by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Crude oil challenging the $66 level along with a sell-off in GM and common sentiments that the rally is due for a little pullback caused investors to start taking some profits off the table. The Dow was down 42.58 points today, actually not a very serious pullback. Looking at the internals, decliners failed to significantly lead advancers, signifying that the bullish undercurrent is still intact. With the China market still bullish and pulling global markets along prior to the launch of their index futures, I think this pullback is healthy and will help the market ride the global trend further.

TECHNICAL ANALYSIS
The Dow was down today as expected after yesterday’s buying climax. I don’t think it is the end of the pullback yet as the short term stochastics remains grossly overbought. I see a possible testing of the 12800 level before a rebound is possible.

Thought For The Day : “Rules Are The Chains Within Which One’s Emotions Must Be Contained”

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by Jason Ng, Founder, Master ‘O’ Equity

We had an exciting and bullish week last week and the Star Trading System seems to think that this bullishness is going to last by turning out significantly more morning stars than evening stars today.

I was surprised last Friday by how strongly the market surged when I had expected it to at least retrace a little bit. The Dow was up 153.35 points in a single day! So, am I wrong that the market needs to retrace at this point? Not really. I may be just 1 day off from my expectations. While investors are celebrating the bullishness, I see 2 major problems with last Friday’s surge. One, the Dow surged with a huge volume surge. Such a volume surge after such a strong run up is called a Buying Climax. Such a surge in volume on a single day usually exhausts the bulls and lead to a significant retracement. Two, even though the Dow broke the 12800 level nicely, it is now up against an even stronger foe… the almighty 13000 psychological resistance level! With the Dow this overbought on a short term basis, coupled with a buying climax, I really see no reason why a significant retracement would not happen within these couple of days. I will be hedging my market based positions to delta neutral on Monday opening.

Thought For The Day : “Every Morning Marks A Brand New Beginning”