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.
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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.
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posted by Jason Ng at 7:00 PM
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