Daily US Stock Market Hours Report and Analysis - Energy Sector Hammered…
Wednesday, June 11th, 2008This Stock Market Hours Report is brought to you by Jason Ng, Founder, Master “O” Equity
FUNDAMENTAL ANALYSIS
There are 3 ways to bring the price of an imported good like crude oil down. 1; Reduction in demand, which has so far been pretty slow at correcting prices. 2; Increase in supply, which is equally hard as OPEC refuse to act. 3; Increase the value of your currency, which Uncle Ben so brilliantly did today by hinting at possible rate hikes in the near future. In fact, Fed fund futures are now pricing in a 100% chance of a 50 basis point hike during the next meeting! Crude oil prices took a hit on the news, bringing the energy and basic materials sector down big by over 2% each, ending the market mixed for the day. Looks like crude oil prices have reached the level of pain where action must be taken. Does it mean that crude oil would not go up further? Have we seen a top, at least for now? I can’t say that in the few months past when Uncle Ben’s cutting rates like its on discount but with rate hikes on the horizon, crude oil and all other commodities are certainly going to be under the most severe pressure they have faced in a while. So, rate hikes are going to bring oil and other commodity prices down, is it good for the economy? Shouldn’t the Fed be on an expansionary policy of cutting rates and stimulating this weak economy now? Not really. This is where I think Uncle Ben is brilliant and worthy of being one of the best economist in the world. By hiking rates moderately, Uncle Ben would be able to arrest the headline inflation problem due to rising oil and commodities while still allowing the economy to grow at a slow and moderate pace through other stimulus actions. This is a fine balance which Alan Greenspan did a terrible job with. This also mean that this Friday’s inflation numbers could be worse than expected, so, be prepared (see economic calendar). The market might be mixed now and could continue to experience more turbulence as the energy sector undergo a corrective storm but the long run looks healthy and under good hands.
TECHNICAL ANALYSIS
The market continue to move sideways today with no signs of being able to reverse this new intermediate bear trend. For now, market trends remain status quo.
The Star Trading System continues to be more bullish than bearish today even though the market continues to move sideways. Could this mean that the market is going to recover soon? Maybe. I never want to second guess the system as it has proven to be more accurate than my predictions over the past 10 years.
Thought For The Day: “Always Follow The System
