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.
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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.
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Labels: fundamental analysis, investment, share market, stock market, stocks, technical analysis
posted by Jason Ng at 7:26 PM
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