FUNDAMENTALS
Markets took a turn to downside yesterday on concerns over a slowing economy and the energy sector turning down along with falling oil prices. The problems in the US economy is not a simple one and one that will eventually show up in the stock markets. With very little positive developments in the economy and mounting pressure from a rising China, US is quickly losing its global competitiveness. This showed up as a 5.8 points decline in the business index for December at a negative 4.3 versus a positive 5.1 in November. With a national debt that is 4 times national GDP, there is no way debts can be repaid with the baby boomers retiring from 2008 onwards. Like a person deep in debt and forced to repay very soon, this giant’s financial picture is not an optimistic one.
 
TECHNICALS
Sadly, the “Black & White Brothers” failed to lift the NASDAQ Composite index. Ending the day in a 0.48% drop, all trend indicators are pointing to a short term  bearish trend for the first time since the same indications showed up on 10 July 2006. We saw the same example of such a behavior in the indicators on 11 May 2006. The Dow is displaying a completely different sentiment, however, as it continues to form yet another plateau of its staircase formation with no indications of coming to a halt. Eventhough all major indices tend to move in the same direction under the same market undercurrent, there are times when they are different. On such time is the tech crash of 2000 - 2001. By 2002, however, the Dow yielded to the falling tech sector and fell in tandem for a year. Oil prices have lasped back into range trading within its neutral channel of $60 - $63 once again. Looks like it is going to stay neutral for a while here.

Jason Ng
Founder, Masters ‘O’ Equity
mastersoequity.com
“Your Personal Stock Option Mentor”
 

FUNDAMENTALS
The Dow closed down marginally on profit taking and FEDEX’s $2.15 drop. With almost no more news release or economic news, markets remain lacklustre. The Energy sector also failed to follow up on its rebound as Crude oil fell from its 3 weeks high to close at $63.19. A warmer winter is expected to cut demand for heating oil thereby relieving the pressure on oil inventory. At this point of time, many analysts are quick to agree that this is no longer a fundamental driven market.
 
TECHNICALS
Markets continued to move sideways yesterday as the Dow continues a series of doji like candles and the NASDAQ Composite forming a doji with a higher high and a higher low. The candlestick formation we see on NASDAQ today is very interesting. Even though it dropped 0.08% yesterday, it formed a formation I call the “Black & White Brothers”. It is a formation consisting of 2 candles (one open candle and the other a close candle) with relatively small candle bodies, lined up horizontally side by side. There are many names given to this kind of formation addressing the specific arrangement of these 2 candles, but the effects to be expected are the same. That is why I gave it a different name, encompassing all the variants. It doesn’t matter which candle comes first; The black candle can come before the white candle or the white candle before the black candle. This formation occurs commonly after a big down or a big up day and usually signals a reversal. We saw a similar formation in BBBY on 3 Nov 2006, lifting BBBY up by more than $2 after a $1.01 drop on 1 Nov. With the Black & White Brothers knocking in after NASDAQ’s 0.88% ditch 3 days ago, it may signal a rebound back up into its neutral channel. This is a very fast formation. If it should be accurate, we should see the action by today.
 
The Star Trading System seems to agree with the Black & White Brothers by turning up an avalanche of morning stars.

Jason Ng
Founder, Masters ‘O’ Equity
mastersoequity.com
“Your Personal Stock Option Mentor”