Dow Pulls Back After 4 Straight Gains

FUNDAMENTAL ANALYSIS
The Dow pulled back down slightly today at last to close 58.03 points lower. The Dow was actually trading a marginally higher until a pullback in crude oil price to below $66 started a pullback in the energy sector and hence the Nasdaq composite and then to the Dow... like dominoes. Looking at the big picture again, earnings are great and March Core PCE remained unchanged bringing the year to year rate to 2.1%, which is very close to the Fed's comfort zone of 2%. Core PCE, Personal Consumption Expenditure, is an inflation indicator based on a measure of the prices paid by people for domestic purchases of goods and services (excluding food and energy) and is a broader measure of consumer prices than the CPI. Rising PCE means rising costs of living, suggesting a rising inflation. With company earnings positive and inflation coming under control, there are no reasons yet to believe, fundamentally, that this market is going to turn drastically to a bear trend yet.

TECHNICAL ANALYSIS
The Dow continued to move along the path of the Staircase formation today with a slight down day. This is hardly surprising and is typical behavior of such staircase formations. However, if we do not see a 1% or so rise tomorrow, then the Dow may be in for an intermediate pullback all the way down and test the 13000 level. In fact, it could go all the way down to 12900 level before a rebound. If I see another down day tomorrow, it may be time to go delta neutral again. Remember, hedging your position may be troublesome but it is always worth it in the long run. Read more about how to hedge with options here.


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Strongest Wave Of Bullishness Since 2003!

The Dow surged another 1.23% in total last week and blew the historically important 13000 level no matter what the economic numbers of oil numbers said or seemed to say. In fact, the Dow has gained an astonishing 4% over the last 2 weeks! In fact, the bullish strength and behavior is so strong that I am certain I have not seen something like this since the great rally of 2003! This bullish wave started way back in July 2006 and lasted all the way till now with a healthy and classic intermediate correction in between, bouncing nicely off the Dow's weekly 30MA line. Right now, the Dow's weekly stochastics has entered the overbought region but I do not think that is going to slow it down as the Dow is all used to rising in the overbought region. Looking back, the Dow's weekly stochastics entered the overbought region last year in August and stayed overbought and bullish untill the 27 Feb correction. Right now, the Dow continues to trace the path of the "StairCase Formation" which I mentioned last Friday and all short term indicators are screaming for a pullback. If I do not see another 1% or so rise within these 2 days, then I would go delta neutral in preparation for a slight pullback. If a pullback really do happen, I reckon it will test the 13000 level.


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Bulls Takes A Breather

There is really nothing fundamental behind today's move, which was at best another sideways day. Even though giants like Apple are turning in great earnings early in the market, it failed to drive the market positive with resolution. In the end, the Dow and the Nasdaq composite are up slightly but with decliners leading advancers. Technically, we see the Dow forming a pretty disciplined "Staircase Formation" with large up days interspersed with a couple of days of small sideways days like the one today. Mid term bullish momentum remains strong and I see no reason why we should not see another step up coming up in the next few days. There is one concern about this formation though. If we do not see a new high within the next 4 trading days, then the Dow may be due for a slightly correction as it is already in the grossly short term overbought region.

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Bulls Wakes Up As The Dow Breaks 13000 Points!

FUNDAMENTAL ANALYSIS
Incredibly, after just catching its breath for 2 days, the Bulls mustered enough energy from the great earning releases so far to break the historically important 13000 points! Even though oil price continues to threaten the $66 level, the lure of the 13000 points is too great to keep the bulls out. Internals are also great with advancers leading decliners by 2 : 1. Incredibly again, the Dow made 12000 points just last October and just 6 months later, it rose by another 1000 points! Is the economy really doing that well? Is the Feds really doing that well? Or is there a greater consipiracy behind all these?

TECHNICAL ANALYSIS
I must admit that today's market action went against all my expectations. I had expected the Dow's short term stochastics to at least retreat back down, off the overbought level before it has enough energy to break such an important psychological barrier... the 13000 points. However, I must say that the market was more bullish than I expected it to be but am I surprised? Not really. That's because the Dow is all used to performing resistance level breaks in the short term deep overbought region anyways. What made me look like a fool was the buying climax on the 20 April. I was convinced that the Dow needed a retreat before going for the 13000 break due to the buying climax (volume surge). However, it looked like this time, the over ADX still won the day as it continued to indicate a strong, raging bull trend. Well, I was able to break the delta neutrality and went long delta early today when the Dow displayed early signs of being able to break the 13000 points level. Well, I profited and kept myself safe when everyone's worrying if the market can go any further up, so, I still think I did a great job. :) The Dow is rising healthily on rising volume and I still see more upside to come interspersed with small retreats along the way. Its going to be and has always been a bumpy ride, isn't it?


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Stale Sideways Day With Corroding Consumer Confidence

A completely stale day today with the Dow closing up 34.54 points and the Nasdaq Composite closing up 0.87 points. Consumer sentiments continue to corrode for a third straight month, putting stocks down whole morning before some steady buying brought it back up positive. Technically, I see today's move as a completely sideways day which didn't even do anything to move the Dow off the short term overbought area, neither did it do anything to change anything I have said yesterday. I have gone completely delta neutral with my market tracking positions and see how the market behaves today.

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Rising Crude Beats Down The Bulls

FUNDAMENTAL ANALYSIS
Crude oil challenging the $66 level along with a sell-off in GM and common sentiments that the rally is due for a little pullback caused investors to start taking some profits off the table. The Dow was down 42.58 points today, actually not a very serious pullback. Looking at the internals, decliners failed to significantly lead advancers, signifying that the bullish undercurrent is still intact. With the China market still bullish and pulling global markets along prior to the launch of their index futures, I think this pullback is healthy and will help the market ride the global trend further.

TECHNICAL ANALYSIS
The Dow was down today as expected after yesterday's buying climax. I don't think it is the end of the pullback yet as the short term stochastics remains grossly overbought. I see a possible testing of the 12800 level before a rebound is possible.


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Bulls Go Into Climax

I was surprised last Friday by how strongly the market surged when I had expected it to at least retrace a little bit. The Dow was up 153.35 points in a single day! So, am I wrong that the market needs to retrace at this point? Not really. I may be just 1 day off from my expectations. While investors are celebrating the bullishness, I see 2 major problems with last Friday's surge. One, the Dow surged with a huge volume surge. Such a volume surge after such a strong run up is called a Buying Climax. Such a surge in volume on a single day usually exhausts the bulls and lead to a significant retracement. Two, even though the Dow broke the 12800 level nicely, it is now up against an even stronger foe... the almighty 13000 psychological resistance level! With the Dow this overbought on a short term basis, coupled with a buying climax, I really see no reason why a significant retracement would not happen within these couple of days. I will be hedging my market based positions to delta neutral on Monday opening.

Bulls Run Out Of Breadth

FUNDAMENTAL ANALYSIS
Ever since the China stock market dip, causing the one day 416.02 points dive in the Dow on 27 Feb, the world suddenly changed. Suddenly big changes in the China stock market seems to affect every markets in the world in a big way. Today, the US market opened decidedly lower as the China market dips. All kinds of speculations filled the air about the China market dipping due to inflation worries and all that nonsense, but they are all wrong. After being here in China for the last 2 years, I can say that it is a hysteria and public money driven market with no fear nor concern for inflation. As long as the great prospects that lie before them continues, inflation is the least of their concerns. The reason why the China market dipped today was because of huge mutual funds exiting the market in order to seal in a 50 to 70% profit on their portfolio so far in just one quarter. However, public money is still pouring in at record rates daily and it won't be long before the public pushes it all the way higher again. In the US markets today, it took a full barrage of great earnings to push it back up to close mixed. Breadth readings continue to deteriorate as 6 of the eight major indices are down. Looks like the raging bull is out of "breadth" and needs just a short break.

TECHNICAL ANALYSIS
Looks like it is happening as expected again. The Dow spent the bulk of the day negative or lingering at the zero point as short term bullish momentum backs off on our short term MACD and the incredibly steady volume fails to make much difference. When volume is rising but prices are not, it signifies that prices are coming up against a strong resistance level and I see that as the 12800 level. The thing about resistance levels is that it is not a thin, precise line. In fact, resistance and support levels are a bold, thick line, which covers a slight range around the resistance/support level instead of just a single point. In this case, the Dow seems to be still under the influence of that resistance level range. With the Dow already in short term overbought and sure signs of weakness as daily gains decline, it is normal and healthy for the market to back off for a few days slightly like what the Nasdaq composite has done, bring stochastics back down to short term oversold before rising to new heights.


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Dow Defeats The 12800 Point!

FUNDAMENTAL ANALYSIS
The Dow mustered enough energy to break the 12800 point at last to new highs as we have expected to close at 12803.84 points! The primary mover behind this surge is again the great earnings season as giants like JPMorgan Chase beat analyst expectations. Even though the stock market continue to rise steadily on rising volume, advancers are already secretly retreating in the background. Today, decliners beat advancers in a show of fatigue. I think it is high time the Dow joined the Nasdaq composite in a little pullback after 5 straight days of gains.

TECHNICAL ANALYSIS
Yes, the Dow broke historical high as expected... the question now is, what's next? The Nasdaq composite has already begun its pullback and the Dow also looks like a pullback is already imminent. Its advance has been slowing down over the last few trading days with daily gains narrowing down even though volume is rising. Short term stochastics is also in the deeply overbought region. I would expect a couple of days of pullback as far down as the 12700 region before resuming the bull trend.

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More Candies For The Bulls

FUNDAMENTAL ANALYSIS
The Dow broke above the critical 12750 point today and is now just a small leap from making a new high. Already the S&P 500 has made a new high as more candies fed the bulls today. Core consumer price index rose lower than expected, increase in housing start and permits and great earnings release from Coka Cola and Johnson & Johnson that topped wall street estimates. All that being said, advancers and decliners were at par today indicating a slight retreat of the bullishness that we saw yesterday... which, of course, is natural. Nothing in the world goes all out and up but in same surges and stages. This earnings season looks like its going to be a good one afterall and that the old wall street adage of profiting in April and going away in May seems like it is going to happen.

TECHNICAL ANALYSIS
The Dow continue to rise on systematic buying as expected. Just look at the volume today and we can see that it is nearly equal yesterday's volume. Even though such large systematic buying can definitely lift the market, I do hope to see evidence of the mass public jumping in and supporting the rally. For now, the bulls look neatly in charge and that we can expect to see a new high tomorrow.


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The Bulls Take Over At Last...

FUNDAMENTAL ANALYSIS
Stock market rallied strongly for a third trading day today as upbeat news and a halting oil price injects a good dose of optimism into the market. Investors headed into this new earnings season with a lot of pessimism which was quickly eliminated as most earnings still checked in higher than expected. Seriously, I haven't seen this much optimism in one day for a while. Clearly, the bulls have been in charge since the market turned around on 14 March and are now roaring and rearing to go.

TECHNICAL ANALYSIS
Market rallied today as expected and today, we might see a new high made if the Dow breaks above the 12750 resistance level. Our ADX trend indicator has also turned up bullish for the first time since the 27 Feb dive. What I see now is a healthy correction completed followed by a strong recovery of the previous bull trend... Classic. The Dow and the Nasdaq composite are now back up in the short term overbought region and would not be surprising to see a couple of small pullback days before. Hang on for the ride to the stars.

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Markets Surfaced After Its Dive At Last.

After one and a half month of steady and hard climbing, major indices have almost completely recovered the one day loss of the 27 Feb dive. This shows that the bulls are very much back in charge right now. The 27 Feb dive have been the direct result of the 27 Feb China market dive. Take that day away and we will see that the overall uptrend pattern is almost completely intact. Investors returned to their steady buying pattern immediately after that dive turned out to be nothing but a fake out. With the government also pouring money secretly into the stock markets, there is hope of new highs in the near horizon. The weekly charts also displayed a nice bounce off the 30MA with bullish momentum growing and stochastics still a mile from being overbought. There seems to be a lot of room to upside now and I do speculate a new high coming up soon.

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Stocks Rallies Despite Rotten Fundamentals

FUNDAMENTAL ANALYSIS
A very surprising day at the markets today as the Dow rallies 68.34 points and the Nasdaq composite rallies 21.02 points despite a continuing barrage of bad news. Just when all hopes of a rate cut has been buried, a surge in jobless claims and rising oil price added early pressure to the market. However, it wasn't long before a barrage of bargin hunters stormed the markets and lifted it throughout the trading session. Seriously, this kind of strong, systematic lifting of the market always make me think some big institution is behind it and the first one that comes to my mind is the Feds themselves. It is no secret that the Fed window has been systematically diverting big chunks of money into the market, as if in preparation for the baby boomers' drawout of the market in the near future. Such systematic buying would definitely be able to lift the markets and make it look nice and rosy for now in order to continue attracting investors... that is definitely what the Feds want.

TECHNICAL ANALYSIS
What looked like a strong up day today was really just another sideways day. The Dow has opened and closed within yesterday's trading range and the Nasdaq composite has not made a significant new high for the past 4 trading days. Volume was mediocre and momentum indicators are not showing a significant bullish momentum too. All in all, today's rally look too much like a fake out to me. In fact, the Dow ended in a lower high and a lower low, which is a bearish sign. However, as long as it remains within the Secret Bullish Channel, it can still go up... but that does not mean it cannot break the channel to downside. That is the thing about channel analysis... it serves only as a guide. It is as good as looking as a train rail and guessing where a train might go, but lets not forget that trains sometimes de-rail too.


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Stocks Dive On Grim Economic Outlook

FUNDAMENTAL ANALYSIS
The Dow was down 89.23 points today as all hopes of a rate cut continue to diminish. The Fed is apparently torn between inflation concerns and a slowing economy as I have previously noted and the best thing to do under such circumstances is definitely to keep things at status quo and see how things develop. In fact, the stock market took a nose dive early in the trading day as the International Monetary Fund cuts it's forecast for US Economic growth to 2.2%, almost 1% down. This worry over a slowing economy lasted throughout the trading session. As if to compound the problem, Feds minutes revealed that the Feds will continue to firm policies if inflation continue to be a concern despite a slowing economic growth. Even though sentiments are largely negative today, I still see traces of buying coming in when the Dow was down about 100 points. CBOE Equity put/call ratio was also relatively stable underscoring the fact that there is still an optimistic undercurrent. This is a tricky market condition not for the weak of heart.

TECHNICAL ANALYSIS
What looked like a scary drop today in the Dow was actually nothing surprising. Like I mentioned yesterday, I would not be surprised to see a drop in the Dow back down to the bottom of the "Secret Bullish Channel" (please see my post on 27 March on the Secret Bullish Channel) before rebounding. Looks like it is behaving totally according to plan. There is still some distance to the bottom of the channel and so I will not be surprised to see another down day tomorrow.

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Stocks Dive On Grim Economic Outlook

FUNDAMENTAL ANALYSIS
The Dow was down 89.23 points today as all hopes of a rate cut continue to diminish. The Fed is apparently torn between inflation concerns and a slowing economy as I have previously noted and the best thing to do under such circumstances is definitely to keep things at status quo and see how things develop. In fact, the stock market took a nose dive early in the trading day as the International Monetary Fund cuts it's forecast for US Economic growth to 2.2%, almost 1% down. This worry over a slowing economy lasted throughout the trading session. As if to compound the problem, Feds minutes revealed that the Feds will continue to firm policies if inflation continue to be a concern despite a slowing economic growth. Even though sentiments are largely negative today, I still see traces of buying coming in when the Dow was down about 100 points. CBOE Equity put/call ratio was also relatively stable underscoring the fact that there is still an optimistic undercurrent. This is a tricky market condition not for the weak of heart.

TECHNICAL ANALYSIS
What looked like a scary drop today in the Dow was actually nothing surprising. Like I mentioned yesterday, I would not be surprised to see a drop in the Dow back down to the bottom of the "Secret Bullish Channel" (please see my post on 27 March on the Secret Bullish Channel) before rebounding. Looks like it is behaving totally according to plan. There is still some distance to the bottom of the channel and so I will not be surprised to see another down day tomorrow.

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Stock Market Continue To Crawl Ahead of FOMC

It is incredible to see so many analysts and news reports screaming 8 days of continuous gain in the Dow at the top of their voices when the last 2 days have been merely sideways days. In fact, the last 2 trading days have been as good as extensions of the Good Friday long weekend. The truth is, the "8" days of gains are only as good as 6 days of gains and such straight gains usually doesn't lead on too well. Investors are still eagerly waiting for the effects of tomorrow's FOMC release and the performance of companies in this new round of earnings. AA kicked off the earnings season well as it out-performs analyst estimates and went up more than 2% in after hours trading. Tomorrow shall be judgement day. Seriously, I will not be surprised to see the market go down tomorrow no matter what the outcome may be with the Fed or earnings releases, but I will be concerned about how strong that decline is and how much public support is behind that decline. If I see a weak decline or a gain, then perhaps better days are indeed coming. If I see a strong decline, then we are all back to square one.

Markets Stagnant Ahead Of FOMC

FUNDAMENTAL ANALYSIS
Markets were sideways today ahead of the FOMC release as usual on below average volume. This is a tradition all investors seems to obey so far, no matter how predictable the actions by the Feds may be. Not even the drop in oil price manage to pump the markets up. Well, tomorrow is going to be another thinly traded sideways day until the Uncle Ben announce another rate pause this Wednesday. The economic data so far still suggests a balance between inflation and economic growth. This makes it extremely hard for Uncle Ben to raise or cut rates. Let's continue to wait and see.

TECHNICAL ANALYSIS
Markets are sideways today on low volume. This suggests that the 5 days rise is coming to an end. In relation to the secret bullish channel as shown in the picture below, it seems a little early to start a retreat back down to the bottom of the channel but it can happen as such channel analysis are never a precise science. Technical traders always read what the market is doing now instead of sticking to prediction. If the Dow should correct slightly now, it would test the bottom of the channel at about 12400, failing which, we should see a testing of the 12250 support level next. Markets remains uncertain but slightly inclined to upside.

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The Dow's Steady Advance

The Dow has been secretly and quietly crawly upwards along a short term bullish channel even though volume remains very thin. A look at the weekly charts revealed that the Dow is climbing steadily along a rising 30MA with rising momentum. If the Dow makes yet another higher high and higher low this week, I would be convinced that the market is ready to come back. This is going to be a heavy weight week again with a couple of heavy weight releases including the Fed Release. (Please See Option Trader HQ For Weekly Market Calendar) The pressure on oil prices has also been alleviated with the release of the British sailors and that certainly puts another point of optimism to the market. As more and more good news comes into the market, so will more and more bullish participation and that is certainly what a good bull trend needs. Will we get these good news this week?


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HAPPY EASTER DAY!!!!
A time to remember our Lord Jesus Christ and for quality time with our loved ones!

Stocks Inched Up As Oil Crisis Eased

FUNDAMENTAL ANALYSIS
Crude oil hit an intraday low of below $64 today following the release of the 15 british soldiers. Even though oil closed back up slightly above $64 due to an unexpected drop in crude inventory, that little episode has helped to ease a lot of crude related worries and helped the market inch up a little. The Dow was up by 19.75 points and the Nasdaq composite was up by 8.36 points which was a far cry from yesterday's move. Market action has also been sluggish whole day with completely no sign of any momentum being carried forward from yesterday. Indeed, as our technical analysis has revealed yesterday, there wasn't enough volume support for yesterday's move and it isn't surprising to see those buying interest drying up by today. Good Friday is at our doorsteps now and I suspect we should see a low volume, slow day tomorrow as investors prepare for the long weekend.

TECHNICAL ANALYSIS
A sideways day today. To me, a sideways day is when the index close within the range of the previous day. Today, the Dow closed neatly within yesterday's top range as buying interest dissipitates. Again, volume was low and uninspiring and major indices remains short term overbought. There just didn't look like there are any enthusiasm or energy left in the market to go any further up. A research report once stated that there is a better than 66% chance that the market will drop within the next 5 days following a 5 days gain. Is this where it is going to happen? For now, both the bulls and bears continue to co-exist in this market with slight supremacy over each other from time to time.


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Dow Rises Along "Secret Bullish Channel"...

TECHNICAL ANALYSIS
Remember the Dow's "Secret Bullish Channel" that I mentioned yesterday? If not, here's a quick recap...

"Looking at the daily charts, the Dow seems to be secretly forming a bullish channel. The probability of a Dow rebound remains high as indicated by a strong 30MA support on the weekly chart.... if we see a strong positive day tomorrow, then this secret channel may well be real and we might indeed be in for another positive April."



The Dow broke marginally above its 12500 resistance level on an extremely impressive 128 points gain in a day, however, the question is, does this constitute a "Strong Positive Day"? I still have my reservations even at this critical point in time as volume remains weak, suggesting that this gain may be due to a few institutional bargain hunting instead of mass concensus. When the mass jump in, we should see volume above the 30days average volume. At least that's my personal take. The Nasdaq composite is also just a short distance from its 2455 resistance level and with its short term stochastics just slightly below overbought, it may muster enough energy to make a break tomorrow.

This is indeed a technically challenging scenario where it has become difficult to put a finger on where the market might head. On one hand, we have the Dow following a nice Secret Bullish Channel upwards, supported by a strong weekly chart but on the other hand, we continue to see a weak level of participation on very big up days like today which makes the whole move a little suspicious. If the Dow should regain its bull trend from here, the next level of resistance would be around the 12745 region.

Based on the trend so far, I see a developing bull trend started by the dragon tail formation that I mentioned on 14 March 07. I just need further convincing before taking definite action. For now, I go balanced long short.

(There will be no fundamental analysis today due to the long technical analysis that I have wrote, however, it can be noted that this market rally could also be contributed to the sudden series of drops in oil prices as the situation with Iran over the captured British soldiers lightened up.)


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Oil Lifts Energy Sector, Floats Market

FUNDAMENTAL ANALYSIS
Stock market closed very slightly up today as the Dow closed up 27.95 points and the Nasdaq composite closed up 0.62 points. In a way, stock markets barely stayed afloat today and much of this bouyancy has been contributed by a bargain hunting spree in the Energy and Utilities sector following a drop in oil price from it's intraday high of $66.69. Major indices actually spent most of the day in negative territory as the ISM index turned out worse than expected and comments from St. Louis Fed President William Poole that the Fed is unlikely to cut rates even if the economy slows down. As we can see from the recent market actions, sentiments remained largely mixed even though April was a historically good month for the stock markets. Certainly, times have changed... or have it?

TECHNICAL ANALYSIS
I was surprised today by the mixed market action as the Dow and the Nasdaq Composite closed largely sideways. One thing that went right was that major indices did open up and end up as I mentioned last Friday (that after a huge doji day with rising volume, the market will end in the direction of its opening the next day.). That does mean that the bulls have won the day, doesn't it? In a way, it might. A new, interesting twist, has been created today in the Dow. Looking at the daily charts, the Dow seems to be secretly forming a bullish channel. The probability of a Dow rebound remains high as indicated by a strong 30MA support on the weekly chart, however, I still think it will fall back down through that channel to the 12100 support level as participation in today's positive move remains weak. But, if we see a strong positive day tomorrow, then this secret channel may well be real and we might indeed be in for another positive April.


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