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

Today’s market action is really more technical than anything fundamental. Investors just need to take some profit after 3 good days in this crazy, volatile market condition. This is especially so in the face of a resistance level, which in this case is the 12750 level for the Dow and tomorrow’s GDP numbers (see Economic Calendar). On the bright side, we are seeing short term treasury yields tanking like a rock, creating an extremely steep yield curve. Such a curve indicates that the flight to quality has really gone a little too far and soon, investing in bonds would be unattractive. Those money would have to find a more attractive investment vehicle, which in this case, would be equities. 

The Star Trading System just released the new criteria D rules for volatile markets in the forum already. If you have not done so, please go check it out right now. Please take note that you need to be registered and signed in before you can see the new directives section of the forum. Here’s the forum URL again in case you lost it… www.mastersofequity.com .

In fact, such a curve pattern usually spell that the bottom is near for equities. On the down side, January durable goods order came in disappointing, further enforcing the notion of a weakening economy. Fed chairman Ben Bernanke seemed to get it at last with his promise of further rate cuts to shore up the economy. That’s the Big Promise. I know he has a very difficult job there in the Fed but I cannot help but criticize his being behind the curve all the time. While the stock market seems to be a leading indicator of what is going to happen, Uncle Ben seems to be a lagging indicator instead. He failed to see a weakening economy late last year when the markets are already talking about it and failed to cut rates aggressively in order to prevent this episode that we are seeing today. Today, with the weakening of the dollar, rising commodity prices and rising inflation, which adds up to an extremely fragile condition where fed fund rate should be held steady for a while, he is promising more rate cuts. Really wonder what is going on. Well, that makes him the Fed chairman and me, a mere fund manager.

Thought For The Day : “Always Respect The Market.”

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

FUNDAMENTAL ANALYSIS
Stocks staged a followup today ahead of tomorrow’s New Home Sales data (see economic calendar) with the Dow gaining 114.7 points, posting the BIGGEST 3 days rise since November! After Monday’s existing home sales beat expectations, investors are looking ahead for tomorrow’s New Home Sales to beat expectations as well, indicating that the housing market is coming to a bottom at last. In fact, this rally came even though the Producer Price Index was higher than expected! A little bit of exuberance? Maybe, but let’s not forget that the stock market DOES NOT reflect current data! The stock market reflects FUTURE EXPECTATIONS and the expectation clearly is that the housing mess is coming to an end.

The Dow continued to soar today, bringing LEN higher… do you guys see now how destructive volatility is? Even though a stock has the potential to go higher, it could swing wildly in the short term. This is why people stay out of volatile markets. But, if we didn’t have our doji day stop loss in place, we could have lost our positions 100% 10 times before 1 LEN turns up! Well, we as Star Traders, move ahead and continue to stick to our rules.

TECHNICAL ANALYSIS
A follow up to yesterday’s breakout but what’s missing? V-O-L-U-M-E!!!! Clearly many investors are still on the sidelines and waiting…. waiting for what? Is there something most of us don’t already know? Maybe. No matter what, the immediate short term resistance level is at 12750 which the Dow failed at during the last relieve rally in January. I still cannot give my 100% certain stamp of approval on this “rally”… its just not not showing all the indications needed.

Thought For The Day : “Discipline and Patience are the hallmark of successful traders.”