Stock Market Analysis

Thursday, June 28, 2007

The Dow Flat On Crude Oil Spike

option trading mentor
The Dow closed flat today as a volatile but bullish inclined session was put back to the neutral line by a spike in crude oil and petroleum prices. The summer heat caused a surge in power utilisation that resulted in an unexpectedly large drop in crude inventory. This drop pushed the crude oil price to above $70 intraday. This surge in crude price put significant pressure on the stock market and erased the optimism generated by a fairly optimistic Fed report. Seriously, the week so far hasn't turned out so bad and the releases so far are fairly optimistic. Tomorrow's Chicago PMI is the last of the heavy weights this week and I believe that will be the final hurdle that will release the bulls.

The Dow ended in a sideways day today. The internals still looks great at the multitude of ETFs that I spotted with reversal signals continue to be valid. All other technical indications remain the same as yesterday with the Dow still nicely poised for a rebound from its short term oversold position. How far this potential rally will go is really the question. I do not expect a big move yet as the weekly charts still look way too high. I would expect the Dow to be range bound until the weekly 30MA catches up.

Dow Technical Chart By Best Charting Software TC2007!

Wednesday, June 27, 2007

The Dow Ready For A Great Rebound!

Well, Even though the Dow was not up by a lot today, our scans showed up a ton of ETFs showing very strong reversal signals. Such a huge number of ETFs pointing to upside only means that the undercurrent is strong and ready to rally. I eagerly await what will happen these 2 days.

Tuesday, June 26, 2007

The Dow Closed Sideways On Lower Consumer Confidence

The Dow closed sideways again as consumer confidence numbers turned in 10 months low. The consumer confidence index is a survey of 5,000 consumers asking them how they feel about the current economy and their spending patterns. They will also be asked how confident they are about buying expensive consumer goods. The report is split into how people feel now and their expectations over the next few months. It is not a major economic index and its results does not corelate directly into economic wellbeing. That is probably why the Dow managed to hold on sideways despite a pretty discouraging reading. Tomorrow is expected to be another dry day in the market as investors await news from the Fed on Thursday. Strangely, even though we all know that the Feds are most probably going to hold interest rates stagnant again this time round, most investors still prefers to sit on the sidelines prior to the release.

The Dow closed marginally lower today as volume continues to dry up.... a good sign for the bulls. On the weekly charts, it still does seem like the Dow needs to find a way to touch the 30MA line again, either by means of a big correction to about 12780 or remain range bound until the 30MA line catches up with it again.

Monday, June 25, 2007

Uncertainty Ahead Of Consumer Confidence Numbers...

option trading mentor FUNDAMENTAL ANALYSIS
The Dow closed sideways today as the bulls and bears wage a ferocious battle for supremacy today, ahead of tomorrow's Consumer Confidence number. Even though the Consumer Confidence number tomorrow is not a historically market moving indicator, it still does cast some light on what to expect for the really big numbers later this week. (please see option trader hq for economic calendar)Even the total equity put/call ratio turned in almost neutral at 1.12 today, so it is hard to see any clear inclination. In the light of recent events, clearly the US economy is at the early recovery stage and the numbers turning in should support that view and lift the stock markets. I remain optimistic for now with regards to the fundamentals.

The Dow has officially lasped into a dangerous neutral trend from a bull trend. A neutral trend here means that it will trade up and down within a tight sideways channel. Clearly, the Dow is now trading within a channel of between 13250 and 13670. The good thing is that such a neutral trend do not usually last very long. The bad news is, if the next trend shift should be to downside, it usually goes into a bear trend instead of just a minor correction. It is clear by now that the all important 30MA is no longer supporting this rally and looking at the weekly charts, it is also about time the Dow make a landing back onto the weekly 30MA before its rally can resume. Such a landing can be as low as 12780. The last time the Dow landed back down on its weekly 30MA is during the 27 Feb ditch. It is hard to make any predictions right now as the Dow can also remain within its neutral channel and let the weekly 30MA catch up to it instead. Such is the time to be fully
Dow Technical Chart By Best Charting Software, TELECHART 2007! Get Yours Now!

Sunday, June 24, 2007

A Heavy Weight Week Ahead

The Dow retreated a grand 279.22 points last week in a giant pullback which took it to a 6 weeks low. Last Friday alone contributed to a 185.58 points pullback. I don't know about the rest of you but the ditch last Friday really surprised me. Well, with last week's action behind us right now, we see a very rough week ahead as heavy weight releases like the GDP, Chicago PMI and the FOMC release lines up (please see economic calendar). It is definitely going to be one volatile week. Hang on for the ride!

Thursday, June 21, 2007

The Dow Rebounds On Energy Sector Rebound!

Option Trading
The Dow gained 56.42 points today as the energy sector rebounded over 2% after yesterday's ditch. The energy sector recovered as signs of strength returns to crude oil prices. Crude oil price almost hit the $70 per barrel level today before turning down again to close marginally lower, however, that is enough show of strength for the energy sector to come back up again. The Dow's gain may look little when compared to yesterday's close but if you look at how low it went today before coming up, you would see a full recovery range of 146.97 points in a day! Now, that's awesome or what?

The Dow made a dragon tail formation today, which is a very strong bullish signal. The last time we saw a dragon tail formation was back in 14 March, which started this whole rally! A dragon tail formation is a 2 days formation which consist of one down candle followed by one small up candle with a long long bottom wick. This is like the traditional chinese dragon which signifies a good harvest if one spots it in one's field. A dragon tail formation in our "field" signifies a good rally to come. :)

Dow Technical Chart By Best Charting Software TC2007!

Wednesday, June 20, 2007

Enery Sector Hit On Falling Oil Price

Energy sector led the way down today as a 2.9% drop in that sector pulled the Dow 1.09% lower today. Crude oil prices took a plunge today by more than a dollar as the crude inventory reports a larger than expected crude buildup. This is really an unusual phenomena as falling oil prices usually means a rising market but this time, it does seem like the energy sector has taken too hard a hit. I would expect this effect to be temporary as it provided some excuse for investors to take some profit off last week's gains and that falling oil prices and falling inflation are fundamentals necessary for this market to grow for now. I remain optimistic and so should you.

Surprise surprise surprise. The Dow surprised us again with a ditch when it is supposed to make another new step in the staircase formation. It is hard to tell if it is just another fake out like it did back in 11 April and 10 May as the technicals on these days all sing to the same tune. If this is just another fake out, then tomorrow should see a rebound of at least 0.5%, if not, the market could way laspe into a dangerous neutral trend which will inevitably lead to a major correction.

Dow Technical Chart By Best Charting Software TC2007!

Tuesday, June 19, 2007

Stocks Continued To Crawl Through This Quiet Week

The Dow ended marginally higher today by 22.44 points as market action continues to be weak into this quiet week without any major releases. In fact, this is best regarded as a sideways day as it closed well within yesterday's tight trading range. Fundamentals can't tell us much today... let look at the technicals.

Well well, more evidence that the Dow has regained its staircase formation as it makes yet another sideways day. This is going to be so classic and we should see another big up day by tomorrow or the day after to really confirm the staircase formation. Short term stochastics has just barely entered short term overbought region, suggesting still more room to upside. Bullish momentum is also growing steadily. The next 2 days will be critical.

Technical Analysis Chart By TeleChart2007!

Monday, June 18, 2007

A Quiet Start To A Quiet Week...

Option Trading
With all the excitement behind us and most of the positive news already priced into last week's over 200 points move, it is certainly not strange to see such a quiet start to a week like this without any major release. The Dow was down marginally by 26.50 points today in a sideways maneuvor. Oil seems to be the only mover today and that might bring the energy up with it if it should continue tomorrow, however, if it goes into a sustained rally, which I do not think so, then it could put some pressure on the stock market. The $70 per barrel level is now pretty much a psychological resistance level and a level which might cause some panic if exceeded... we shall also keep an eye on that.

Nothing surprising today as the Dow regained its staircase formation at last. I would expect another one or two day's sideways movement before the Dow makes another step up. Short term stochastics are still slightly off the overbought region and bullish momentum continues to build up, all is set for the staircase formation to go on and on. In technical analysis, the most important thing is the identify the prevailing chart pattern and find evidence to its strength or weaknesses. Here, the Dow has been on what I personally call the Staircase Formation, a formation where one big up day is followed by 3 to 4 sideways, small candle days and then another big up day.

Technical Analysis Chart By Best Free Charting Software : Telechart 2007!

Sunday, June 17, 2007

A Quiet Week Ahead

The Dow made the classic, text book, rebound that I mentioned and rallied a total of 215.09 points last week in a spectacular come back. With the Dow's short term stochastics still off the overbought region and a growing bullish momentum, this rally be expected to continue through this quiet week. Let's look forward to a rewarding trading week ahead!

Thursday, June 14, 2007

Core PPI Matches Analysts Expectations

The Dow gained another 71.37 points today after core PPI matched analysts expectations, giving more signs of an abating inflation. The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation. The CPI numbers tomorrow is certainly more important than the PPI numbers as it reflects the change in prices at the consumer's end directly and is a much more important inflation indicator than the PPI. Stay tuned.

We witnessed the first real bullish followup today since the correction started on 5 June. This follow up has allowed the Dow to rebound off its 30MA support line. However, it is still a little lacking in volume and doesn't make it a very strong rebound. Unless I see a strong hundred point candle tomorrow, or very soon, along with growing volume, I cannot convince myself that the Dow's staircase formation has resumed. However, our momentum indicators are definitely flashing a growing and steady bullish momentum and short term stochastics are also rising steadily. Both tells me that the bulls have definitely woke up on the Dow and is just awaiting the right moment to strike.

Wednesday, June 13, 2007

Economic Expansion Without Inflation Pressure

The Dow skyrocketed 187.34 points today the very moment the Fed Beige book release an economic view that suggests "Economic Expansion Without Inflationary Pressure"! Wow, what gets better than that? That is the kind of news the stock market rallies on. In fact, investors have been secretly bullish on the release before it even happened as advancers led decliners more than 2 : 1 before the release.

The Fed Beige Book is a summary of anecdotal information on current economic condition from each Federal Reserve Bank in each District through reports from Bank and Branch directors and interviews with key businessmen, economists, market experts, and other sources. The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings.

The main worry of economic expansion is inflation. Economic expansion without inflation truly is the holy grail of every economic and as long as this continues on, the stock market will move onwards and upwards. The next thing that can push the market even further are favorable PPI and CPI numbers, supporting the view that inflation is indeed well under control.

Yesterday's ditch proved to be a fake out indeed as the Dow regained ground in one day and stood atop the 30MA support line again. In fact, it is now 5 points higher than last Friday's close and all our short term momentum indicators are showing the beginning of a bullish momentum. Looks like my view still stands so far and I await the come back of the staircase formation again. :)

Technical Chart By Best Charting Software Of The Year : Telechart 2007!

Tuesday, June 12, 2007

Bonds Weigh On Stocks

The Dow ended what was shaping up to be a positive day down 129.95 points on rising bond yields. After such a great run in the stock markets, it is not surprising to see a move into bonds to better secure those gains so far. Even though the Dow has surrendered much of last Friday's gains, the real market moving news are still to come with the PPI and CPI numbers. In a couple of days time.

Much to my surprise, the Dow gave up the 30MA support line and made a run downwards. However, one day down does not suggest anything at all and I continue to stand by my analysis of yesterday.

Monday, June 11, 2007

Bulls and Bears In A Draw...

option trading mentor FUNDAMENTAL ANALYSIS
The Dow closed flat today as it gains a mere 0.57 points or 0.00%. Not only is the index flat, advancers also parred decliners 1 : 1 and the total equity put/call ratio also turned in 1.03 today. It is a rare day where every indication seems to sing to the same tune... Bulls and Bears ended in a draw today. The day started out with the bulls in charge for the first half of the day and the bears for the second half. Investors are struggling and balancing the prospects of a diminishing rate cut against an economy that seems to be picking up at last. This battle is likely to rage on until the CPI and PPI numbers later this week (please see ) and I am secretly optimistic.

The Dow is now in a perfect setup for another leg in its rally. It showed strong support as it rested atop the 30days MA as the short term stochastics entered oversold region for the first time since March 2007 and started to turn up. This looks like a perfect textbook technical correction within a sustained bull trend. We should see the Dow resume its Staircase formation soon.

Free Charting Software By Worden Brothers.

Sunday, June 10, 2007

Hope In The Horizon

The Dow dipped 243.72 points last week with last Friday staging a dramatic rebound of 157.66 points, ending the Dow above it's 30MA support line. Much of the Dow's action last week has been the result of fantastic economic releases that suggest that the economy is picking up at last. Trade gap also narrowed for the first time in a long time. These releases caused a 2 days ditch as the prospect of a rate cut becomes almost zilth. However, all stock markets move ahead with the economy and as economy moves, so will the market. This week's big releases are the CPI and PPI (please see economic calendar at ) which will paint a definitive picture on inflation status.

FREE : Read All About The Short Condor Spread !

Thursday, June 07, 2007

The Dow Goes Into Correction

The long awaited correction has indeed come to be. The Dow has broken the 30 days MA support line I mentioned yesterday and is about to test the 50 days MA support line. Seriously, I am not expecting the Dow to go lower than that as the Dow enters the short term oversold region on a healthy bull trend, however, anything can happen and I can only tell in the next day or two when the Dow reaches the 50MA line.

Wednesday, June 06, 2007

The Dow Correction Begins?

The Dow took a further hit today as it fell another 129.79 points. This is the first time in this rally that the Dow fell by more than 200 points in 2 days. This is definitely a change in character and a break in the staircase formation. Like I said yesterday, if the Dow does not make a new step in the staircase formation today, it may be in for the correction that so many people are anticipating. Right now, the Dow is very near its 30 days moving average support line. If this line holds, the Dow may do a classical textbook 30days MA support rebound and continue its rally. If that is the case, then the rebound is when we should reenter the market. If the Dow continues to move lower than the 30 days moving average line on advancing volume tomorrow, then this correction may go as far down as the 50 days moving average line at about 13100. Hang on for a rough ride...

Technical Chart By Worden Brothers TC2007 Charting Software
Voted Best Software By Readers Of Stocks & Commodity Magazine Since 1993!

Tuesday, June 05, 2007

Dow Drops As Hopes Of Rate Cut Drops

option trading mentor FUNDAMENTAL ANALYSIS
Obviously, the US market is looking forward to a rate cut more than anything else... in fact, more than economic growth itself! The Dow was down 80.86 points today as Fed chairman released a positive review on the economy and the ISM services number turning in the strongest since April 2006. These positive indications seemed to push the possibility of a rate cut into the abyss and caused an instant sell off. The ISM Services index is based on a survey of about 370 purchasing executives in industries of finance, insurance, real estate, communications, and utilities, reporting on business activity in the service sector. Readings above 50% indicate expansion for the non-manufacturing components of the economy. While readings below 50% indicate contraction. The ISM services index checked in at 59.7 today, indicating a growing service sector. I would expect any heartache due to no-rate-cut to be temporary as a growing, healthy economy is still the underlying strength behind the stock market.

Surprise surprise. The Dow did not make a new step in the staircase formation today but instead, it dropped slightly down. Even though the drop was slightly over 80 points, it is not a big drop considering the overall strength prevalent in the chart pattern. In fact, the staircase has not been broken the last 2 drops of 84.52 points (24 May) and 147.74 points (10 May). However, no speculations are accurate. Tomorrow is going to be a critical day for the Dow... it must make a new step tomorrow or risk going into a correction. Even though hedging during these times have hurt my profits somewhat the last 2 times, I would not risk not doing it again.

Technical Chart By Worden Brothers TC2007 Charting Software
Voted Best Software By Readers Of Stocks & Commodity Magazine Since 1993!

Monday, June 04, 2007

The Dow Standing Strong Again!

Option Trading Fundamental Analysis
The 8.26% ditch in the Shanghai Index doesn't seem to have any real effect on the US Market anymore as investors learnt from Feb 27 that such dips tend to be temporary and does not mean anything at all. The drop this time round was actually stronger than the last time. On 27 Feb, the Shanghai index dropped 268.81 points, causing worldwide panic. This time round, the Shanghai index dropped 330.34 points, much higher than the last time, but investors are now clever enough to understand that it ought not affect the US market. Energy stocks also led the way today as oil prices surged more than 1% again. China stock market, being an immature, panic and greed driven market, is one that is expected to be very volatile with huge gains and drops. Investors worldwide should not take China stock market's actions as reflective of economic performance... it is simply not at that level of maturity yet.

Again, no surprise today as the Dow continues to complete yet another step in the staircase formation. Nothing look out of sorts today and I would expect a new step being formed within these 2 days. The Dow has once again entered the short term overbought region and I would expect it to stay overbought to a while as it is used to trading at such overbought levels and still growing. Volume profile is also favorable so far with volume steadily declining before a new step is being made. This is the textbook volume profile for the Staircase formation. This rally just isn't going to go away just yet.

Technical Chart By Worden Brothers TC2007 Charting Software
Voted Best Software By Readers Of Stocks & Commodity Magazine Since 1993!

Sunday, June 03, 2007

A Smooth Ride Ahead?

The Dow has done well last week despite a barrage of mixed economic data. Technically, it has regained its staircase formation and is currently forming yet another step in the formation. Everything looks good for the Dow to continue its flight.