Another Mixed Day...

This time, even more bullish indications than yesterday!
Yes, not only did more and more companies are reporting in with profits beating estimates and more and more are our internal indicators showing more and more bullish reversal signals. In fact, to say that today's market ended mixed would be unfair to the effort the Dow took to get back into the green but was cut short by the market hour. All these are taking place despite record breaking oil prices topping $90 per barrel! In fact, with all the attention on core indexes (core-PPI and core-CPI), it is easy to forget the effects of rising oil prices on the economy in the mid term. Well, for now, like Brunnermeier and Nagel of Stanford concluded, "riding a price bubble [in an irrational environment] for a while can be the optimal strategy for rational investors", we will be watching for the first signs of the beginning of yet another of such price bubble. (the market trend is made up of countless tiny price bubbles by the way)

What's your take for the rest of the week?

The Beginning Of The Re-Rebound?

There are little or no fundamental to talk about that contributed directly to the market action today. In my opinion, market movement these few days are purely technical. Remember I speculated that the Dow would retreat back down to the weekly 30MA line before staging a real rebound? The Dow went to a low of 13132.65 today, 132.65 points to the weekly 30MA line and then rebounded to end the day higher. Our momentum indicators revealed a definite reversal of bearish momentum to bullish momentum today, again, strongly suggesting that a rebound is imminent. Even though it is hard to pin point the exact day, I would say within these couple of days. So, some of you are asking me, hey, what happens if the Dow breaks below the weekly 30MA line? Well, such a break may not also indicate a full scale bear trend as we saw happened back in 13 June 06 and 19 April 05. When it happens, we need to take into consideration a lot of other fundamental and technical factors surrounding it in order to arrive at a conclusion as to what is going on, therefore, there is no way to answer that question intelligently. Anyone who tells you what will happen if such a break happens are merely speculating.


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Stocks Surrendered A Week Of Gains In A Single Day!

FUNDAMENTAL ANALYSIS
Stocks completely went flat on the face and surrendered an entire week's gains in one day today! The Dow went down 242.66 points and the Nasdaq composite went down 51.72 points! Decliners led Advancers 8 : 1 in a broadbased stock market earthquake. This landslide happened right after a report from the Mortgage Bankers Association which showed delinquencies among subprime borrowers hit 13.3% in the fourth quarter. That was the highest rate in more than four years. This report hit the financial sector badly as the S&P Financial sector ditched 3.2%. Even the continued slide in oil price do not seem to pump in any more optimism as investors scattered like scared rabbits. Basically what these numbers are doing is to bring out the fear that the economy is indeed doing badly and that the Greenspan Prophecy (of a recession by the end of the year) might indeed be a reality. There are more numbers coming out this week... will the CPI and PPI numbers calm the nerves of our nerve shaken investors?

TECHNICAL ANALYSIS
Well, again, this ditch didn't come as much of a surprise for followers of my blog, did it? As I have mentioned yesterday, with the "rally" so far being weak and unenthusiastic plus the Dow coming up against a strong 100MA (100 days simple moving average) resistance level, the markets might just tumble back down and regain its bear trend. Looked like the 50/50 chance fell flat on the down side. That is why traders must never go on hunches but look for objective evidences and trade according to what is actually happening. Option traders straddling on my advise yesterday to go both long and short should be laughing your way to the bank by now. With such a huge single day drop, it will not be strange to see the market going sideways forming small candlesticks over the next few days. This is also supported by the weekly charts showing both the Dow and the Nasdaq composite on their respective 30MA support levels. With such a strong break to downside on rising volume, I see that the bears have definitely taken over and that the market will most probably continue to drop after that few sideways days. So far, the market has followed a classic mid term bear trend pattern by going down strongly, pulling up its loose sock slightly, before going way down again. As such, we might see a testing of their respective 200MA at about 11800 and 2300 soon.



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Microsoft Shares (MSFT) Reaching A Bottom?

MSFT $27.83, +1.02%

Its certainly been a while since I last analysed MSFT. Now that I looked at it again, I see that it had been swept by the merciless correction wave since the last time I suggested that it has begun and completed a turnaround. Indeed, every stock is but a boat on the stock market ocean. Although the boat itself may have indicated an intention, the ocean can still move the boat along with it when a storm comes. MSFT has since fell to near the 200MA which I mentioned before to be the last line of defence for MSFT. I do see a glimpse of hope today as selling volume begins to dry up as a small reversal occurs. It seems as though MSFT, along with the market, has found some kind of support or bottom even though there still is some distance to its 200MA. If MSFT rallies today on high volume, it may indicate the beginning of another rally for MSFT. Let's watch and see.



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Microsoft Shares (MSFT) Stages Strongest Rally Since 11 Jan!

MSFT $29.35, +1.80

MSFT rallies after my report on its "Selling Climax" 2 days ago! In fact, it staged the greatest single day rally since 11 Jan 2007 despite being involved in yet another patent war. This time against AT&T for use of their digital speech coder in Windows overseas.

Despite all that, the technicals look simply beautiful! Short term MACD continues to climb in upside momentum and short term stochastics continued up following a "kink". A "Kink" in short term stochastics always mean more upside to come. Volume is also on the rise, supporting the rally. 5MA also crossed 10MA for the first time since this correction begun. All technical indications are shouting "Hooray!" and it will not be surprising to see swing traders begin to accumulate at this point. My sentiment remains Bullish.


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Microsoft Shares (MSFT) Goes Into Selling Climax

MSFT $28.74, -2.44%

What a surprise with MSFT last Friday. :) It was a nasty but interesting surprise.

All over the news wires, analysts are attributing the 2.44% drop to nasty Vista comments. But, is this the first time we are hearing nasty comments about VISTA?? Vista has been the center of controversy, nasty comments, hacks and security problems since the very first day... did all these comments finally accumulate into a 2.44% dropp on Friday? I don't think so.

Looking at the technical charts tell us a more intelligent tale. MSFT ditched on a huge volume surge indicating what we call a "Selling Climax". A selling climax suggests a last ditch effort by the bears to bring prices down. Such a selling climax indicates that the bears are expended and ready for the bulls to take over. Similarly, such a volume surge at a peak indicates a "Buying Climax" where the bears are ready to take over. A recent example is a "Buying Climax" on 12 Jan 07 leading to a correction in MSFT that lasted till now. I continue to see MSFT as Bullish. :)



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Microsoft Shares (MSFT) Completes Turnaround!

MSFT $29.46, +0.20%

Microsoft Shares (MSFT) behaved as I hope to today as it continued a 3rd day of gain on growing volume. My complaint about MSFT's invert hammer formation was that it was not supported with a strong volume surge, however, MSFT's price action today formed a Hammer candlestick formation (not an Inverted Hammer) on higher than average volume. A Hammer formation is formed when prices closed near the high of a large intraday range. This suggests that the bulls were strong enough to take over by the end of the day to close prices higher eventhough there were significant selling pressure bringing prices to intraday low. This is an extremely bullish candlestick signal when supported by a significant volume surge... like the one we saw today. This move tells me that the MSFT rally is confirmed and we can expect more upside to come.

All short term momentum indicators showed that there are more headroom to go with growing strength to upside. For now, I am BULLISH on MSFT and see an immediate resistance level at $30.00, which is the 30 days simple moving average which used to be its support level. A high volume break above that level would certainly ensure more upside to go.


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Microsoft Shares (MSFT) Ends Correction On Schedule!

MSFT $29.40. +1.34%

Well well, MSFT is on time on schedule this time round isn't it? :)

Its turnaround was completed yesterday as MSFT gains 1.34%. Short term stochastics and RSI along with MACD unanimously indicated upside momentum. There is just something I do not like about this "turnaround"... It did not happen on the strong volume that I typically see associated with a full scale turnaround. In fact, the candlestick signal that was formed was again an inverted hammer. The difference about this inverted hammer and the one that we saw on 8 Feb 07 was that the first inverted hammer showed that there are buying interest in a stock and when supported by the right technical indications will mean that a decline is coming to an end. This inverted hammer showed that buying interest was beaten down by the end of the day on relatively low volume. This suggests that buying interest is still shaky and that this turnaround may not be real. This gain may be due to the effects of the optimism and rally in the market yesterday and not something related to MSFT in particular. I would love to see a follow up today with strong volume before I conclude that MSFT's second rally has started. For now, I remain neutral on MSFT.

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Microsoft Shares (MSFT) Breaks 8 Days Losing Spree!

MSFT $29.01, +0.24%

Microsoft shares (MSFT) broke an 8 days losing spree at last with a small up day. I mentioned yesterday that MSFT may start to turn sooner than we expected and probably before it hits the $28.00 support level. Does it look like it is happening already?

Does this mean that MSFT is going to stage a rally from this point onwards? Well, it might, but it is still too early to tell. As technical analysts, we are like medical doctors. We look for syntoms and then look for further evidence before declaring an illness.

A small up day like this is again a common continuation pattern called the lowering steps formation. The pattern goes that a few days of small sideways or reverse movement usually follow a significant move before another significant move in the same direction occurs. There had been a lot of such examples and XEC on 27 Feb 2006 is one of such classical examples.

However, some thing about MSFT's movement tells me that something is different about MSFT's move. For a classic lowering stairs formation to work out, it should usually occur with the stochastics off the oversold position. That gives it the potential and room to move downwards further. In the case of MSFT, however, it is already in the deep short term oversold position with MACD clearly indicating a reversal to upside momentum from a very deep region too. Both Short term stochastics and RSI are also turning up for the first time since the drop begun 8 days ago. A reversal from such an oversold region is also a very strong syntom. Tomorrow is going to be critical for MSFT. If MSFT follows up with another up day on strong volume ( volume at least at 2 days high ), I would say that MSFT's correction is done.

For now, my sentiments (my sentiments are short term and more swing trading based by the way. My long term sentiment on MSFT has always been Bullish.) on MSFT upgrades to Neutral from Bearish.



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Microsoft Shares (MSFT) Goes Marching On...

MSFT $28.94, -0.14%

Microsoft shares (MSFT) goes marching on southwards with yet another lower low and lower high. Today, MSFT's chart displayed a typical candlestick continuation pattern where a day of significant drop is followed by a couple of days of smaller drops. We saw the same pattern back on 6 Feb 07. This pattern usually mean more downside coming up, however, we see some exceptions today. Unlike the continuation pattern on 6 Feb 06, MSFT's short term MACD indicated a loss of downside momentum along with a drop in volume versus yesterday. This tells me that there is a lack of followup to the drop yesterday and that this correction is not supported by mass concensus. Such a trend may not last very long. A strong correction that really cause damage and concern must be backed up by the kind of strong volume that we saw back in the May 2006 correction.

Every analyst in the world today is calling for a buy on MSFT and shouting out that MSFT is "On Sale". That served to breed bullishness and further eliminate bearish sentiments in the markets.

With a loss of downside momentum and a shaky level of participation to downside, I would say that the $28.00 support level is going to be a strong one. In fact, I will not be surprised if MSFT starts to turn before that level is reached. For now, I remain Bearish on MSFT.

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Microsoft Shares (MSFT) Dives For A 6th Straight Day...

MSFT $29.26, -0.37%

I recieved an interesting comment in Digg on my daily Microsoft stock action analysis. It kinda goes that "Why are you saying that microsoft is going down when it has been up for 6 months?" Interesting, huh? It is as good as asking why does a ball start to drop when it has been rising through the air for the past 5 seconds after I throw it hard in the air. No matter how long a stock has been rising, it comes a point in time where it must fall, at least a little, to the nearest support level. This is the Law and the way stock actions behave. This is an excellent time for swing traders to make some money to downside. As a technical analyst, I simply watch and read what the chart actions and technical indications are telling me. This puts me ahead of all minor and major trends.

Microsoft (MSFT) continue to show persistent weakness today as it dropped for a straight 6th day. Today, MSFT is showing an inverted hammer candlestick formation. Such a formation tells us that some accumulation is occuring at this level but do not have the strength to persist through the day and is brought back down by the bears by the end of the trading day. However, this is not a strong bear trend we are witnessing in MSFT. This is probably just a slight technical correction to the 100 days or 200 days Moving average support level. Volume has been steadily declining over the past 6 days and that tells us that this swing is not supported by mass concensus and is destined to fail at some point and start accumulating.

With MSFT now in short term deep oversold condition and evidence that some level of buying activity has started to enter the stock, I would revise my short term outlook to a testing of its 100 days moving average. A break to downside from the 100 days moving average of around $29.00 would see a probable testing of the 200 days moving average. Short traders should consider covering at least half your positions by now.



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Microsoft Continues Long March Down...

MSFT $29.37, -0.47%

No surprises today as Microsoft (MSFT) continues the long march down. This is the fifth day down for the bellwether stock despite efforts put into to train and teach users on the pros of windows vista and how it can work in tandem with the rest of Microsoft's products for the benefit of small businesses.

Short term MACD continues to show downside momentum as volume continues to decline with no indications that the drop is coming to an end yet. ADX has also started to indicate the beginning of a developing bear trend. Short term MACD is now at the -0.20 level. This is a level where most short term trends start to lose momentum and where MACD starts to reverse upwards. However, it must be noted that stocks do continue to fall even when MACD reverses upwards abeit in a much slower fashion. A recent example on MSFT was the MACD reversal on 4 May 2006. It is still a long way down to the 200 days MA and my sentiments remain bearish until proven otherwise.




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Microsoft Continues Journey Down ....

Microsoft shares (MSFT) continued its way down today as I have expected yesterday. However, I would only say that it is doing a slow climb down instead of a jump down the cliff. Being an important bellwether stock, it is not strange to see a quick dose of accumulation from bargin hunters, lifting the stock off its intraday lows.

After 4 days walk to downside, the MSFT is now showing a short term oversold condition along with declining volume. However, downside momentum continue to be strong as indicated by short term MACD and all other relative strength indicators.

My sentiment on MSFT continue to be bearish and looking to a testing of the 200 days MA until the indicators and chart actions speak otherwise. As a trend following technical option swing trader, I always place what I can see now first and then keep my eyes peered on the earliest indications of change.





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Microsoft Ditches On Poor Vista Expectations!

Microsoft (MSFT) ditches 1.92% yesterday as analysts commented that the current stock price do not justify the expectation on Window Vista sales at all. Window Vista has been the target of a ton of controversial security flaws since day one. Every single day, we can see reports on new flaws being discovered from user accounts security to the "fake" firewall. In fact, the news has been so controversial so far that I have decided not to upgrade to Window Vista until maybe another 6 months later.

The break to downside on MSFT is a very critical one to technical analysts like myself. MSFT made a downside break below its 50 days moving average support level on very high volume. This is a classic bearish breakout which should see swing traders following up on to downside today. I would say that a testing of the 200 MA at about $26.50 should come up pretty soon. We will follow up on this intently.



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