
2. To see policies made and executed to reduce trade deficit and national debt.
3. To see oil prices remain stable. (to see it falling further is a little wishful with OPEC right on its heels)
4. To see the housing market come to a soft landing.
5. To see confidence coming back into the equity markets from the bond markets.
6. To see an interest rate cut right about March 2007.
7. To see the US dollar come to a support level where the US economy can remain competitive against a rising China.
8. To see less turbulence in the middle east.
9. To see worldwide terrorist network broken down.
10. To see more mergers between strong US corporations with foreign corporations.

If my wishes can come true, then I am confident that our long term portfolio should remain long. :)

HAVE A PROSPEROUS YEAR 2007 IN THE MARKETS!