by Jason Ng, Founder, Master ‘O’ Equity

The markets are showing some significant weakness yesterday as the FOMC release approaches tomorrow. The Star Trading System also turned out an equal number of morning and evening stars in preparation for this uncertainty.

FUNDAMENTAL ANALYSIS
The Dow closed marginally down by 3.9 points today in a spectacular recovery off it’s intraday low of -75.41 points today! Early profit taking has forced the Dow to open down and dive straight down below the 13300 point level, just when all hopes seems lost and that a full scale correction is at hand, a recovery in oil price to above $62 helped stage a small rally in the Technology sector which helped to liven sentiments across the board and lifted the Dow steadily throughout the day. This slight pullback also ended the Dow’s 5 days rally ahead of tomorrow’s FOMC release. The uncertainty that surrounds tomorrow’s Fed release also explains why so many investors are taking profits today. Let’s monitor how the sentiments go tomorrow. All in all, the numbers so far suggests that inflation continue to be in control and I would certainly expect the Fed to keep rates steady and to “continue monitoring”.

TECHNICAL ANALYSIS
The Dow closed sideways today inline with it’s staircase formation. Nothing seems out of sorts today and that some profit taking is normal at such levels. We saw the same “hangman” signal back on 19 April, which led on to another step in the staircase formation. There is only one concern though, that our momentum indicator shows a slight drop in bullish momentum. Such a drop makes a “hangman” signal very strong. I would make the 13210 points my final ultimatum on the Dow before I start going delta neutral and prepare for a correction.

Thought For The Day : “Discipline and Patience are the hallmarks of every successful trader.”

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by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
The Dow was up today by a significant 48.35 points on a pretty mixed market action. The Nasdaq composite was down marginally by 1.20 points, advancers only barely par decliners and trading volume retreated significantly. There signs tells only one thing… the traditional lethargy before every FOMC release. Uncle Ben is going to talk about rates again this coming Wednesday. The retreating oil price was probably what caused the tech heavy Nasdaq composite to pullback into the red a little but that has certainly helped the Dow gain more bullishness. Trading action is expected to be thin and sideways tomorrow ahead of the FOMC and then, we shall see how investors react to the release.

TECHNICAL ANALYSIS
The Dow was up again today on declining volume. Technically, declining volume at this juncture always suggest that the bulls are running out of steam, HOWEVER, with just 2 days to FOMC, this decline in volume may be fundamental driven instead and I would treat it with a little bit of doubt. One thing that I may really be concerned about is that the gain today of 48.35 points seems to be a new step in the Dow’s staircase formation. In this aspect, we are witnessing a steady shortening of each step since the formation begun and that also hints to this stage of the rally coming to an end soon and a pullback seems imminent. The first step in its staircase formation on 3 April took the Dow up 128 points, the second step on 16 April was up 108.33 points, the third step on 20 April was 153.35 points, the fourth step on 25 April was up 135.95 points, the fifth step on 2 May was up 75.74 points and today, we clocked in at 48.35 points. I would certainly be going delta neutral again at the first sign of a pullback.

The market is cooling down slightly now ahead of the FOMC release. (Please see http://www.mastersoequity.com/option_trader_hq.php for stock market calendar) The Star Trading System also reflected this cool down with only 5 signals today.

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

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