This Stock Market Hours Report is brought to you by Jason Ng, Founder, Master ‘O’ Equity

The Dow took a further hit today as it fell another 129.79 points. This is the first time in this rally that the Dow fell by more than 200 points in 2 days. This is definitely a change in character and a break in the staircase formation. Like I said yesterday, if the Dow does not make a new step in the staircase formation today, it may be in for the correction that so many people are anticipating. Right now, the Dow is very near its 30 days moving average support line. If this line holds, the Dow may do a classical textbook 30days MA support rebound and continue its rally. If that is the case, then the rebound is when we should reenter the market. If the Dow continues to move lower than the 30 days moving average line on advancing volume tomorrow, then this correction may go as far down as the 50 days moving average line at about 13100. Hang on for a rough ride…

The Dow dropped by more than 100 points for a second consecutive day yesterday after the Star Trading System flooded us with evening stars yesterday. This is the first time in the rally which the Dow fell by such a magnitude for 2 straight days.

Today, the Star Trading System continues to give us more evening stars… preparing us for worse to come?

Thought For The Day : “Always respect the market.”

This Stock Market Hours Report is brought to you by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Obviously, the US market is looking forward to a rate cut more than anything else… in fact, more than economic growth itself! The Dow was down 80.86 points today as Fed chairman released a positive review on the economy and the ISM services number turning in the strongest since April 2006. These positive indications seemed to push the possibility of a rate cut into the abyss and caused an instant sell off. The ISM Services index is based on a survey of about 370 purchasing executives in industries of finance, insurance, real estate, communications, and utilities, reporting on business activity in the service sector. Readings above 50% indicate expansion for the non-manufacturing components of the economy. While readings below 50% indicate contraction. The ISM services index checked in at 59.7 today, indicating a growing service sector. I would expect any heartache due to no-rate-cut to be temporary as a growing, healthy economy is still the underlying strength behind the stock market.

TECHNICAL ANALYSIS
Surprise surprise. The Dow did not make a new step in the staircase formation today but instead, it dropped slightly down. Even though the drop was slightly over 80 points, it is not a big drop considering the overall strength prevalent in the chart pattern. In fact, the staircase has not been broken the last 2 drops of 84.52 points (24 May) and 147.74 points (10 May). However, no speculations are accurate. Tomorrow is going to be a critical day for the Dow… it must make a new step tomorrow or risk going into a correction. Even though hedging during these times have hurt my profits somewhat the last 2 times, I would not risk not doing it again.

The Star Trading System seems to be preparing us for worse to come as it floods us with evening stars today.

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