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

FUNDAMENTAL ANALYSIS
The Dow ended lower today by 120.96 points on more volatility. With all these volatility talk so far, what exactly is volatility?? Why is everyone talking about volatility? Well, in laymen terms, volatility means that the market will either go up or down in huge, sudden moves which defies short term prediction. Under such market conditions, one needs to adopt a longer time scale. Right now, it seems like there are 2 tribes in the market right now; The Recessionist who thinks the US economy is near or is already in recession and bangs on the weaker dollar, subprime mess and crumbling consumer confidence; The Expansionist who thinks the US market is going to do well even though growth has slowed down. I am definitely an Expansionist who continue to believe in keeping America great. Just look at the bond yield curve right now (See daily yield curve here)! The curve is getting steeper by the days with the long term yields systematically declining! Just look at the Fed Fund Futures! Already pricing in a more than 25 basis point cut! Think America is missing out on the global growth and that the rest of the world is “decoupling”? Think again! Growth is simply a number! Anyone who started with zero would show surprisingly huge growth on the slightest, smallest improvement! Here’s to draw an analogy: A company CEO hires a new worker. That worker’s pay improved by $1200 a month from zero! Now, that’s a huge “growth” for that worker and at the same time, did nothing for the CEO. However, at the end of the day, the CEO is the one who makes the big money when the company does well. That company is now Earth.

TECHNICAL ANALYSIS
More volatility indeed. There are 2 interesting things to take note of today. 1, the gains of 3 days ago continue to hold up and as long as the low of 13 Nov remains intact, we could see a short term run from here. 2, the total equity put call ratio (see daily put call ratio here) SURGED over 40% against yesterday! This is indicative of an excessive bearishness in the market and such excess bearishness usually leads to a short run rally. We saw the same pattern back in some of the key reversal periods previously too. Overall, I would agree that this is a very volatile and dangerous market but with a slight hint of bullishness already magnifesting.

Some of you trigger happy guys have been under a lot of torture lately, waiting for the right trades to surface on the Star Trading System. In fact, this torture is slowly becoming too much for some of you maybe because you don’t know how much turmoil there is out there in the market! Indeed, the Star Trading System protects every star trader so much that most don’t know of the storm out there.

Thought For The Day : “Real Traders Love Weekends”

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

FUNDAMENTAL ANALYSIS
What a familar sight!
The Dow held its head up high all day just to get beaten down by the end of the day to close down 76.08 points. The very same thing that happened 2 days ago! However, the Dow was still a little more bullish than most analysts expected. Most analyst expected a close down of at least 100 points reasonably and a pullback of up to 200 points to be consistent with the volatile theme right now.

The Dow got an early boost before market opens when the wholesale inflation data, Producer Price Index, turned in better than expected. The PPI was up only 0.1%, beating analysts estimates of 0.2%. The Producer Price Index measures the price of production at various stages of production. An increase in production prices do not necessarily translate to higher consumer prices in the short run but it does give an insight into the inflation situation. Tomorrow’s Consumer Price Index (see economic calendar) is one of the 2 very important indexes monitored by the Fed, the other one being the PCE index. It does seem from the PPI that the higher crude oil of recent months has not begun translating into higher prices in the real economy, that makes me a lot more optimistic about tomorrow’s CPI. The data so far seems to point to the conclusion that stagflation does not exist in the US economy like so many economists feared. Stagflation is an extremely dangerous economic condition where inflationary pressure is high while economy growth remains stagnant. However, in order to seal in this low inflationary condition, I would expect another 25 basis point rate target cut next. So how about the weak dollar? Yes, further rate cut’s going to hurt the already depressed dollar some more. In the short run, a weaker dollar’s going to help the stock market and export growth however, I do see that measures need to be taken to bring the beloved greenback up in the long run after all these uncertainties are in the rear view mirror.

TECHNICAL ANALYSIS
No surprise on the technical front as a huge surge usually leads to a small pullback on a healthy rally. The question remains… is this really the beginning of a rally? With today’s market action, I would give the bulls one more thumb up. The Dow has bounced off its 50WMA quite nicely and the market action right now seems to be an exact photocopy of what happened back in August so far. If the photocopy doesn’t end here, this may be the start of a short term rallyfrom this point onwards.

Thought For The Day : “Discipline and Patience Pays Off”