- 08
- May
by Jason Ng, Founder, Master ‘O’ Equity
FUNDAMENTAL ANALYSIS
The Dow was up today by a significant 48.35 points on a pretty mixed market action. The Nasdaq composite was down marginally by 1.20 points, advancers only barely par decliners and trading volume retreated significantly. There signs tells only one thing… the traditional lethargy before every FOMC release. Uncle Ben is going to talk about rates again this coming Wednesday. The retreating oil price was probably what caused the tech heavy Nasdaq composite to pullback into the red a little but that has certainly helped the Dow gain more bullishness. Trading action is expected to be thin and sideways tomorrow ahead of the FOMC and then, we shall see how investors react to the release.
TECHNICAL ANALYSIS
The Dow was up again today on declining volume. Technically, declining volume at this juncture always suggest that the bulls are running out of steam, HOWEVER, with just 2 days to FOMC, this decline in volume may be fundamental driven instead and I would treat it with a little bit of doubt. One thing that I may really be concerned about is that the gain today of 48.35 points seems to be a new step in the Dow’s staircase formation. In this aspect, we are witnessing a steady shortening of each step since the formation begun and that also hints to this stage of the rally coming to an end soon and a pullback seems imminent. The first step in its staircase formation on 3 April took the Dow up 128 points, the second step on 16 April was up 108.33 points, the third step on 20 April was 153.35 points, the fourth step on 25 April was up 135.95 points, the fifth step on 2 May was up 75.74 points and today, we clocked in at 48.35 points. I would certainly be going delta neutral again at the first sign of a pullback.
The market is cooling down slightly now ahead of the FOMC release. (Please see http://www.mastersoequity.com/option_trader_hq.php for stock market calendar) The Star Trading System also reflected this cool down with only 5 signals today.
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