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

The Dow gained 52.43 points today despite oil hitting fresh highs once again. So far, the Dow has been behaving in the exact same fashion it did when it rebounded last month, so, if it follows up strongly tomorrow, we could look forward to a significant break of the 13000 resistance level. How about the rising oil price? That’s the only thing nagging me right now. Excluding oil, the economy and the stock market is well poised for a recovery. In fact, the stock market has been rising for over a month now. However, crude oil price, being of negative correlation to stock prices, could be an indication of lower stock prices to come if it continue to rise. In fact, crude oil has been on an extremely strong uptrend since the beginning of 2007, in line with the credit crisis and weakening of the dollar. Yes, the weaker dollar was certainly a huge reason why crude oil is this high, the other reason being the fact that supply is reducing around the world but OPEC is not going to meet until September. The US dollar has strengthened significantly over the past month but it doesn’t seem to have an impact on crude oil prices yet as continual reduction in oil inventory kept prices rising. The point to consider now is, how much is this rise in crude oil price supported by fundamentals? Reduction in oil inventory is certainly cause for oil to rise due to supply and demand but has prices gone beyond supply and demand model? I see that oil is certainly over extended and the very moment a weakness in oil fundamentals is detected, a self defeating process would certainly occur taking oil prices down in the same explosive fashion we saw back in 2006. Anyone still willing to speculate on higher oil prices at this high level should do so through call options on the USO with only an amount of money that you can afford to lose. USO is the ETF tracking oil futures and is as close to buying actual crude oil as it gets.

The weekend’s here again. Learning to make money is nothing without learning to use money wisely. Using money wisely involves managing your credit, loans, expenses and savings. If you are over extended on credit cards, mortgages and car loan, then you are like a bucket with a huge leak; there is no way your bucket can fill up no matter how much water you pour in. If this is you, apart from learning more ways to make money, you must endeavour to cut up your credit cards and pay off your loans no matter what it takes. For you, plugging your holes is a lot more important than filling in more water. If you are still light on loans and credit, then you must endeavour to keep the status quo while learning more ways to make money. This way, your wealth bucket will fill up and overflow over time. If you are a student who has no loans or credit, then I would also encourage you to keep it that way. Never yearn for anything you cannot afford to pay for upfront and don’t get yourself tied up in loans as loands tend to be a vicious cycle. Like a crack in a ship’s hull, it can only get bigger and bigger! Why is that so? It is so because everything you own costs you some maintanence! The car you bought on loan is just going to cost you more in fines and petrol. The house you bought on loan is just going to cost you more in renovation, utilities, maintanence and furnitures. The computer you bought on loan is going to cost you more electricity. If you are already hard on paying for that which you want, why would you make your financial picture even worse by owning it on loan? right?

The bottomline, laerning more ways to put more money in your pocket is actually less important than learning to plug your leaks and prevent new ones from happening.

Thought For The Day : “Money making does not equal to wealth building.”

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

FUNDAMENTAL ANALYSIS
Crude oil reached for the sky today as it made yet another historial high of above $120! Last year, when the white house economic committee panicked over possible $150 per barrel oil, analysts were skeptical. Right now, I hate to say this, $150 does look like a possible and realistic scenario. The surge in oil price squeezed all the optimism from the stock market today, taking the Dow mercilessly down over 200 points by the end of the day even though Q2 productivity turns up better than expected, which is a sign of a recovering economy.

The Dow took a hit due to oil prices making yet another new high on geopolitical factors. Yes, even though the dollar is gaining strength once again, oil prices has refused to come down at all. With oil now above $120, the doomsday scenario of $150 per barrel oil which got the white house economic committee jumping seems a lot more probable than it was first proposed last year. Could this be another self fulfilling prophesy? We will never know. What we do know is that this is a time unlike any in history and that as a Star trader, you would be safe following our rules without compromise.

In fact, sadly again, there doesn’t look like there is any reasons, fundamental nor technical, for oil prices to come down at all. Oil fundamentals does support higher oil prices with reducing supply and growing demand and oil technicals show a strong bull trend riding atop a strong rising trend line with no signs of weakness nor signs of being overbought! Oil has never been this high and demand for oil has never been this high either. This means that nobody knows what to expect as economists and quants rush to update their economic models in order to generate a reasonable prediction of the future.

TECHNICAL ANALYSIS
Does this spell the start of a huge correction in stocks? I don’t think so. I’ve already predicted that the Dow needs to drop to as low as 12750 in order to get off its overbought condition before it tries to break the 13000 resistance zone significantly, remember? In fact, the Dow staged a decline of over 200 points last month on 11 April before it mustered enough strength to break the 12750 resistance level significantly. This time round is no exception. So, this decline doesn’t come as a surprise at all. I will be watching how well the 12750 support level hold up over the next couple of days very closely. To keep the game play unchanged, the Dow needs to stage a come back within 3 days, otherwise, a reassessment of the market behavior needs to be conducted. Let’s see how it plays out.

Thought For The Day : “NO COMPROMISE”