Welcome To ThanksGiving Week!

First of all let me give thanks to all of you who have been faithfully following my blog and analysis. :)

This is a holiday shortened week where we are likely to see a stagnant market even on Friday as everyone extends their holiday through the weekend. Coincidentally, this is also a week that does not have much in the way of heavy weight news release (see economic calendar). Investors will be looking forward to indications of a bottoming in the housing market through the housing datas throughout the week, as well as an upbeat leading indicator reading in order to diminish the recessionary fears. A week like this is likely to be technical driven too. The Dow made a remarkable rebound off its 50WMA, which sets the stage for a run all the way to a new high from this point should it follow up tomorrow. The low of 13 Nov will be critical. A close below this level would totally erase the setup and set the mood for more downside.

A lot of analysts are using the amount of put options outstanding as an indication of investor sentiment, which is a HUGE mistake. Investors buy put options over all kinds of reasons and one of the most popular use of a put option is as a protective put . In a protective put, investors are still speculating to upside but adding downside protection to their portfolio! It doesn't that investors are speculating to downside at all! We really need to take such analysis with a large pinch of salt.

I will soon be hosting a podcast on Optiontradingpedia.com where I give my opinions on stocks that you guys request for! Stay tuned to that!


Dow Technical Chart By Best Charting Software TC2007!

Another Sluggish Day...

FUNDAMENTAL ANALYSIS
What was shaping up to be a terrible day at the markets, ended up with the Dow down only 51.70 points, which is a lot better than suggested by the extremely weak opening that brought the Dow down by 100 points within the first 3 mins. Dow futures was pointing sharply down this morning with all the horrific news piping in from the Financial sector and in particular, from Citigroup and Merrill Lynch. It seems like the real, tangible effects of the subprime crunch has just begun to show its ugly head and to really take people down from high places at last. Investors are indeed beginning to wonder... "Who's Next"? The ISM business index released today, which was not a major economic indicator, turned up better than expected, beating estimates at 55.8%, lifting the Dow off its lows for the day. This release is just about the only trace of optimism investors could hold on to today, preventing the Dow from going even lower. It is hard to see where any more optimism can come from with the rally in oil and gold along with the continued weakening in the dollar. The economic numbers have turned in great so far but the outlook going forward, at least for the next 12 months, remains largely uncertain.

While you are here, you might want to check out my free option trading education initiative that has recently taken the internet by storm. Bookmark it, link to it, tell your friends about it and I would be more encouraged to write in this blog more! :)

TECHNICAL ANALYSIS
Well, even though it was a volatile day today, it's still to be classified as a sideways day as trading range is largely contained within yesterday's trading range with an insignificantly lower closing. It is extremely hard to tell if the market has found a bottom here or not. Looking back on 13 August, we saw the same market action where 2 days of sideways trading after a huge dip led to more downside. Even though the long term bull trend remains intact, short term outlook continues to be extremely uncertain on the technical front and on days like this, I always prefer to sit on the sidelines.

The Week That Really Counts.....

It's here at last! The week that will completely defy technical analysis by the time it is through! Technical analysis reveals sentiments and trends based on historical data, which makes it totally useless in the face of events which cannot be predicted with moral certainty... the Fed's Policy Decision! Any up or downs before the Fed meeting this Wednesday (see economic calendar) will only be speculations and more speculations. Technically, the Dow looks great to start another rally like we last saw in August as it bounces off the 30WMA. However, don't bang on it so much as the Fed meeting can still change everything.

LANDSLIDE!

That's the only feeling I got from the market today. And what a great day!

Great day? Yes! Big drops like this are precious times where portfolio managers like us get to really stress test our portfolios! :) No amount of hypothetical tests can exactly duplicate the effects of a real occurrence on a portfolio. The Dow dropped the biggest single day drop since the 387.18 points drop of 9 Aug 07. I must admit that I was really surprised with the magnitude of the drop, especially when the slight pull up at mid day almost convinced me that the market has found a botton. Well, as a faithful technical trend follower, I never act on prediction. I will always look for definite signs before acting on it... and am I glad I stuck with it.

This drop has brought the Dow back almost all the way down to its 30WMA. In fact, the Dow could drop another 122 point or so to land on the 30WMA level at about 13400 before staging a rebound. The Dow always back down to its 30WMA due to regression to the mean (the mean here centered around the 30WMA) caused by the law of diminishing marginal utility of investors. With the market moving towards more and more efficiency (I'm not suggesting that the market is efficient as suggested in the Efficient Market Hypothesis), periods of explosive gains would pullback down to the mean more readily than we have witnessed before the great bear market of 2000 - 2003.

The market outlook has turned slightly sour lately as possibilities of another rate cut sinks below the quicksand, leaving behind the certainty of decelerating economic growth ahead. The Feds continue to look more inclined to a contractionary monetary policy, as they always have since inception. Before any of you throw curses at the Fed, I must say that their job is an extremely difficult and sensitive one, making decisions that nobody likes to make, deserving more praise than curses. On the one hand, they need to combat inflation and on the other hand, they need to make sure what those actions do not result in a depression! It is such a fine balance that these guys literally live their lives on a balancing beam. As Chaos Theory so correctly suggests, that the transition from stability to chaos in a complex system is often occassioned by the change in a single variable. The problem here is, nobody really knows what that "single variable" is until hindsight! That makes the Fed's job look like a man leading a team through a minefield. As investors, it is always prudent to keep a farsight during uncertain times like this.


Dow Technical Chart By Best Charting Software TC2007!

Bullish Inclined Mixed Day...

FUNDAMENTAL ANALYSIS
What a mixed day today as the Dow ended down marginally by 20.40 while the Nasdaq composite gained by a significant 28.74 points. There are certainly tons of reasons for this mixed action both on the fundamental and technical front, however, why did I say that today is a "Bullish Inclined" mixed day? Well, that's because there are plenty of good news to look forward to versus the "Bad news" so far. The "bad news" is, Consumer Price Index rose 0.3%, the biggest increase since May. This is compounded by the fact that real weekly earnings have gained only 1.3%, lower than the current inflation rate suggested by the core-CPI index of 2.1%. Such an increase certainly reduces the possibility of another rate cut at the end of the month (well, we all know that it is probably not going to happen by now, don't we?) Well, the good news is, as I have mentioned, that the core-CPI has risen only 2.1% over the past year, which is within the Fed's "comfort zone" of keeping inflation within 2.5% (analysts estimates... unofficial). Another good news is that despite this earnings season being widely speculated to be a disappointing one, companies continued to report better than estimated earnings generally (other than a couple of disappointments). If good news continues to roll in from the earnings front, the market could recieve a short term boost. Well, to conclude for today, even though the housing front still looks terrible and Uncle Ben's speculating a slow down in the economy over the next few quarters, there are still plenty of good news and good company performance to keep investors happy for now.

TECHNICAL ANALYSIS
Similarly, the technical front also supports the view of a bullish inclined mixed day. The Dow went all the way down to its critical short term support line, the 30DMA, and then bounced right off to end up significantly higher, forming a huge spinning top formation along with a volume surge. This formation, following a few consecutive drops, signals a possible selling climax (possible because selling climaxes usually takes place after a much more significant pullback). A selling climax suggests that all remaining sellers have jumped in and it is time for the buyers to take over for a bargain. Of significance is also the fact that the Dow has also entered the short term oversold region, giving it all the more reason to be able to stage another run from this point. Our internal screening also turned up significantly more bullish reversal signals than bearish signals across the universe of stocks, increasing the possibility that the market might be staging something. From these indication, I would certainly be preparing my account for the up side. :)


Dow Technical Chart by Best Charting Software TC2007!

And So It Begins...

The Dow made a significant drop today by 71.86 points. What made this drop significant is the fact that it is the second consecutive drop on rising volume. In fact, it is rather clear now that the market has begun a pricing in of the possibility of not getting a rate cut, beginning 10 Oct. A lot of analysts attributed the action these 2 days to rising oil prices. Yes, rising oil prices is a concern but, recently, not a concern big enough to move markets. In fact, the market has been rising along with oil prices since this rally begun in August. Tomorrow's CPI numbers is going to be a major market mover. CPI is expected to be lower this time as all other inflation indicators continue to turn up tame. Response to the number is likely to be textbook, but with limited real gains or losses reflected in the market eventually.

What's your take on tomorrow's CPI numbers? Please comment on your thoughts. :)

Oil Rises As Stocks Sinks...

FUNDAMENTAL ANALYSIS
The Dow sheds 108.28 points today to close 15.2 points shy of the 14000 mark. This is also the hardest single day drop since 7 Sep 2007 when the rally just begun. Oil prices has reached high points which nobody has expected, especially with the summer months just behind us. Higher energy always mean higher production prices (which showed up in the PPI index last week) and increases the possibility of inflation. Early optimism in the market futures just before market opens due to a better than expected Empire State Index reading was immediately erased. Well, the Empire State Index has never been a major market moving index. The Empire State Index tracks manufacturing activities in New York on a monthly basis through a survey of a goup of 175 manufacturing CEOs. Well, you guessed it, when did New York's small community of manufacturers become a major or significant determinant of overall economic health? That is why the Empire State Index continues to be one of those index which fails to move markets significantly. Again, no prime market movers tomorrow as we look forward to Wednesday's CPI numbers. More and more analysts are now gloomy about the possibility of another rate cut at the end of the month. However, our dear Uncle Ben continues to be careful and wary about economic outlook in his speech today in Washington. Obviously things are not as rosy as we thought... yet...

TECHNICAL ANALYSIS
Well, can't say I wasn't surprised with the magnitude and eagerness of the pullback today. The only consolation is that the Dow continues to close near the 14000 line, in line with my expectation of trading along the 14000 line until the 30MA catches up with it. Yesterday's action took the Dow off the short term overbought region in one fell sweep but has also started a bearish momentum as our trend indicator turns for the first time since the rally begun. Well, regression to the mean is not just a mean old theory, but a fact in all areas of life, including the stock markets. What has baffled scientists and mathematicians (and to some extend, economists like us) is what constitutes the "mean" under each circumstances. I have my own research and empirical data which are not yet conclusive, however, it seems to have been pretty consistent so far for the Dow. Yes, you guessed it, the 30 days/weeks/month Moving Average. So, what is my take for the next couple of days? No guarantees but I would not be surprised if the Dow decides to visit the "mean".

What is your view? Do you think we will get another rate cut at the end of the month? Please comment to this post with your thoughts! :)


Dow Technical Chart By Best Charting Software, TC2007!

Thus Ends A Sideways Week...

I don't usually write on Friday nights but due to the growing audience to this blog, I have decided to begin Friday night writing. So, thank you for tuning in again and enjoy...

This sideways week has ended on a slightly upbeat note today as core-PPI (inflation) index increased by only 0.1%, beating estimates of 0.2%, further proving that inflation is not a concern in the economy... so, what is? Recession of course! This reading continues to support a rate cut at the end of the month and thus the optimism.

The Producer Price Index (PPI) is an extremely important index and is the first major inflation indicator to be released on the second Friday of every month. The PPI is made up of a group of indexes, measuring the change in price manufacturers pay at various stages of production. Of greater concern to the investment community is the "Core-PPI" index. The core-PPI index takes highly inelastic and seasonally variable elements such as crude oil and food out of the equation in order to arrive at an index that truly reflects market action. The Core-PPI is so important that the investment community often neglect the main PPI reading. A classic case in point is today. PPI was higher than expected due to higher crude and food prices but Core-PPI was lower than expected by 0.1%. Investors chose to act on the Core-PPI, not the main PPI number.

On the technical front, the Dow continues to play by our book by trading atop the 14000 level as expected. There was no conviction and strength behind today's move as the advance was made on much lower volume than the drop of yesterday, so, don't take this as the start of a rally... the Dow's just not prepared for that yet. The Dow continues to look over extended in relation to its 30WMA, so the danger's not over yet.

More Sell Offs...

FUNDAMENTAL ANALYSIS
We witnessed more profit taking today as profiteers bailed out heavily when the Dow reached new historical highs intraday. The profit taking action left the Dow to close down by 62.57 points or 0.45%. The day actually started out extremely well when Jobless claims fell more than expected, allowing the Dow to open up strongly. Well, not strange to see profit taking at this height as the marginal utility of profit pleasure gives way to the fear of loss. (see my article on how the Law of Diminishing Marginal Utility affects markets ) Afterall, the stock market is not totally based on market fundamentals, right? (George Soros calls the over reliance on market fundamentals the "Market Fundamentalism")

TECHNICAL ANALYSIS
The Dow certainly played according to expectations by trading along the 14000 line as I mentioned yesterday. However, today's action is slightly different from yesterday's. Today, the Dow sold off on heavy volume and spurred a ton of bearish reversal signals in the individual stocks. This could mean trouble and a test of the 14000's holding power. Obviously a sell off has started, which is nothing to be surprised about as the Dow is already very over extended in comparison with the 30WMA. (for a detailed discussion on the 30WMA and its significance, please read the comments on my post on 9 Oct.)In fact, for the rally to continue on healthily, I would expect the Dow to trade sideways for many more days to come, or simply make a significant ditch before rebounding back up. However, the danger remains at the 14000 border. If the Dow should ditch below the 14000 line, it might find it a challenge to get back above it again later on. So, I would certainly prefer that the Dow simply trade sideways above the 14000 level and wait for the 30WMA to catch up a bit... However, I won't bet on it as the internals does look awfully dangerous right now.


Dow Technical Chart By Best Charting Software TC2007!

Threading The 14000 Water Surface....

FUNDAMENTAL ANALYSIS
Stocks closed mixed today in an extremely turbulent session ending the Dow 85.84 points lower but the Nasdaq composite a marginal 7.7 points higher. Today, a broad based, low volume profit taking drove stocks to into the pit, back where it started yesterday but buying interest soon returned after midday, pushing the Nasdaq composite back up into positive territory. The Dow was making an attempt into positive territory too but time was up before it could do so. With the Dow making new highs recently, it is not unusual to see some profit taking, especially before the sensitive Jobless Claim report tomorrow (which is released every Thursday by the way). Jobless Claim report is an extremely important, forward looking economic indicator and formed part of the leading indicators index. Basically, if jobless claims show a rising and persistently high trend, it could be expected that consumer spending would drop and affect the rest of the economy in a domino like effect. That is why the stock market is sensitive to the jobless claim report. From investors' response to last Friday's employment report, I think investors would want to see some positive indication out of the jobless claim report instead of a gloomy one. Which also means that a positive report tomorrow may allow the market to get back up and probably to new highs. Let's watch and see...

TECHNICAL ANALYSIS
Praise be to the 14000 support level. The Dow rebounded off the 14000 support level once again in intraday trade today. This further reinforced the fact that the 14000 level has indeed become a strong short term support level. Short term momentum is now on the decline on our indicators and with the 14000 level this strong, I would see the Dow moving sideways along this line a little bit before making another upwards attempt. Overall outlook remains bullish as the Dow continues to trade atop a rising 30WMA and investors need to practise discretion when interpreting single day pullbacks like this one today.


Dow Technical Chart By Best Charting Software, Telechart 2007!

YES!!! Dow Makes It To The Top!

FUNDAMENTAL ANALYSIS
The Dow makes historical high at last closing at 14164.53 points!!! *~Pops Firecrackers~* In fact, the Dow did not just make one historical moment today but 2! The other historical performance is that the Dow made a month to date gain of over 7% since 10 Sep, the strongest single month move since 2003's great rebound! Too much optimism in the market over too little real data? I think so too. The market started out mixed and uncertain this morning but optimism soon flooded the floor and pushed the market straight for new highs after the Fed Minutes was released. The Fed Minutes "seemed" to support yet another rate cut at the end of the month. It is indeed hard to see where the Fed is going with this expansionary monetary policy but as long as it is an expansionary monetary policy, the economy can be deemed to do better in the months to come, starting a huge pricing in of that possibility in the stock markets. An Expansionary Monetary Policy is a policy taken to expand the economy by increasing the monetary base with actions such as lowering of Fed Fund targets. Even though the minutes looks good, Fed Fund Futures are still pointing to a less than 50% chance of a rate cut at the end of the month... are investors heading for a huge disappointment? Whatever the outcome, I would not be surprised.

TECHNICAL ANALYSIS
The Dow is once again in lala land... the land of the unknown where dragons lurk in the dark beyond. The Dow has done well rebounding off the 14000 point, creating a short term support level from which it can pursue higher gains, and it did. A strong bullish momentum is now underway, pushing the Dow at the doorway of being over-extended. In fact, from the Dow's retracement pattern so far, I would not be surprised for the Dow to continue to move further up but retrace back down to around today's level when the inevitable pullback comes. As an trend follower, I never make a judgement before things really happen and I will be peeled at the first indications.


Dow Technical Chart By Best Charting Software TC2007!

Slight Profit Taking...

The second week of every trading month usually starts weak and with some profit taking like this. The first week of every trading month is packed with so much important economic releases and excitment that the second week usually starts by taking some of that profit away. So, what are we looking forward to this week? The PPI of course. The only heavy weight release for the week. ( please see http://www.mastersoequity.com/option_trader_hq.php for economic calendar) For now, the Dow continue to trade sideways in a very tight channel around recent highs, with short term overbought sentiments digested quite nicely. It does seem like there are just slightly more upside to come, probably pricing in the PPI results for the week, before the Dow over extends on a weekly time frame, inceasing the probability of a pullback to the weekly 30MA again.

Upsy Tipsy...

The Dow climbed a fairly nice 170.38 points last week. So far, all economic data are supporting the possibilities of more rate cut this time round, probably another 25 basis points. The only surprise I had was the employment report last Friday. I was expecting optimism in the market only if the employment report also turn in a little gloomy BUT NO! :) What happened was a textbook response to the employment report which turned in much much better than expected! :) Equities futures SOARED at 0830am when the report was released and a huge wave of optimism roared through the financial system, lifting equities and the dollar in a response we learnt only in our finance textbooks. :) (ok, for once the textbooks were right!) With the numbers continuing to point towards a rate cut when the Fed release their policy statement end of the month, I would expect further pricing in of the rate cut throughout the month at decreasing velocity.

Investors Eagerly Awaits Employment Report

FUNDAMENTAL ANALYSIS
The Dow ended sideways today as investors eagerly await tomorrow's employment report. The employment report is truly the economic indicator of all economic indicators; The ONE Economic Indicator. This is also the economic indicator most closely monitored by the Feds in concocting their fed fund rate policy. Indeed, the employment report is so highly anticipated that the Job report and factory orders report today hardly matter. The employment report, or also known as the Employment Situation Report or the Uemployment Rate report, is the most direct indication of USA economic well-being. As the saying goes, what matters is the bottomline. The bottomline of every economies are happy, employed citizens who are contributing to the economy! Nothing else matter when the end result doesn't please. That is why this report has such significance, even though it is released every first Friday of the month (versus Mondays for the ISM index). So, what are we looking for in the Employment Situation report? Like all economic indicators, we are looking for a reading which supports investor's expectations. So, what are investors expecting? Investors are expecting data that increases the possibility of another rate cut! :) Which means that the employment report tomorrow should show a slightly higher than expected unemployment but not enough to cause widespread panic about a pending recession. This is a tricky balance which is difficult to predict. That makes for all the uncertainty in the market. Indeed, without uncertainty, there will be no efficient or liquid market and every other day will be boom or bust, making it impossible to invest in. The pricing in of another rate cut has obviously begun and would definitely magnifest as a nice bull run tomorrow if the employment report turns in "favorable". From the data so far... initial claims beating and raising the 4 months average and factory orders declining, employment report cannot be expected to turn in rosy.

TECHNICAL ANALYSIS
The Dow ended it's 2 days fall in an almost neutral day today. These 3 day's corrective action has allowed the Dow to get off the short term overbought region by a slight margin, increasing the possibility that we will see more upside to come. The low of 1 Oct, which I identified yesterday as a critical short term bottomline, continues to hold up safely. In fact, the 1 Oct low of 13893 is as important as the bottom of a baby cradle now! Break the bottom and be ready for a painful fall. Volume was low today as investors await tomorrow's data. A completely neutral day with very low volume is indeed as good as a market holiday. The Dow however continue to look slightly over extended as it trades high above its 30MA on a weekly scale. In fact, the Dow rarely trades more than 10% higher than its weekly 30MA before a significant pullback (this, surprisingly, conforms to the mean/variance theory). Currently, it is about halfway there. This is certainly not the best of times to put on new positions.


Dow Technical Chart By Best Charting Software TC2007!

Another Healthy Retreat...

FUNDAMENTAL ANALYSIS
The Dow retreated yet another 79.25 points today as the ISM services index turned in the lowest level since March. The ISM services index is the second monthly index released by the Institute for Supply Management and is the cousin of the more influential ISM manufacturing index. ISM services is released on the 3rd business day of every month and measures the health of the service sector. Similar to the ISM manufacturing index, a reading above 50 suggests a growing service industry and a reading below 50 suggests a contracting service industry. The ISM service index is not a very influential economic indicator due to its relatively short history. There is simply too little data to arrive at a significant emphirical correlation between the index and prevailing GDP performance. That is why I would attribute today's market action more to profit taking than on the ISM services performance as a declining ISM services index should enforce the probability of another rate cut this month, thereby spurring some optimism instead. In fact, contrary to many of the news wires out there saying that today's pullback is due to poor economic data, the market ditched before the ISM services was released and then actually ROSE after the ISM services index was released! This suggests that there was already heavy profit taking prevalent in the market today and the ISM services index actually ENCOURAGED some buying (due to the higher possbility of a rate cut)! (so much for new wires)

TECHNICAL ANALYSIS
The Dow continues a healthy retreat today even though it dipped below the 14000 level once again. The Dow needs to get out of its short term overbought position for a sustainable bull trend to develop. In this sense, 2 days of pullback still didn't do the job. The Dow continues to be short term overbought and more sideways action should digest more of it. I would, however, be placing emphasis on the 1 Oct low. The Dow should not dip below the 1 Oct low in its efforts to digest the current short term overbought sentiment, otherwise, the short term bull pattern will be broken and the 14000 level would once again become a resistance level. Strangely, the markets has been more cautious and wary more than bullish since the fed rate cut. So far, only investors who took a risky speculative position before the rate cut would have benefitted significantly. Even on the weekly charts, it does seem like the Dow is almost due for a pullback to the weekly 30MA before it could muster enough energy to go further.


Dow Technical Chart by Best Charting Software, TC2007!

14000 BEATEN!!!!!!

FUNDAMENTAL ANALYSIS
The market is always full of surprises and just when I thought the 14000 points resistance level is going to pose a bit of a problem, the Dow beat it in one swift stroke today, closing 191.92 points high at 14087.55! Obviously, the pricing in of another quarter point or half point rate cut has begun right now with the ISM index reporting in the lowest since March, marking a 3rd consecutive decline. The weak ISM data increases the possibility of another rate cut this month, encouraging the pricing in that we saw today.

The ISM index or the Institute for Supply Management manufacturing index is the first economic data to be releases on the first business day every month. It is an economic indicator of great significance not only for its timeliness but also for its close correlation to the GDP performance, which is why it maintained its high level of importance since its first inception at 1931. In an over simplistic explanation, a reading above 50 suggests an expanding economy and a reading below 50 suggests a contracting economy. The ISM index hit 52 in today's release, down from 52.9 in the last release. A reading of 52 from 53.9 suggests that the US economy is expanding at a declining rate. If the situation deteriorates further, the economy could fall into a recession. AS point of the index above 50 roughly approximates a 0.3% in GDP growth, as the ISM index falls, the US GDP is also being eroded away. Such a reading definitely increases the possibility of another rate cut and thus the action we saw today.

Today's action is also a reminder of the classical Efficient Market Hypothesis in action. The Efficient Market Hypothesis has been around for decades and has recieved bombardment from all fronts, especially from the real world trading floors of its inaccurate assumptions of a rational market full of rational well informed investors such that stock prices at anytime reflects all known information about that stock. This didn't used to be true during the time Eugene Fama suggested it in 1965 when information exchange was difficult and information is the privilege of the minority. Today, with the information and internet revolution, more and more the Efficient Market Hypothesis is coming to being (although at this point in time, the market remains highly inefficient in many ways). As more and more investors are well versed with the effects of a rate cut right now and have up to the minute information on all economic data, any future gains are quickly priced in way before that future event happens, such that, there are actually little or no gains left when that future event happens. This results in the scenario suggested by the Efficient Market Hypothesis. Certainly, the EMH is alive and well and currently being groomed into being by the world today despite its many short comings.

TECHNICAL ANALYSIS
The Dow made a huge break above the 14000 points level today on a discomforting mediocre volume. In fact, volume was somewhat on the same level as it was yesterday. This makes me wonder if this breakout is the work of a few institutional buyings. The Dow continues to be short term over bought at this time and needs to quickly find a foothold, making 14000 a support level before it can move comfortably further. That being said, looking at a longer time frame, we can see that the bullish channel established since the dragon tail formation I suggested back on 16 August is pretty much intact and goign strong. I would like to see the Dow digest some of the overbought sentiment by going sideways a bit along the 14000 level before moving upwards more as anymore upwards movement will increase the probability of a significant pullback and makes it ever harder for anyone to put on new positions.


Dow Technical Chart By Best Charting Software TC2007!

Dow Breaks From Sideways Trading...

FUNDAMENTAL ANALYSIS
The Dow gained 99.50 points today in a nice attempt to break out of 5 days of sideways trading. Many analysts attributed today's small rally to the GM and Bear Stearns news. However, if the good news is this localised to just 2 companies, why did the market stage a broad based gain instead of just a small gain based on the mega gains of just 2 companies (and their associates)? From what I noticed, the market continued to be bullish due to more and more reasons assuring investors that more rate cuts are coming our way. The recent bout of bad economic data not only failed to bring the Dow down, but eventually resulted in a small rally today! This shows that investors are optimistic and expecting something... another rate cut next month?

TECHNICAL ANALYSIS
The Dow broke out of sideways trading today and good thing it is to upside. However, the bad news is, this move is made on declining volume, didn't manage to reach a significant height, and prevented the Dow from digesting more of the short term overbought sentiment prior to challenging the all time high level. This is going to make it EXTREME difficult for the Dow to make a break. This is time again to be extremely cautious.


Dow Technical Chart By Best Charting Software, TC2007!

Still A Healthy Young Bull...

The Dow made a fantastic 377.67 points rally last week on uncle Ben's fantastic rate cut package. In fact, the Dow has made a 706.81 points over the last 2 weeks! That certainly makes one wonder... is it now overbought? is it time for a little pullback? Well, technically, YES. Especially with the all time high resistance level of 14000 points looming in the horizon. That is also why the Dow has been trading sideways over the past 3 trading days in an attempt to digest some of these short term overbought sentiments. However, that 3 days has not done anything significant to bring the Dow out of being short term overbought on our indicators. 2 things might happen from this point onwards. 1, The Dow continues sideways for a few days more or pullback for a couple of days and then make a grand break to new highs. 2, The Dow go straight for the 14000 points and then fail to make a break, correcting back down signigicantly (probably to the 13500 level). Whatever it might be, it is certainly not the job of traders like us to predict what will happen. Our job is to make sure we know what to do in order to profit should any of the 2 scenarios happen.


Dow Technical Chart By Best Charting Software TC2007!

Ben The Market Savior!

FUNDAMENTAL ANALYSIS
Even though Uncle Ben's in the habit of disappointing the market, when he really act to save, he do it beyond everyone's expectations. The Feds not only cut 50 basis points off the Fed Fund Rate but upped the poker by further cutting another 50 basis point off the discount fund rate! This way, the economy will get an instant dose of steriods through the immediate help rendered to banks and financial institutes through the discount rate cut and be ensured of recession curbing through the Fed fund rate cut. These cuts will definitely help alleviate the current credit situation, keep more people in their homes, save more mortgage lenders from bankruptcy and eventually, improve spending and consumer confidence. The Dow was trading with a 70 points gain just minutes before the release and quickly scaled to a stunning 20 points gain within just 20mins of the release and then end the day with a huge 335.97 points gain. We have not seen such a strong single day gain since 2002!!! Well, enjoy the bull for now and do not be surprised to see a couple of profit taking days... it is time speculators enjoy the wins of their high risk bets.

TECHNICAL ANALYSIS
Well, definitely a fundamental ruled day. The Dow's gain has enabled it to make a strong break above the 50MA resistance line at last! The Dow has been struggling at this critical level for a couple of weeks and if it failed to make a break, it might correct back down and laspe into a full bear trend. I see the next short term resistance level at 14000... the new high. In the meantime, we might see some profit taking but the staircase formation should resume. Enjoy the bull.


Dow Technical Chart By Best Charting Software TC2007!

Dow Challenges 50MA Resistance...

FUNDAMENTAL ANALYSIS
The Dow RALLIED 133.23 points today as credit fears relaxes. This is the second time the Dow has gained over 100 points this week, making this the most delightful week in a long time... so far. Investors are greeted by a lower annual average mortgage rate and CountryWide, US's largest mortgage lender, securing 12 billion in credit. These news assured investors that the credit crunch may not be as bad as the media has made it to sound so far. These series of large gains this week could also be the pricing in of a possible rate cut next Wednesday... which of course could lead to a huge disappointment and a correction should the rate cut not come... all in all, all eyes are still on the rate cut and new money should still sit on the sidelines.

TECHNICAL ANALYSIS
The Dow made it to the daily 50MA resistance level at last on rising bullish momentum. Tomorrow will be the day of reckoning... failing at this level tomorrow could put the Dow back down into a bear channel. So far, the Dow looks good to make a break as it displays healthy bullish momentum on the short and mid term charts.


DOW Technical Chart By Best Charting Software TC2007!