Markets Ditch On Greenspan's Outlook

FUNDAMENTAL ANALYSIS
Markets took a blow today as ex-Fed chairman Alan Greenspan suggested that there might be a recession coming later this year. This is further compounded by oil prices holding steadily above $61. Higher oil price put pressure on the transportation sector as usual with decliners leading advancers by 4 : 1. However, the internals for the market wasn't bad with advancers parring decliners. The Chicago PMI and ISM this week could still help lift the markets if they turn out well. If oil prices continue to climb on the higher demand due to snow storms, it could end the current rally and put the market into a correction.

TECHNICAL ANALYSIS
As expected, the Dow corrected right down to the 30 day moving average line and looks poised for another rebound. No surpise on that front. What will seriously surprise me would be if the Dow should close significantly below the 30 days moving average tomorrow on significant volume. That could spell the start of a Dow correction. The Dow has closed slightly below the 30days MA line only once on 28 Nov 2006 ever since this rally started. That was done on low volume and not by a significant margin which did not end the rally then. I think we should see a rebound to new highs soon. On the Nasdaq front, the Nasdaq 100 failed to make a resistance level break as expected and has brought the Nasdaq composite down for a second straight day. With both the Nasdaq composite and the Nasdaq 100 still in overbought condition, we could see a testing of the 50 days MA soon. That would set the Nasdaq composite back down into its lateral channel again. I was so close to changing my hunch for the Nasdaq composite to a bull trend but now, I was right for being just a day more patient. Nasdaq remains plain water to me.


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