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

FUNDAMENTAL ANALYSIS
We witnessed more profit taking today as profiteers bailed out heavily when the Dow reached new historical highs intraday. The profit taking action left the Dow to close down by 62.57 points or 0.45%. The day actually started out extremely well when Jobless claims fell more than expected, allowing the Dow to open up strongly. Well, not strange to see profit taking at this height as the marginal utility of profit pleasure gives way to the fear of loss. (see my article on how the Law of Diminishing Marginal Utility affects markets ) Afterall, the stock market is not totally based on market fundamentals, right? (George Soros calls the over reliance on market fundamentals the “Market Fundamentalism”)

TECHNICAL ANALYSIS
The Dow certainly played according to expectations by trading along the 14000 line as I mentioned yesterday. However, today’s action is slightly different from yesterday’s. Today, the Dow sold off on heavy volume and spurred a ton of bearish reversal signals in the individual stocks. This could mean trouble and a test of the 14000’s holding power. Obviously a sell off has started, which is nothing to be surprised about as the Dow is already very over extended in comparison with the 30WMA. (for a detailed discussion on the 30WMA and its significance, please read the comments on my post on 9 Oct.)In fact, for the rally to continue on healthily, I would expect the Dow to trade sideways for many more days to come, or simply make a significant ditch before rebounding back up. However, the danger remains at the 14000 border. If the Dow should ditch below the 14000 line, it might find it a challenge to get back above it again later on. So, I would certainly prefer that the Dow simply trade sideways above the 14000 level and wait for the 30WMA to catch up a bit… However, I won’t bet on it as the internals does look awfully dangerous right now.

One week has gone by again… and again, what a dangerous week. The market looked like it was going up but the Star Trading System continuously refused to give us any qualified stocks and now we know why… there is an extremely strong bearish undercurrent threatening to explode. Today, we see an explosion of evening stars in response to the market and those signals that fails to qualify for entry a few days ago like MDRX, all took an extremely hard hit. In fact, MDRX was hit over 3%, just like our existing signal CYPB! See why we must learn to trust the system now?

Thought For The Day : “Traders Love Weekends!”

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

FUNDAMENTAL ANALYSIS
Stocks closed mixed today in an extremely turbulent session ending the Dow 85.84 points lower but the Nasdaq composite a marginal 7.7 points higher. Today, a broad based, low volume profit taking drove stocks to into the pit, back where it started yesterday but buying interest soon returned after midday, pushing the Nasdaq composite back up into positive territory. The Dow was making an attempt into positive territory too but time was up before it could do so. With the Dow making new highs recently, it is not unusual to see some profit taking, especially before the sensitive Jobless Claim report tomorrow (which is released every Thursday by the way). Jobless Claim report is an extremely important, forward looking economic indicator and formed part of the leading indicators index. Basically, if jobless claims show a rising and persistently high trend, it could be expected that consumer spending would drop and affect the rest of the economy in a domino like effect. That is why the stock market is sensitive to the jobless claim report. From investors’ response to last Friday’s employment report, I think investors would want to see some positive indication out of the jobless claim report instead of a gloomy one. Which also means that a positive report tomorrow may allow the market to get back up and probably to new highs. Let’s watch and see…

TECHNICAL ANALYSIS
Praise be to the 14000 support level. The Dow rebounded off the 14000 support level once again in intraday trade today. This further reinforced the fact that the 14000 level has indeed become a strong short term support level. Short term momentum is now on the decline on our indicators and with the 14000 level this strong, I would see the Dow moving sideways along this line a little bit before making another upwards attempt. Overall outlook remains bullish as the Dow continues to trade atop a rising 30WMA and investors need to practise discretion when interpreting single day pullbacks like this one today.

The Star Trading System is beginning to sit on the sidelines right now with only 5 signals. From giving us a pool of evening stars 3 days back, the pool has been shrinking everyday. Such is the behavior of the Star Trading System during times of extremely uncertainty and usually, at the brink of a dramatic correction. That is why even though there are tempting trades to be made against the rules these few days, all the reasons stil points towards the Star Trading System is right, so let’s stick to the game!

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