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

FUNDAMENTAL ANALYSIS
The Dow ended sideways today as investors eagerly await tomorrow’s employment report. The employment report is truly the economic indicator of all economic indicators; The ONE Economic Indicator. This is also the economic indicator most closely monitored by the Feds in concocting their fed fund rate policy. Indeed, the employment report is so highly anticipated that the Job report and factory orders report today hardly matter. The employment report, or also known as the Employment Situation Report or the Uemployment Rate report, is the most direct indication of USA economic well-being. As the saying goes, what matters is the bottomline. The bottomline of every economies are happy, employed citizens who are contributing to the economy! Nothing else matter when the end result doesn’t please. That is why this report has such significance, even though it is released every first Friday of the month (versus Mondays for the ISM index). So, what are we looking for in the Employment Situation report? Like all economic indicators, we are looking for a reading which supports investor’s expectations. So, what are investors expecting? Investors are expecting data that increases the possibility of another rate cut! Which means that the employment report tomorrow should show a slightly higher than expected unemployment but not enough to cause widespread panic about a pending recession. This is a tricky balance which is difficult to predict. That makes for all the uncertainty in the market. Indeed, without uncertainty, there will be no efficient or liquid market and every other day will be boom or bust, making it impossible to invest in. The pricing in of another rate cut has obviously begun and would definitely magnifest as a nice bull run tomorrow if the employment report turns in “favorable”. From the data so far… initial claims beating and raising the 4 months average and factory orders declining, employment report cannot be expected to turn in rosy.

Volatility prevails yesterday, setting our existing positions back quite a bit without triggering doji day stop losses. What is volatility? Volatility is changes that happens suddenly and without much warning. Volatility is a fact of the stock market and is what takes many beginners right off the game. That is why the Star Trading System’s rules has been properly optimised for trading in this kind of environment. Option trading is scary. Along with huge gains comes higher than stock trading losses and we all need to learn to live with it.

TECHNICAL ANALYSIS
The Dow ended it’s 2 days fall in an almost neutral day today. These 3 day’s corrective action has allowed the Dow to get off the short term overbought region by a slight margin, increasing the possibility that we will see more upside to come. The low of 1 Oct, which I identified yesterday as a critical short term bottomline, continues to hold up safely. In fact, the 1 Oct low of 13893 is as important as the bottom of a baby cradle now! Break the bottom and be ready for a painful fall. Volume was low today as investors await tomorrow’s data. A completely neutral day with very low volume is indeed as good as a market holiday. The Dow however continue to look slightly over extended as it trades high above its 30MA on a weekly scale. In fact, the Dow rarely trades more than 10% higher than its weekly 30MA before a significant pullback (this, surprisingly, conforms to the mean/variance theory). Currently, it is about halfway there. This is certainly not the best of times to put on new positions.

Thought For The Day : “Complete Certainty & Total Confidence are the premise of Fools & the Ignorant.”

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

FUNDAMENTAL ANALYSIS
The Dow retreated yet another 79.25 points today as the ISM services index turned in the lowest level since March. The ISM services index is the second monthly index released by the Institute for Supply Management and is the cousin of the more influential ISM manufacturing index. ISM services is released on the 3rd business day of every month and measures the health of the service sector. Similar to the ISM manufacturing index, a reading above 50 suggests a growing service industry and a reading below 50 suggests a contracting service industry. The ISM service index is not a very influential economic indicator due to its relatively short history. There is simply too little data to arrive at a significant emphirical correlation between the index and prevailing GDP performance. That is why I would attribute today’s market action more to profit taking than on the ISM services performance as a declining ISM services index should enforce the probability of another rate cut this month, thereby spurring some optimism instead. In fact, contrary to many of the news wires out there saying that today’s pullback is due to poor economic data, the market ditched before the ISM services was released and then actually ROSE after the ISM services index was released! This suggests that there was already heavy profit taking prevalent in the market today and the ISM services index actually ENCOURAGED some buying (due to the higher possbility of a rate cut)! (so much for new wires)

The Dow continued its correction yesterday, into the second consecutive day. Despite the pullback in the market, our qualified stock CYPB continue to drive upwards yesterday. That is the magic and power of investing in individual stock signals as it reduces Primary Risk using the Star Trading System, which is also called market risk or Systematic Risk… the risk that stocks will go down with the market. Let’s see if anything qualifies today.

TECHNICAL ANALYSIS
The Dow continues a healthy retreat today even though it dipped below the 14000 level once again. The Dow needs to get out of its short term overbought position for a sustainable bull trend to develop. In this sense, 2 days of pullback still didn’t do the job. The Dow continues to be short term overbought and more sideways action should digest more of it. I would, however, be placing emphasis on the 1 Oct low. The Dow should not dip below the 1 Oct low in its efforts to digest the current short term overbought sentiment, otherwise, the short term bull pattern will be broken and the 14000 level would once again become a resistance level. Strangely, the markets has been more cautious and wary more than bullish since the fed rate cut. So far, only investors who took a risky speculative position before the rate cut would have benefitted significantly. Even on the weekly charts, it does seem like the Dow is almost due for a pullback to the weekly 30MA before it could muster enough energy to go further.

Thought For The Day : “Excellence is a plant requiring patient nurture”