Free Stock Market Research Report by Jason Ng, the man behind The Star Trading System (one of the best option trading systems)

Up one day, down one day. This volatile market does stir up waves that are totally unfit for normal swing trading. This is why the Star Trading System have decided to have us out of the market yet again today.

The last thing we would expect a capitalist country to do is for the government to buy out (instead of bailout) private companies and assets. Instead of providing unconditional bailout to the financial system, the Bush administration has decided to BUY OUT shares of troubled banks, thereby taking partial ownership of these banks. Sounds like communism? Maybe but is it a right thing to do? Seriously, I think such a plan works better than an unconditional bailout in that it has the ability to help the government recoup the money eventually when the economy clears up and prevent this large infusion of cash from creating inflation problems down the road. An unconditional bailout is going to create a lot more cash in the economy which cannot go directly back to the government when the economy clears up, creating inflation. But how will it work out? Seriously, nobody knows but most economists seem to support this "nationalizing" plan.

A slew of inflation data will be released from tomorrow onwards (see economic calendar), which I suspect isn’t going to attract a lot of attention. The Empire state index is probably going to be gloomy tomorrow and that could put pressure on the market for those die-hard number investors looking to sell on sure statistical signs of a US recession (amazingly, 2 quarters of negative GDP growth has not happened yet!).

Well, shouldn’t all that rescue effort all over the world start a worldwide stock market turnaround from now on? The stock market is a discounting mechanism isn’t it? Well, you are right that the stock market is a discounting mechanism and the historical surge yesterday have priced in much of that optimism. Investors and economists remain skeptical on the outcome of all these rescue effort and if the sink hole should turn out to be much bigger than all these rescue effort can handle (So far in this crisis, the hole seem to get bigger after every effort to mend it), the stock market could continue it journey to the center of the earth.

Well, the market was down slightly today as expected. All of you who have been following my blog knows something I always say; that the few days following a large single day rally would be sideways days inclined in the opposite direction. But why is that so? Simply, Profit Taking! Investors tend to take profit too quickly and hold losses too long (which is a fact established in behavioral finance). After a few days of profit taking, if the market still holds up pretty strongly, then investors will re-evaluate the market and make a decision to move and that creates a breakout… either to topside or downside. Again, I would not be surprised to see the pullback continue tomorrow and it is the quality of this pullback that will determine if a bottom have been set. For now, the market remains in a short term and primary bear trend.

Star Trading System’s Thought For The Day : "Time For Troops To Rest."

Free Stock Market Research Report by Jason Ng, the man behind The Star Trading System (one of the best option trading systems)

A market that can fall by nearly 700 points in a day (last week) could as easily rally more than 900 points in a day (which it did yesterday) and a market that can rally over 900 points in a day could as easily fall over 900 points in a day again (tomorrow?). This is what a volatile market is all about and why the Star Trading System have been keeping us out with no signals lately. If it had given us bearish trades last week as some of you suggested, then those positions would have been killed yesterday in one fell sweep.

Again, the Star Trading System produced no picks today, demanding us to continue to be patient.

The Dow rebounded off its critical monthly 200MA (which I mentioned in yesterday’s post) today in a HISTORICAL 936 points rally. If you add the rebound off last Friday’s bottom, the Dow would have accumulated a gain of over 1000 points in just 2 days!
What caused this rally? Well, the US is not alone in this rally as markets all over the world gained as much as over 10% before the US market opened due to decisive moves made by central banks especially in Europe. I must say that the Europeans are a lot more decisive in executing their rescue plans (Germans especially).
So, is this the time to celebrate and start buying like a nut?
Not just yet.
Remember, a market that can go up 900 points can as easily go down 900 points (the reverse is true and we witnessed it today after the 2400 points beat down last week). This is what volatile markets are all about. With a crisis this big, we cannot expect the Dow to do a V-shape reversal and then start a bull trend right away. It is probably going to do a dead cat rally of some sort since the Dow is this incredibly oversold and then retreat, or even retreat right away tomorrow. Either way, the main thing to look out for is the quality of that retreat. If the retreat is benign and does not reach for new lows, then a bottom could have been found.
From tomorrow onwards, I will focus on looking for technical signs of a bottom and will title the series "Signs of the Bottom". Stay tuned.

Star Trading System’s Thought For The Day : "Always Respect The Market"