by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Stocks were down just marginally today as oil prices break the $60 psychological resistance level and reports that home prices have yet to reach a bottom. Stocks have been incredibly resilient in the face of these traditionally market moving bad news this time round as advancers par decliners 1 : 1. Stocks hit today are from the Materials & Construction sector as stocks like TOL plunged 3.02%. US homes are estimated to be more than 400,000 more than demand can handle and will continue to pose a problem to the supply/demand curve. Frankly, the stock market has been handling the housing crisis well so far as it does look like it is in for a soft landing, as the Feds wanted it to be, even though we are not seeing a bottom just as yet. Giving markets a lift today from its intraday low was oil prices breaking the $60 level, lifting the energy sector. It does look like, so far, that the OPEC production cut along with a higher demand as the winter chills return in a big way is acting together to give oil prices a serious boost. Will this rally in oil prices put pressure on the stock markets?

TECHNICAL ANALYSIS
Ah… back to my favorite section. As a technical chartist, I somehow see more sense from my charts than from the news most of the time. Again, no surprise today as both the Dow and the Nasdaq composite closed sideways. The Dow formed a “Hammer” candlestick signal today as market forces take it off its intraday lows to close near opening level. A hammer candlestick signal at this level tells me that there is a strong undercurrent to the Dow. This has also helped the Dow get off its short term overbought condition. A hammer signal occuring along with RSI has moving off from the deep overbought region has preceded the Dow climbing to new highs 4 out of 4 times over the last 5 months. The Nasdaq composite remains short term overbought and has started to lose upside momentum in the face of the 2500 resistance level. Seriously, it is difficult for a tired man to fight a giant and is certain difficult for the Nasdaq composite at such deep overbought condition to make a break anytime soon. It could take a short breather at this level before facing off the 2500 level next week.

I see another interesting pattern emerging today… since 14 July 2006, the market has moved completely inversely to the movement in oil prices. However, that pattern was broken on 18 Jan 2007 as the markets rallied along with the rally in oil prices. What does this mean? Does it mean that higher oil prices will now actually be beneficial to the economy and the stock markets?
 

by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Not much fundamentals at work today as the Dow continue to close sideways on a dropping oil price. The Nasdaq composite took a boost from Cisco today as we have predicted yesterday and headed up 0.77%, the biggest single day gain in 5 days. Wholesale inventories numbers for Dec will be released tomorrow. This number tells us how much inventory is left after December sales and tells the tale of how active retailers had been. Although not a major release, it does hint at the health of the economy and with a complete lack of any market moving news release this week, this may well turn out to be quite important. Expectations are for Wholesale inventories to drop from 1.3% to 0.6%.

TECHNICAL ANALYSIS
Again, no surprise today as the Dow continued sideways to form another step in its staircase formation and the Nasdaq composite continued up towards the 2500 resistance level as expected. Both indices remain in short term overbought condition and looking back at past behaviour, it is unlikely to see the Dow surge to new highs until it has moved sideways enough or even ditch slightly to wear off its short term overbought condition. The outlook for the Nasdaq Composite continue to be extremely uncertain. Even though the Nasdaq composite has moved very near to its 2500 resistance level, the Nasdaq 100 is still a distance from its 1840 resistance level on rising upside momentum. The Nasdaq 100, with its growing momentum and distance from resistance level, may well help to drive the Nasdaq composite beyond its 2500 resistance level. Oil prices has failed to break the $60 resistance level and has started to ditch after taking a bang on the head. Even though it will affect the energy sector negatively, it should help drive the rest of the market up. That is again, another plus for the markets. All in all, my sentiment remains the same… Bullish for the Dow and Neutral for the Nasdaq Composite. (until proven otherwise)

The Star Trading System continues to give us only a few signals today amidst the uncertainty.