by Jason Ng, Founder, Master ‘O’ Equity

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It happened at last! The Star Trading System has warned us of something bad whole week with a whole lot of evening stars and now, it seems like the correction that everyone’s been waiting for is finally here. Sit tight everyone!

FUNDAMENTAL ANALYSIS
It was almost by concensus that markets around the world, including the US market plunges after China’s Shanghai Index plunges by over 8% in a single day. Dow plunged over 416 points in one day and could lead to the long awaited correction in the US Market. We have not seen this kind of single day drop since Sep 2003. Alan Greenspan’s speculation of a recession served as a catalyst to this correction and is followed up by today’s correction in the global market… everything seems to tie in nicely for the kind of correction  everyone’s been waiting for. Sit tight everyone!

TECHNICAL ANALYSIS
There was no doubt at all what happened today! It was surprising, strong and without a trace of doubt… the correction HAS BEGUN! Both the Dow and Nasdaq composite broke strongly to downside, out of their neutral channel on strong volume. This is definitely a concensus move and anyone still in today will be dying to get out tomorrow. All technical indicators are screaming for us to get out of longs. I believe we should see a testing of the 200MA at 11775 before the Dow pullup a little. All traders speculating for a rebound should know that a Dow rebound after a 3+% drop usually happens near a bottom, not at the peak of a bull trend. I will not bet on it personally. Well, My Educated Hunches completely changes today.

by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Markets took a blow today as ex-Fed chairman Alan Greenspan suggested that there might be a recession coming later this year. This is further compounded by oil prices holding steadily above $61. Higher oil price put pressure on the transportation sector as usual with decliners leading advancers by 4 : 1. However, the internals for the market wasn’t bad with advancers parring decliners. The Chicago PMI and ISM this week could still help lift the markets if they turn out well. If oil prices continue to climb on the higher demand due to snow storms, it could end the current rally and put the market into a correction.

TECHNICAL ANALYSIS
As expected, the Dow corrected right down to the 30 day moving average line and looks poised for another rebound. No surpise on that front. What will seriously surprise me would be if the Dow should close significantly below the 30 days moving average tomorrow on significant volume. That could spell the start of a Dow correction. The Dow has closed slightly below the 30days MA line only once on 28 Nov 2006 ever since this rally started. That was done on low volume and not by a significant margin which did not end the rally then. I think we should see a rebound to new highs soon. On the Nasdaq front, the Nasdaq 100 failed to make a resistance level break as expected and has brought the Nasdaq composite down for a second straight day. With both the Nasdaq composite and the Nasdaq 100 still in overbought condition, we could see a testing of the 50 days MA soon. That would set the Nasdaq composite back down into its lateral channel again. I was so close to changing my hunch for the Nasdaq composite to a bull trend but now, I was right for being just a day more patient. Nasdaq remains plain water to me.

The Star Trading System continues to turn out more evening stars today… is the market going to continue down?

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