Welcome back from the long weekend!
 
Hope you are mentally and spiritually recharged for the challenges ahead. A warm welcome goes to our new week one students too.
 
FUNDAMENTALS
The traditional Pre-Christmas weakness hit the markets Last Friday as markets take a dip. Concerns over a slowing US economy is starting to overshadow the concerns over inflation. As we have explained Last Thursday, the problems facing the US economy is a very complex one. Layers of potential concern overlap each other so tightly that with the removal of one area of concern, another immediately surfaces. A strong economy is still the primary mover for the markets at the end of the day. Oil price continue to move lower last Friday with lower demands on heating oil this warm winter. Notice that recently, drops in oil price no longer serve as a booster for the equity markets. This may mean that a $60 - $65 oil price is a reasonable one, one that do not put further capital pressure on industries. Hence, from this level, any further drop will only serve to bring down the energy sector and therefore put pressure on the overall market. Well, with the end of 2006 just days away, I suddenly remembered predictions made by high-salaried “analysts”, claiming that oil prices will hit over $90 by the end of 2006… well, are they still worth their salary or their place on TV?
TECHNICALS
The Dow begun yet another step in its staircase formation last Friday. It should be safe as long as it’s 30SMA is not broken. Looking at NASDAQ, the composite index moved lower as expected, its short term bear trend developing steadily and without surprise. If we see a break below the 2400 level, we could see a testing of the 2350 level soon. Looking at the QQQQ, it seems to have moved slightly ahead of the NASDAQ composite index by breaking its 50SMA and breaking the $43 level. The QQQQs have traditionally moved slightly ahead of the NASDAQ composite index and serves as a kind of leading indicator of investor sentiments on the composite index. So, I would be more inclined to stick with the bearish trend and cover my shorts by now, so should you.
 
Jason Ng
Founder, Masters ‘O’ Equity
mastersoequity.com
“Your Personal Stock Option Mentor”

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