FUNDAMENTALS
Markets suffered the first setback in 4 days as crude oil prices plummetted by more than a dollar within a day. The already weak and sensitive energy sector brought NASDAQ down by 0.88% as the Dow followed it down by a marginal 0.03%. Crude oil sent shares of Dow component ExxonMobil down $1.79, or 2.3 percent, to $75.51. Rival Chevron Corp. shed $2.05, or 2.7 percent, to $73.33. British Petroleum PLC declined $1.13 to $66.75. Other giants affected by the year end sell off are Google and Yahoo, both dropping by 3.65% and 2.23% respectively. All eyes continue to be on crude oil action with the complete lack of any major release anytime soon. It will certainly be of benefit to the market in the mid term should oil price remain constant within a $60 - $63 range.

TECHNICALS
A sideways day at the markets yesterday despite great drops in NASDAQ. The Dow closed a completely neutral day while NASDAQ fell back down into its sideways movement. NASDAQ has remained neutral since 27 Nov and still do not look like it’s mustering the strength needed to go further up. Unlike the Dow, NASDAQ has failed to complete its staircase formation and is now forming a flat top neutral trend. Such a neutral trend usually spells the end for a rally as it needs to make a new decision soon whether to go up or down or simply stay sideways like it did during the first 5 months of the year. The Dow continues to look strong and if it continues its bullishness, it can also help NASDAQ break to upside. Oil slipped back down into its neutral $60 - $63 channel yesterday surprisingly. Let’s see if it follows up today. 

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

Welcome back from the weekends!
 
Hope you are mentally and spiritually recharged for the challenges ahead. A warm welcome goes to our new week one students too.
 
FUNDAMENTALS
Markets gained last Friday on favorable November CPI numbers. The CPI numbers continued to point towards a controlled inflation as both total and core CPI remains unchanged. The bullishness didn’t last throughout the trading day as a sudden surge in oil price put renewed pressure on the markets and brought the markets back down to closing near the day’s low. The ISM national survey of manufacturing conditions also ditched below 50 for the first time since 2003, showing a contraction in the manufacturing sector. Even though it does put pressure on the manufacturing sector, we all know that manufacturing cannot always be on the top of the list for a matured economy. I will be watching oil price very closely now as it is showing sure signs of recovery with the surge last Friday. The market’s bullishness so far will certainly end if oil should rally from here.
 
TECHNICALS
The Dow has regained it’s uptrend condition last Friday since it laspe into a short term neutral trend towards the end of November. NASDAQ continued to struggle with a neutral trend as it continues to go sideways. Well, this is an interesting juncture here as all major indices eventually affect each other. If one rallies strongly, it will lift the other indices too and if one ditches strongly, it will pull the others down too. So, we will have to see if NASDAQ follows the Dow back into an uptrend soon or have the Dow laspe back into a neutral trend along with it. Oil remains the focus of concern here as it breaks the $63 psychological resistance level last Friday to close at $63.40. Even though right now oil prices have retreated back down a little in asian trading, it is still holding well above $63. Short term stochastics on USO is showing a recovery from the oversold position indicating strong possibility of more upside to come. As we can see, the rally so far has been the result of an inverse movement against oil prices. If oil should take a turn around, the possibility will be high that the markets will also be affected.
 
The number of evening stars versus morning stars today seems to indicate a more pessimistic outlook.

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