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

FUNDAMENTAL ANALYSIS
The DOW gained 180.54 points today in a nice get back rally even though Uncle Ben stubbornly made no reference to a rate cut in his speech in Berlin this morning. Speculative institutional players are beginning to enter the market systematically, thus slowly pricing in the rate cut. Such pricing in ahead of major, high confidence events are very common, usually leading to a weak rally when the event really occurs. The Fed has a very very hard decision to make here… cut rates and sacrifice the dollar, hold rates and sacrifice the market and the economy… both are very bad scenarios. Let’s see what these highly paid geniuses can cook up to save the economy this time round. For us traders, new money should really stay on the side.

TECHNICAL ANALYSIS
A very weak rally today as the Dow gained on declining volume ( read about the relationship between volume and price movement in my article HERE ). Again, such significant gains on weak volume are always the work of institutional players trying to get ahead of the crowd… but will the crowd come? The daily 50MA line has proven to be an extremely tough resistance level lately… how dangerous is that? Beating that line leads to a rally, failing at that line leads to a bear trend… that’s how dangerous that is. Right now, with the Dow retreating back down to the short term oversold region, it might muster some strength in an attempt to break the 50MA line. In fact, I see that coming this week… make or break…. this week.

No signals yesterday and today, an explosion of signals. All of a sudden, the Star Trading System seems to see the market going topside and is trying to prepare us for it. If the market should start a rally today, ALKS (week 3 and 4 students) might be brought along with it, completing a double bounce action. In fact, those who are slightly more technical analysis saavy, you can also see ALKS completing a huge bull pennant formation, which is also an extremely bullish signal. ALKS has also stayed above the doji day stop loss despite all the turbulence, hence remaining a valid morning star signal. All in all, the trade still looks great for those who follow the run at first sight or 25% profit taking method.

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

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

Volatility describes how suddenly and without warning, changes can happen. A volatile mrket is one which can change its direction or nature suddenly and without warning. This is the market condition that we are all in right now.

The Fed meeting is next week (18 Sep), where the Fed is expected to cut rates, but as the Fed meeting draws near, more and more horrifying news suggesting that the economy is going into a recession hit the wire; Payroll dropped for the first time in years, Fed official comments that the credit crunch is going to hurt the economy and consumer spending, employment is down, employment rate dropped, percentage of industries adding jobs dropped, and most scary of all, Bernanke’s recent talks doesn’t give a hint he is about to cut rates!

Uncle Ben’s stand on this matter is clear… a rate cut is a monetary policy which is aimed at solving economic problems, not a move to salvage the stock market. But imagine this… you are now paying through your nose for your monthly mortgage installment, with little to spare for food, let alone luxury… how is that helping the economy? A rate cut will alleviate the monthly installment pressure through a reduction in the installment amount, allowing you to buy more food and probably some luxury. That way, more money returns to the economy, consumer spending goes up, consumer confidence goes up. How is that not helping the economy… and the stock market of course.

So far, we are not seeing a definite pricing in of a possible rate cut in the stock market yet. The Dow continue to fiddle on top of its weekly 30MA, which is a good thing. However, if the Dow should drop today significantly, it will breach the weekly 30MA and form a clear bearish channel on the daily charts… that could mean a lot more downside to come. For now, I remain optimistic as the Dow is still closely replicating its behavior back at 29 March where a small 2 to 3 days ditch occurred before a full scale rally. Tomorrow, the market shall tell us its decision… up or down.

What a RARE RARE RARE day! A day with completely no signals! I have only experienced it once before back in 2002. This is the second time I have ever experienced having ZERO signals! This is also testimony to how turbulent the market continue to be. As the Fed meeting draws nearer, more and more horrifying news about how the economy is going into a recession hit the wires. Investors know that this issue can be solved in one fell sweep by the Fed through a rate reduction but a lot of uncertainty continue to surround the possibility of a rate cut. That causes the turbulence and volatility that we see recently and which has caused the Star Trading System to give us totally no signals today.
Volatility is changes that happen suddenly and without much warning. A volatile market is one that changes directions almost on a daily basis suddenly and without much warning.
Well, good time again to take a break, don’t you think?

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