Daily US Stock Market Analysis - Stocks Gained Despite Worrisome Signs Of Inflation
Friday, March 16th, 2007by Jason Ng, Founder, Master ‘O’ Equity
Today is Friday but I do see that some Week 1 and 2 students are not yet ready to make the big leap into trading and the main weakness that I commonly see is in the identification of dangerous chart profiles. The 3 dangerous chart profiles can wipe out your account very easily and untill you master identifying them consistently, you cannot move into actual trading. Today, I shall tell you individually who needs to repeat either week 1 or 2 next week. This repeating does not reduce your mentoring time. This is an Add On to your mentoring time. My objective here is to make sure everyone leaves the course as strong, profitable Star Traders so I will use any amount of time necessary to that end.
Many students are already starting the good practise of sending in your reports the night before market opens. That is very good as it gives me a lot of time to give you better comments. Keep it up!
FUNDAMENTAL ANALYSIS
Stocks gained today despite wholesale prices soaring up 1.3% in Feb. This is the highest increase since November and was double analyst expectations. Core inflation also gained by 0.4%, which is again much higher than analyst expectations and is double January’s gain! All these tells us that inflation is slowly creeping back into the picture and rising inflation certainly gives more probability to the Greenspan Prophecy (recession by end of the year). However, the markets were still led by yesterday’s bullish momentum and closed up higher today yet again. However, I do see that there is a significant drop off in volume today suggesting that many investors were starting to feel uncertain about what impact these inflation numbers will have on the market and were already sitting on the sidelines. On the other hand, we might note that the sudden surge in PPI is mainly led by a strong surge in oil price from January to February. If this number is oil driven, then it may not stay up there for long as oil prices are now settling nicely into a $55 to $60 range. Tomorrow, we will have the all-powerful CPI and Consumer Sentiment numbers. While a higher PPI on one month may not necessitate a rise in CPI, it sure does increase it’s probability and I sure wonder what effect that will have on the markets this time round. Will the bulls be resilient enough to hang on?
TECHNICAL ANALYSIS
Both the Dow and the Nasdaq composite staged a weak follow up to the Dragon Tail Formation which I mentioned in yesterday’s analysis. It was a marginal up day, in fact, a neutral sideways day from a technical point of view, with extremely weak volume. What does something like this tell us? Simply, UNCERTAINTY. This uncertainty is not uncalled for as we are now heading into some heavy weight economic release along with a Quadruple Witching Friday tomorrow (see yesterday’s analysis for explanation). Such a day requires technical chartist like us to look at a slightly longer time frame in order to see the real picture and in this case, for short term analysis sake, I choose to go on the 2 days timeframe. The 2 days timeframe have been an excellent time frame for short term swing trading and momentum analysis as it basically erases all the one day sideways movements which serves to be nothing more than distractions. Looking at a 2 days time frame, we still see the dragon tail formation on the Dow on rising volume with stochastics rising out of an oversold position steadily. All in all, still a pretty bullish outlook. Today, we might probably still see the market going sideways or even slightly inclined to downside as most Fridays tend to be (see US Market Trivals). Is the Bear going to hybernation at last? Would its last Yawn still cause a shakeup and would that shakeup wake the bear up again?
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