The Bulls Strike Back!

Talk about a volatile market...

Bulls came back in a BIG way despite mixed economic indicators. I heard that many hedge funds are taking positions these few days, taking advantage of every single sign of weakness in the market to establish positions. Sometimes it takes weeks to put on a single position when you have that kind of money. This is also in line with the recent surge in institution sentiments as indicated by my proprietary Institution Sentiment Index which you can see at OptionTradingPedia.com. They are obviously trying to take bullish positions today in expectation of an optimistic Job Report tomorrow. So far, the market is still in a general bear trend and the surge today certainly cannot be taken as the start of a rally until I see a definite move from bonds back into equities.

50 Points Cut Disappoints!

FUNDAMENTAL ANALYSIS
What did I say yesterday? Here's a Quote:

"So, here's the bottomline for tomorrow ... 25 points, the market down. 50 points, the market still down. 75 points and above, the market up instantly and then down within the next two days."

Well, the Fed totally disappointed the market today with their 50 basis points cut and I really have to wonder why's that. The Fed can NEVER cut 150 basis points in just 2 weeks! In fact, 125 points cut in 2 weeks is already a give away! But, the market being greedy as it is now, wasn't pleased with merely having their demands fulfilled like some spoilt child, bringing the Dow down from its day high to end down 37.47 points. That was the reasoning behind my predicts yesterday. Adding some pessimism in the background is the GDP number disappointing with only 0.6% up. This really feels like what some analysts call a "Gro-cession" where the economy grows at almost zero rate, slightly above recession but feels totally like a recession. So, what's the way ahead? The Job report this Friday of course! (see economic calendar) The Job Report is likely to be optimistic and perhaps even beat estimates due to increased employment due to the rising export sector. In fact, the ADP numbers turned in very healthy today as well. The Job report is a classic, grandfather-of-all, economic indicator which is always positive if it is healthy. So, anymore rate cuts ahead? I seriously don't think so. The inflation indicator that the Feds are watching turned in very worrying today. Core PCE and PCE both shot skyhigh compared with the numbers in December.

TECHNICAL ANALYSIS
The Dow formed a huge shooting star signal today indicating weakness in this short relief rally and possibly the start of another leg down. A shooting star is a candlestick signal which has a small, negative body with a long tail on top. This signal is created due to the bulls being brutally beaten down by the bears throughout the day, dragging the stock down from its intraday high to end negative for the day. If the Dow should turn down from here, we would be paying a lot of attention to a test of the 12000 level. Breaking that level would push the market further into this bear market. However, if the 12000 level holds, it would form a double bottom, which is an even stronger point from which to accumulate a rally.


Dow Technical Chart By Best Charting Software TC2007!

FED DAY!

Uncle Ben and his gang started their 2 days meeting today and will be releasing their rate decision tomorrow.

The strong Durable Goods Order number today indicated that the economy is still stronger than most has expected and brought down Fed fund futures a little. It is now pretty uncertain what the Fed is going to do... 125 points cut within 7 days in this environment is just unthinkable.

So, here's the bottomline for tomorrow... 25 points, market down. 50 points, market still down. 75 points and above, market up instantly and then down within the next 2 days.

Bullishness Ahead Of The Fed...

Aren't we all fed up with all these false moves prior to the Fed decision? However, is the Fed decision really that important this time round? In my honest opinion, the most important report this week is the Jobs Report this Friday, which will really cast some definitive light on the health of the economy. No rate cuts is going to help the market for real, only renewed faith in the economy will. Earnings coming in so far has been mixed and reflective of the general health of the economy. Too much uncertainties this week... very bad for traders.

The First Positive Week Of 2008!!!

The First Positive Week Of 2008!!!

Ok, the Dow's only 0.39% up, no big deal, but hey, this is the very first up week in 2008! That's what's making it so significant!

Is this the bottom? Near... but just not yet, especially with the Fed coming up again next Wednesday. The market is pricing in a further 50 basis point cut, which is another way of saying, "If the Fed doesn't cut more than 50 points, we are going to throw tantrum and SELL!!". Well, that's the market talking there. Does it even make sense for the Fed to cut 125 basis points within 7 days???? Think for yourself! Monday's going to be a cautious day, probably pull back a little bit on moderate volume across the board as investors take some more ka-ching into their pockets before the Fed on Wednesday. All eyes are on the Fed next week and the ISM numbers. Its gonna be a heavy week!

If you still don't know how to profit no matter which way the market goes to, its time you pick up Options Trading!

Dead Cat Bounce Starts....

FUNDAMENTAL ANALYSIS
More good news today gave fuel to the bulls, bringing the Dow up another 108.44 points. Jobless claims are down another 75k and earnings have been hot hot HOT so far! We also saw a return from bonds back into equities as bond yields rise across the board. On top of that, institutions are also increasingly bullish as indicated by my proprietary Institution Sentiment Meter as funds started moving in to take up positions for the year. On top of all these, a proposed bail out of the bond insurers gave lift to the financials across the board. Short term prospects does look good for the market right now especially with oil prices this low relative to where we were a while ago. The long term still looks bleak as there are certainly many plans to get out of this crisis but nothing firm and no real results yet. The market is also pricing in a 50 basis points cut next week. A 50 basis points cut would definitely help get the economy out of the subprime mess from the bottom up and the bottom is where the real problem lies. Well, with the regulators in such a state of panic, it does hint at more problems to come and yes, this crisis is still far from over but when the end if near, we can be sure that the stock market, as a discounting mechanism, would price it in way beforehand.

TECHNICAL ANALYSIS
Today's a feeble follow up to the nice reversal signal formed by the dragon tail formation 2 days ago. However, with the signal formed up and followed up so nicely, there seem little reason why we should be skeptical, at least for the next few days to a week. As for tomorrow, well, I would be skeptical that the market would go up significantly for a third day in this weak market. 3 significant days up are really rare even in strong markets. By significant day, I mean anything more than a 50 points move up in the Dow Jones.

Follow Up To Dragon Tail...

The Dow rallied an intraday range of over 600 points in a spectacular follow up to yesterday's Dragon Tail Formation! This is the kind of follow up that gives a lot of strength to the Dragon tail formation! Well, I do see a rebound from this point onwards for perhaps a few days or a week before the market turns down again. The market's just not ready for a full scale rally before the Fed funds rate hit rock bottom.

Calamity Averted....

FUNDAMENTAL ANALYSIS
What was shaping up to be a historic 500 points opening to the downside with a possibility of ending the day 1000 points lower, ended up much "better" than expected when the Fed jumped right in with an Emergency Rate Cut of 75 basis points! (1 basis point = 0.01% by the way)This is the BIGGEST emergency rate cut given since 1984! Some analysts think that all Uncle Ben did was to show the state of panic that the regulators are in and some others think that he is catching up with the curve at last. No matter what anyone says, reality speaks for itself with the market pulled back from the edge of calamity. Well, that goes to show that rate cuts do work afterall and that investors are much more savvy compared to the crash of 1987. Investors do recognize that such weak openings are perfect time to be buying as such huge ditches usually heralds a rally. Such expectations in an efficient market has the power to prevent the huge ditch from happening in the first place. Therefore, I think the market action today proves 2 things; 1. Rate cuts always works... its just the magnitude of the cut that matters. 2. The markets are getting more and more efficient as the textbooks suggests. Indeed, I do see a few other factors that are contributing to the possibility that the bottom is near. Firstly, bond yields have really been severely depressed over the past few months. In fact, the short term bond yields are so low now that soon investors would start to notice that the returns on these bonds hardly offset inflation and that equities are looking extremely cheap, hence a move back to equities. Such a flight to bonds is also indicative that inflation is really not as much of an issue as the Fed has expected. Secondly, oil prices are also severely beaten down, hence reducing the possibility of further energy driven inflation, reducing production costs and allows the Fed more room for rate cuts. All in all, the case looks good both fundamentally and technically for a bottom soon.

TECHNICAL ANALYSIS
Yes, the Dow ended in a dragon tail formation day again. A dragon tail formation is an inverted hammer with an extremely long tail occuring at the bottom of a significant draw down. Dragon tail formations are extremely strong reversal signals and needs an up day tomorrow as a follow up in order to confirm. The Dow rallied back on 17 August 2007 on a Dragon Tail formation as well. In fact, this dragon tail formation occured in line with our expectation of a dead cat bounce. With the market this oversold and multiples plummetted across the board, investors would certainly be accumulating at this point for a few days at least. In fact, this could shape out to be the first up week of 2008.


Dow Technical Chart By Best Charting Software TC2007! Download Now!

Grim Grim Grim... Grimace?

WELCOME BACK FROM THE LOOOOONG WEEKEND!

It sure felt like a really really long weekend as we watched Asian market meltdown and futures pointing to 500 points downwards in the Dow! So far, the "Stimulus Package" proposed by President Bush had served as nothing but a confirmation of the fears in the market so far... that the US economy is indeed in serious problem. So far, many investors are speculating that this is nothing more than a technical correction, however, with the President getting involved, they now know that its not as simple as that and are dying to get out quickly. The good thing about all these is that it is always the grimest before the grimace. We do need some stimulus for a big shakeout before the dead cat bounce that I mentioned could even take place.

The Bears Take Over...

Well, the only good thing a stock options trader like myself can say about the market now is that, clearly, the bears has taken over. Which is a good thing for aggressive directional traders like myself. The only questions to answer now are, how long, how low? Like I mentioned yesterday, the near term prospects are pretty clear; A test of the 2007 lows, failing which a test of the 200WMA at about 11400 would be in order. Even if the 2007 low holds, I don't see it as a significant enough level to stage a sudden turnaround in this weak environment, therefore, any rebound can only be construed as a dead cat bounce. The long term prospects remain extremely scary. If history is anything to go by, a precipitious decline all the way to 10000 could also happen in a period of crisis such as this one. I am not trying to scare anyone, neither am I predicting anything. As a trader, I merely trade whatever the market is doing, not what I think it will do. I think a huge shake out is good both for the economy and the market. Let the punters exit the stock markets and let the subprime loans disappear forever (subprime should never exist in the first place and anyone not fully qualified for credit should never have access to it!).

The REAL Credit Crunch Begins....

FUNDAMENTAL ANALYSIS
If you think the credit crunch is bad enough and that the worst is over... think again.

These bad mortgages has been creatively packaged into bits and pieces by the banks and sold it to third parties who do not have any idea what these papers are worth, just that these papers generate a consistent interest and that they are guaranteed by insurance companies that are supposedly "AAA". Now, many of those "AAA" guaranteed papers are still floating around thinking that they are still safe and so, not written off at all. BUT, what if the insurance companies guaranteeing these papers are going to DROP THEIR AAA RATING altogether??? That will REALLY make those papers worthless and result in precipitious write downs across the economy! More banks are going to be hit, more insurance companies are going to be hit, more more more! That's RIGHT! AMBAC and MBIA, which are the 2 major insurance companies guaranteeing these papers are considering to drop their AAA rating! This financial system is going to go DOWN! Even worse, there are now signs that the consumers who used credit cards to finance these obligations are beginning to default on their car loans and credit cards as well! This is going to be the perfect storm brewing and the bottom may still be a mile below.

TECHNICAL ANALYSIS
With the break below the neckline of the head and shoulder formation, the Dow faithfully moved lower today. In fact, it does look like the next support level is all the way down to the 2007 lows at about 11900, which is a fairly weak support level, failing which, a test of the 200WMA at about 11400 might be in order. Anyone who bought put options on the DIA would have made good money by now. Yes, stock options traders would be able to nimbly take advantage of this meltdown quickly. Over the next few trading days, it will not be a surprise to see a little pullup just because the market has dropped so quickly but I would rather prefer to ignore such a pullup nor to try to take advantage of one. This is a bear trend no doubt and it may get as ugly as any of the market slumps we have witnessed in the past... or worse...


Dow Technical Chart By Best Charting Software TC2007!

No Rate Cuts....

FUNDAMENTAL ANALYSIS
You know what? Core CPI numbers came in inline with expectations at 0.2% while headline rate came in 0.3% and hey, no news from Uncle Ben! What does this mean? Even though the inflation number is inline with expectations, analysts expectations is clearly not what the Fed is expecting to justify an early cut! We all know by now that if inflation numbers turn in favorable that the Fed will throw in a rate cut almost immediately following the release but hey, NOTHING! That threw the market into a complete disarray that ended the day right about where it begun. Does that mean that the Fed is not going to cut rates afterall? MAYBE! If there is any intention to cut rates under the present pressure on the dollar and surge in gold and inflation number, Uncle Ben would have cut... TODAY! Well, the next big thing would be what Uncle Ben says in congress Tomorrow. BUT, IMO there is too much talk! Its time for some action! Price multiples have been severely depressed with the multiples compression so far and it does look ridiculous to see multiples compressed further across the board. If the Fed does please the market, we could see a really huge rebound. That's a really BIG "if". So, what exactly is "Multiple Compression"? This is a term coined up by popular finance describing a situation where Price Earning Ratios of stocks are took down across the board in a broad bear market.

TECHNICAL ANALYSIS
Huge doji formed today in the Dow with after market futures pointing upwards. All indications suggests that the relief rally or more technically known as a reaction rally is going to happen over the next few days... nothing to cheer about as all technical patterns and indications are starkly bearish. In fact, patterns formed over the past year looks like how it looked just before the 2001 crash! Well, I continue to be wary and continue to balance call options with put options in order to react quickly to any degradation.

Tomorrow's The Big Day...

Today's drop may look scary but, in case you have not noticed it yet, it merely took the market down to the 9 Jan low, back down to where the market started going sideways. Where it is really going to go really depends on 2 things:

1. CPI numbers turned in lower than expected like the PPI did today.

2. The Fed throw in a rate cut immediately following the favorable CPI number.

I am against a rate cut for the sake of saving the market but I think that's what the Fed is going to do anyways if CPI numbers convince him that inflation is not yet a serious problem. (Yes, he's just kidding himself... the inflation situation is clearly very bad right now evident in the flight to gold.)

All Cards Hidden Till CPI Numbers...

The CPI numbers coming this Wednesday is the most important that I have ever waited for. In fact, any market action prior to the CPI numbers are merely misleading moves. Why is that so? That is because Uncle Ben could cut rates the moment the CPI numbers are released! YES! Uncle Ben wanted to do something during the last Fed speech but he held back because he wanted to see how inflation is behaving before taking the shot! If the CPI numbers turns in lower as expected, Uncle Ben could drop the case for inflation and just cut fed fund rates 25 basis points and the discount window by another 50 basis points! However, if the CPI numbers turns in HIGHER, I can assure you that the market is going to be very very disappointed as it will not only kill any possibility of a rate cut right after the CPI numbers but also during the meeting end of the month. Gold is making a rush along with the continued downwards shift in the bond yield curve. All these goes to show a general concensus that inflation is indeed a concern and a flight to wealth protection is underway. So, all cards are in the hands of the CPI numbers and any speculation before the release are just that, Speculations.

Another Volatile Week Ahead...

Welcome back all of you and thank you for faithfully following my rantings. :)

This is going to be another very volatile week with focus on the Producer Price Index on Tuesday and Consumer Price Index on Wednesday for indications of inflation as well as the jobless claims numbers on Thursday. Friday's options expiration is also certain to add volatility to an already volatile week (see economic calendar).

The market has priced in another 50 basis points cut this time round and that really is forcing the Fed's hands. Uncle Ben, being one of the most repectable economist in the US, knows that recession is cyclical and easy to handle and get out off but hyper inflation is something that will completely destroy the economy. In ancient times, almost every single dynasty and empire collasped due to inflation, not recession. In recent times, severe inflation has forced dramatic changes to the extend of revising the entire currency system. Recessions never have such an impact. Furthermore, the economy looks more like it is going into a STAGFLATION instead of a mere recession or inflation! If the CPI this week continues to turn in higher along with higher jobless claims, the case for a Stagflation will strengthen. What we do know now is that the Goldilock economy that we have enjoyed over the past 7 years is clearly over. A Goldilock economy is an economy that is growing at a healthy rate along with very moderate inflation. Kinda like the ideal case.

On the technical front, the Dow continue to struggle around the August lows over the past few days and does continue to display a lot of bearishness. Under such pessimism, any rally from this point is likely to be a dead cat bounce or what is known more commonly as a bull trap or a fake rally, especially with the breaking of the neckline that I mentioned on Friday. This is the time to be extremely nimble and to trade short term swings using both call options and put options in order to leverage returns on those very small moves. Don't know how to trade options? Let me teach you options trading personally over a 30-day mentoring course!

There Goes The Second Week....

The weekly chart pattern for the Dow has never looked this gloomy for decades.

The second week of the new year ended the Dow down 1.51% and broke through the neckline of the most perfectly formed head and shoulder formation that I have ever seen on the Dow. A head and shoulder formation is a technical chart pattern which is a chart pattern looking like 3 mountain peaks with the central peak higher than the other 2 by its sides. All 3 mountains have the same support level, called a neckline, which in this case is around 13000. A break below this neckline is an extremely bearish signal. Furthermore, this head and shoulder formation break is supported by all kinds of bearish fundamentals, making it less likely to be a Bear Trap. In fact, any rally next week would very likely, as I have mentioned, to be a dead cat bounce. The credit crunch is far from over with Merrill Lynch announcing more writedowns. Its definitely going to be a very bumpy 2008 ahead. In fact, like all crisis, we should see a couple of high profile wind ups, which so far, none have happened yet.


Dow Technical Chart By Best Charting Software TC2007!

The Reaction Rally Begins...

TECHNICAL ANALYSIS
Today, I decided to put technical analysis right up front... for obvious reasons. ;-) The reaction rally that I have been talking about for the entire week seems to begin at last after rebounding off the August low intraday yesterday like I predicted it will. Here's the catch... reaction rallies are sometimes known as Dead Cat Bounces. The Dow continues to be range bound within a declining short term channel. The test of the 30WMA at about 13400 will be critical. So, Yes, I do think the market is going to go up for now, at least to 13400. In fact, I just closed out all my profitable put options positions today.

FUNDAMENTAL ANALYSIS
Coincidentally, a number of fundamental reasons collided today to produce the rebound off that August low I mentioned above. Jobless claims are down 15,000 to 2 months low, retail sales are ok, crude oil retreats intraday plus a Bernanke speech that seems to say that he getting out from under the rock at last. However, lets not forget that 67% of the retailers missed expectations and that Walmart's earnings are surging, indicative of consumers moving from luxury to better prices which does suggest that consumer spending power has indeed been affected so far. More rate cuts?? What this economy needs is some FISCAL POLICY, not more MONETARY POLICY! Give small businesses TAX CUTS and stop feeding the market with rate cuts! Tax cuts increases employment, spending power and consequently earnings without the drawback of immediate inflation! Tax cuts, not rate cuts, will cure this economy.

First Real Up Day Of 2008!

Well, today marks the first real, significant, up day in the stock market for 2008. :) A couple of great earnings releases really encouraged some investors to jump right in for some speculative cash this earnings season late in the day. However, it seems like participation isn't all that impressive as bond yields continue to drop across the board, as the flight to quality continues. Even though it was an up day, it really did nothing to reverse the bearish trend so far, at least not yet. Tomorrow's jobless claims and wholesale numbers are likely to point to more recession and probably erase all the gains we saw today, just like it did late last November. HOWEVER (and that's a BIG however), if the market should close yet another significantly higher day tomorrow, ideally beating the high of 8 Jan, we could see that reaction rally all the way to the 30WMA that I have been talking about for days now. Fingers crossed.

Soft Earnings Expectation Ahead...

FUNDAMENTAL ANALYSIS
Just as I feared, companies are coming out of their holes one by one to warn of soft earnings ahead. I have been building a case of a possible STAGFLATION over the past few days and these earnings warnings just days ahead of the earnings season further supports that view. Gold also hit a record high of $880 today as inflation fears rises dramatically. Growing inflation fears, sloppy earnings ahead and slowing employment... everything continues to point to the dreaded STAGFLATION. What if the Fed really do cut rates again? Well, it will definitely feed the stock market for a day or two but when the inflation numbers start coming in much higher again follow that, the stock market is going to take back all that gains and go down some more... we have seen that over the past few months now, haven't we?

TECHNICAL ANALYSIS
The Dow was so extremely weak today that the November low failed to provide any support at all! Rather than go up a little to test the 30WMA before falling down the cliff, it is jumping right off the cliff right now! I am going to look at the Aug lows at about 12517 for some support, otherwise, this market is cooked! That being said, with such a panic and the total equity put call ratio surging into put options, it is not surprising to see that reaction rally up to the 30WMA over the next few days. Stock Options traders might want to make sure your aggregate options delta is negative by now.

More Jitters...

Not surprising to see a small sideways day after such a strong drop and certainly not strange to see a short term rebound off from tomorrow onwards as the Dow reaches the strong 12800 support level. With more talks of a sour economy coming directly from the White House, it is hard to conjure any sense of optimism and my range bound expectation seems coming to be. I will be watching 2 critical levels, a breach of either level could spur a mid term reaction in that direction; 12800 and 13500 (coincidentally, the 13500 level is also the 30WMA level which I mentioned yesterday). Again, remember the 2 golden principles in technical analysis... Significance & Prudence.

Range Bound Trading For The Rest Of The Month?

FUNDAMENTAL ANALYSIS
Plenty of reasons to be bearish right now as more and more evidence of a very tricky economic condition develops in the US. There are 3 bad things that can happen to every economy; Recession, Hyper Inflation and Stagflation. Of the 3, recession is definitely the easiest to handle. What I fear is that recession may be a complete understatement because the US economy could instead moving into a dreaded Stagflation! So far earnings growth does not look promising for the coming quarter and more shocking economic data may be released. Many analysts are speculating a rate cut even before the next fed meeting but I think it is a remote possibility as aggressive rate cutting and expansionary monetary policy is going to lead the economy into Inflation, which is much more dangerous than recession! Optimism is out of the windows for now as Santa Claus never came back last month. All eyes may be on the jobless claims number this Thursday (see economic calendar). If jobless claims number exceed expectations, it will definitely tilt the balance deeper into recession or even staflation.

TECHNICAL ANALYSIS
The Dow failed to break above the 30WMA last week, transforming the 30WMA into a strong resistance level along with a gradual downturning of the 30WMA. This is definitely a very bearish pattern. This, along with the Dow getting into a oversold level, I do expect the Dow to test the 30WMA again this week. That next test of the 30WMA is definitely going to set the pace for the rest of the month.


Dow Technical Chart By Best Charting Software TC2007!

Evidences Of Stagflation...

I have been a goldilock for a long while now, crunching numbers and economic data like every economist should and have brushed aside any notion of stagflation so far. Today, I begin to change my mind...

Stagflation is the most dangerous and complex economic condition ever. Stagflation is when inflation is rising but the economy is sinking in terms of employment and growth. Under such conditions, the Fed can neither raise rates to beat inflation without sinking the economy further nor can the Fed lower rates to boost the economic without risking inflation running amok.

All throughout 2007, I am seeing evidences of inflation and not sinking economic conditions and employment but this week's data changed my mind. Both the ADP and Jobs report turned in extremely lousy numbers which indicated for the first time since 2003 that employment conditions are sinking, job growth is grinding to a halt and unemployment rising. PLUS, commodity prices are rising and headline inflation numbers are rising too. All these points towards the dreaded Stagflation which the economy went through in the turbulent 70s. Stagflation is more dangerous than recession or inflation by themselves. In fact, the market is reacting as though stagflation is already here by totally reversing the previous bullish reversal pattern into once again a bearish continuation pattern. In fact, with the current pattern unfolding, I would not be surprised to see the rest of the year performing a rendition of the 2004 conditions. Under such conditions, stock options traders who can trade both to up and down side would certainly be advantageous.

JOBS REPORT TOMORROW!

No matter what the market did today, the jobs report tomorrow is truly the report of all reports and the one that is going to rock the market. 75% of the US economy is powered by consumerism and consumption power is powered by employment and jobs! Lousy jobs = lousy spending = lousy economy. That is why the Jobs report released on the first Friday of every month recieves such enormous attention. From the ADP national employment report today, it certainly looks like job growth is slowing down but is that indicative of the number we are going to get tomorrow? It is hard to put a conclusion to it and trust me, with the secrecy the regulators put on safekeeping those numbers until they are officially released, nobody has any insiders on it, trust me.

Market SLAMMED On Day 1!

The market was SLAMMED face down today on this first trading day of the year when the ISM index turned in far worse than expected. ISM index turned in at 47.7%, far lower than the expected 51% and at its worst level since April 2003! An ISM reading of lower than 50 indicates a contracting manufacturing sector and a contracting manufacturing sector is never a good sign for the economy. On the bright side, the last time the ISM index was this bad back in April 2003, a series of action taken by th regulators spurred the market right back up and into a bull market ever since! Yes, the Feds need some really terrible numbers to convince them that more needs to be done and it sure does seem that way this time round as the Fed Fund Futures immediately priced in a 100% chance of a rate cut this coming meeting. Will the prospects of more rate cuts bring the market back? It is anybody's guess right now. Market action recently has totally baffled analysts and economist like myself who really cannot put a finger down to a definite, cohesive conclusion. There is one concensus though, and that is the market is expected to be volatile this year, maybe even more volatile than last year. Its definitely going to be a bumpy ride ahead.

On the technical front, the Dow broke the bullish reversal pattern to downside. More and more it seems like the market is going to laspe into a sustained lobotomy like we saw back in 2004.

2008 At Last!

Its nice to be back at last after such a long break. :)

The Dow did a disappointing and dangerous looking dip over the past few days but I am going to deem it an unreliable indication of where the market is going to go because much of those profit taking is due to end of year closing of positions and fund drawouts on very low volume. Today's big mover is definitely going to be the ISM index at 10:00 eastern (see stock market calendar). The ISM index, or Institute for Supply Management Manufacturing Index. This the first BIG economic indicator every month and is definitely the most important indicator released by the private sector. This index measures the health of the manufacturing sector and indirectly, the health of the economy. The ISM index is also known as the PMI or Purchasing Manager's Index. A higher PMI is bullish for the stock markets now in diminishing recessionary fears. This also mean that any market action before 10:00am today is largely unreliable.

On the technical front, the Dow continues to ride atop its 50WMA on the weekly charts, waiting for a breakout. With the long term bull trend strongly intact, it could be expected that a breakout to upside will happen especially with folks investing their remaining December bonuses.