by Jason Ng, Founder, Master ‘O’ Equity

Fundamental Analysis
The Dow made another historical high today as more evidence to Uncle Ben’s claims surfaced in today’s economic reports. What are these evidences? A big jump in unemployment last week, a record high trade deficit, a death drop in industrial output, a weaker than expected manufacturing in Philadelphia, continued housing slump…

With the economy slowing and weakening at this pace, surely there are no reasons why interest rates should be further raised. The only question is, what matters more to an economy? Higher interest rate? A weaker economy? Even Uncle Ben couldn’t answer to that question. So far, Uncle Ben’s so caught up with trying to tie down baby boomer’s money in the
markets by giving investors exactly what they want to hear and see that few questioned or answered to these fundamentals. Seriously, what is actually going to cause severe damage to the US economy is the large scale baby boomer drawout looming in the horizon and by giving them a reason to continue to keep their money in the markets is certainly one way to delay the inevitable.

 

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TECHNICAL ANALYSIS
No surprise today as markets continued its advance at a slower pace. The Dow looks like it is ready to move sideways again in preparation for yet another step in its staircase formation. Volume of trade is significantly lower today indicating a lack of follow up to the rally yesterday. This is hardly surprising as that is the way the Dow behaved since the rally begun. Tomorrow is going to be a critical day for the Nasdaq Composite as it has reached the 2500 resistance level at last. Tomorrow will reveal if it will make a break and begin a bull trend or not. Things still look good for a break as short term stochastics is still a small jump away from being overbought and MACD continue to show growing upside momentum. Even though that gave me enough reasons to believe that Nasdaq will at least make a short term surge, I will not change my sentiments untill I see actual proof of a break.

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by Jason Ng, Founder, Master ‘O’ Equity

Fundamental Analysis
Markets continued its bullishness today as Fed Chairman Bernanke (Uncle Ben) took the bench and painted a rosy picture for all investors to lavish on. Here are some market moving quotes:

“inflation pressures are beginning to diminish.”

“likely to foster sustainable economic growth and a gradual ebbing of core inflation.”

“Overall, the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes,”

Uncle Ben sounded extremely optimistic and is a great contrast from what we have heard from the Feds so far… this makes the intent highly suspicious. Well, no matter what the intent may be, this is exactly the kind of things investors love to hear from a man like Uncle Ben… no matter if it be true or not. This, along with a drop in oil price due to healthy oil inventories, helped to push the Dow to yet another historical high. There will be more heavy weight economic release along the week which should either give emphasis or diminish what Uncle Ben just said. Realistically, we should not be getting a rate cut anytime soon as core inflation numbers are just beginning to go down. I seriously don’t think the Feds will start to make any adjustments when their efforts has just begun to show up.

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Technical Analysis
The Dow is at new highs! Did it come as a surprise to you? Certainly not to me. Here’s my quote from yesterday:

“If the pattern holds, we should see a new high by tomorrow.”

And indeed, we see the Dow at new highs today, beautifully and faithfully completing yet another step in its staircase formation. It is also interesting to note how nice economic news seems to tie in nicely with every step that is formed in the Dow chart. The Nasdaq composite has been faithfully neutral for a few days and have been off my focus for a while, today, the Nasdaq composite made a comeback at last to challenge the 2500 resistance level. The last time the Nasdaq composite made a trip this high up, it is already in the deep overbought condition. This made it very difficult to have any energy left to break a resistance level. This time round, the Nasdaq composite is still a mile from being overbought and with growing upside momentum on growing volume, it looks like it just might make it this time round. A high volume break above the 2500 level with a nice follow up will bring Nasdaq out of its current neutral trend into a short term up trend. As for the Dow, it is almost certain to see it start to go sideways again tomorrow or the day after. So far, both indices has stayed true to their patterns and my sentiments remain Bullish for the Dow and Neutral for Nasdaq.

The Star Trading System continues to flood us with morning stars today… could this be the start of another market surge?

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