FUNDAMENTALS
Stocks avalanched downhills as it seems more and more certain that Q2 earnings will not meet expectations. The Techs continued their way down across the board with giants like Microsoft (- $0.39)and Apple (-$1.71) leading the way. The Dow followed the trend at last with industrials leading the way down with giants like Boeing (-$3.09) and Caterpillar (-$1.16). Internals are clear as decliners lead advancers by 2 to 1. It seems like the markets is hit by a sudden wave of negativity after one weekend with little fundamental reasons.

TECHNICALS
Even though yesterday’s market action was well within our predictions again, the intensity of it still shocked us. The Dow completed another level of its staircase formation as it corrects down to its 30 days moving average as we have predicted a few days ago. Volume was typical of such a move and do not show any signs of abnormality. We have seen similar moves in the Dow throughout this rally on 5 Jan 07, 22 Dec 06, 27 Nov 06 and 9 Aug 06. All displayed similar characteristics and volume profile. This move has helped the Dow get off its short term overbought condition and should pave the way for further upside. Nasdaq opened up as expected but immediately collasped back down to close sideways on its 30 days moving average once again. The Nasdaq composite’s short term stochastics is almost at the oversold region and that could allow the index to go higher if it rebounds off this level or its psychological support level at 2400. This week continues to be an important week for the Nasdaq composite. Oil has found a support level at $52 and has started to trade sideways. Such a slight pullback is completely expected but it also seems to be putting some pressure on the markets. This week’s oil inventory numbers should be an important determinant on the next direction for oil.

The Star Trading System continues to turn out more evening stars today with the continued negative sentiments.

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.
 
Last week has been a bullish continuation for the Dow but a terrible week for the Nasdaq Composite as it corrected back down to its 50 days moving average support level on lacklustre Q2 earnings performance outlook by tech giants. Oil also staged a slight rebound late last week as it landed on a strong $50 support level.

This week is going to be a very critical one for the Nasdaq Composite. If it drop below its 50 days moving average, it could go all the way down to test the 2400 level and failing which, it could laspe into a full scale bear trend. With people like Cramer shouting “SELL THE TECHS” everyday, its little wonder why everyone is panicking despite good Q1 earnings.
The number of evening stars versus morning stars today seems to indicate a market downturn… or at least a short term one.

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