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

FUNDAMENTAL ANALYSIS
You guys must really hate me now… I can’t help it but I am detecting more and more problems in the real economy and the stock market in the short run. It is becoming obvious that further rate cuts are not going to help the subprime mess as people are just not borrowing anymore, PLUS, credit agencies are reluctant to lend anymore. Houses are going into default simply because everyone’s so maxed out their home equity loans and refinancing instruments for the purpose of other alternative investments (and probably lost them all by now) that there simply aren’t any ways to get more credit to tide through the crisis! There’s a good old chinese saying, “You don’t tear the west wall to mend the east wall”. That’s exactly what credit consumers are doing right now and more rate cuts isn’t going to help. That is exactly why regulators are beginning to admit that more must be done to help relief the impact of the subprime crisis beyond just cutting rates.

A quiet day today from Star Trading System… only 2 signals and no qualifiers. I just want to sit back & relax today!

In the short run, more rate cuts cannot translate fast enough into lower mortgage rates but will hasten inflation. After 75 basis points cuts, stock markets are lower than before those cuts in August! That tells that no matter how the Fed is going to cut, investors know that this is not the way to go anymore. But is the cut going to happen? YES! Because investors have forced the Fed’s hands through the Fed Fund Futures! Again, the lousy thing continues to be this… a 25 or 50 basis point cut isn’t going to help because it have already been priced in and a 100 basis point cut would only satisfy the speculators for a day or two before grim reality sets in again, bringing the market lower. My market poll on my Option Trader’s HQ has moved from more votes on ending the year higher last month to ending the year moderately lower today. Until a really sensible plan of action to clear this mess up arises, investors are going to look like a huge bunch of rabbits scattering at the very first sight of danger. Today’s trading is also light across the board as investors await the Job reports this Friday… fingers crossed.

TECHNICAL ANALYSIS
The critical pullback on the recent 4 day reaction rally has happened at last. The next 5 days will be critical. In accordance to the Dow Theory, if the pullback turns around before the 12750 level, we will have ourselves a possible staging area for a rally. However, if the pullback continues lower than 12750, this would signal a transition into the Big Move phase of the current bear trend… which means a lot more downside to come. In fact, by pulling back at this level, the Dow is also completing a dangerous head and shoulder formation, which also suggests more downside. All in all, the next 5 days is going to be critical and all technical indications are flashing warning signs… certainly not a good time to be either long or short but a straddle could be worth the bet.

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

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

FUNDAMENTAL ANALYSIS
Yes, more contrarian views from me today as investors enjoy all the hoaxing from the Fed so far. I picked up a few more warning signs today suggesting that all is not that rosy:

1. Fed fund futures are starting to price in a possibility of a 50 basis point cut. Unless the Fed cut by 75 basis points or more, it is likely to disappoint the market.

2. Jobless claim numbers increased this time round by 32,000, bring the 4 weeks moving average up by 5,500. In fact, jobless claim has been rising throughout the year due to structural unemployment as more and more manufacturers move operations overseas. Jobs is what is going to move the market most and contracting employment number is the first signs of a recession. Next week’s Job Report (see economic calendar here)is going to be critical. With the jobless claims number on the rise, the Job report has become somewhat uncertain. What is certain is that if the job reports turned out lousy, all the optimism in the market will be wiped out instantly. In fact, much of these optimism this week are due to nothing but a lot of hoaxing by the Feds!

This is going to be another turbulent week with the heavyweight job report coming out this Friday (please see economic calendar at). Let’s remember to stick to the rules strictly this week.

Yes, GDP continues to be extremely strong and grew at the fastest pace in Q3 due to a contracting dollar with exports rising 1% against the Q2 report. However, the dollar is now at a level so low that the Europeans cannot sit by and do nothing anymore. Europeans are rushing to the States for shopping throughout the holiday season, returning with huge duffle bags of cheap goodies! In fact, most of the luxury brands only cost half the price in the States versus in England! Well, free market capitalism solves a lot of problems by itself. With such imbalance, a tilt by the Euro back down to more acceptable and less harmful levels seems imperative. In fact, analysts are expecting a rate cut from the BOE soon. So, what happens when the dollar returns to equilibrium? Exports contract, taking the only strong component in the GDP numbers down with it and erases the only bit of optimism left in the report. This is going to be a prolonged period of uncertainty.

TECHNICAL ANALYSIS
The Dow’s reaction rally seemed to have begun and ended all in one week and sadly, it ended where I hate most. The Dow closed right on top of its 30days moving average yesterday with a huge hangman signal in the DIA, suggesting a lot of weakness and a strong resistance level.

This tilts the probability of the Dow’s movement next week in favor of the bears. On the other hand, it is definitely not wrong for the Dow to pullback slightly from here in accordance to the Dow Theory. What is important is what level the pullback goes down to. If the pullback ended higher than the 26 Nov low, a return to a primary bull trend may be suggested. However, if the pullback goes under that low, it will be the start of the “Big Move” phase of a primary bear trend, which means much more downside to come for a significantly long time. Looking at the weekly charts, the uptrend seems intact with the 50WMA providing a strong support. The 30WMA at about 13500 will be critical. If the 30WMA turns into a resistance level which does not get broken next week significantly, it could spell the level where the Dow might just move downwards from. All in all, more reasons to be bearish than bullish… beware.

Thought For The Day : “Every Morning Marks A Brand New Beginning”