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

FUNDAMENTAL ANALYSIS
The bears could certainly hear the loud thumps on the other side of the 13000 wall as the bulls attempted to break it down today. The Dow gained 189.87 points today as optimism returned on optimistic jobless claims number and an ISM index reading that turned in at the same level as March despite falling short of estimates (48.6). The fact that the ISM index turned in at the same level as March kept the ISM recovery story intact, which is of course a bullish sign.

How time flies, it is a Friday again. Since we did not get any trading practise, week 3 and 4 students will get to repeat your respective week 3 and 4 again for free next week. There are times to trade and times to stay out of the market and this is one of the most important trading concept that you need to understand after going through the course. The Star Trading System literally makes that decision for you but you need to accept the decision and follow. Weekend’s the time for family, friends, love, joy and God. So many important aspects of our being but so little time weekly to be committed to them. To most of you still struggling financially, yes, money is everything. But for most of you who are already making a good living, never forget to let your money do more and more of your work and then for you to concentrate on living life. This is when mastery in investment and trading sets you free.

The ADP report as well as the jobless claims report so far continue to point towards a recovering job market, which of course is adding to the speculation on positive numbers in tomorrow’s Job Report (see economic calendar). Speculation surrounding an optimistic Job Report may also be what drove the market higher today. Adding to the optimism is the big follow-up in the decline in oil price today! Yes! Like I said yesterday, crude oil price needs to follow up to downside today in order to form a significant turnaround and it happened just as we hoped. Crude oil price is the final hurdle standing in the way of a full scale rally (how many times do I have to repeat this?) and if it continues its way lower, below the $100 mark, the market could truly go into a sustainable rally. Let’s look forward to great Job numbers tomorrow and see if it sparks a rally next week.

TECHNICAL ANALYSIS
The Dow made for the 13000 resistance level today and ended just slightly higher at 13010. 10 points above a resistance level does not signify a breakout. With the Dow still in overbought condition, I would not be surprised if the Dow retreats a little before making for the 13000 resistance level again for a significant breakout. That said, on a slightly longer time horizon, the 13000 level is not much of a level that will stop the bulls. In fact, we could see new highs this year despite widespread pessimism. The Dow is extremely used to trading in overbought conditions when a bull trend is in place. Is this it? Is this the bull trend that is going to keep the Dow overbought for a while more? As a technical trader, I would rather go with the trend then against it.

Thought For The Day : “Weekend is love, joy, family, friend and God.”

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

FUNDAMENTAL ANALYSIS
Market fundamentals are once again strengthened today with Q1 GDP continuing to be positive and the Fed cutting a “probably-final” 25 basis point cut… all within our expectations. Why then did the market sell off right after Bernanke’s speech, you may ask? Simply because this is a volatile market on a rocky path to recovery! The Dow have been staging a very rocky recovery since March 08, marked by strong sell offs on seemingly good news by the last of the skeptical bears still believing in the “buy into weakness and selling into strength” method, which is useful only in a totally sideways, volatile market.

What a rocky day! See how the Dow gained over 100 points before the FOMC release just to collaspe back down negative by the end of the day after the release? That is the reason why we don’t put on new positions on FOMC day. Any morning stars which qualified during the first half of the day would have been wiped out by the end of the day. All Star Traders are to keep this lesson in mind at all times.

Those are the last of the bears who still does not believe in a recovery despite my 15 signs of the bottom and the fact that the Dow has gained an annualized 53.64% over the past month! Well, I must say those bears who sold into the strength today would have nothing more to buy when the market continues its recovery and then more and more bears would have to turn themselves into bulls in order to continue participation in the stock market.

Tomorrow’s ISM index is going to be critical as well (see economic calendar). To play into my 15 signs of the bottom, the ISM index need to show continued signs of recovery. The ISM index has already begun recovering last month and a follow up this month, no matter how small, would confirm the recovery and set the stage for more upside in the stock market. ADP payroll today also pointing upwards, shedding some light of optimism on this Friday’s Job Report as well. All in all, we could be in line for a pretty good month if all the numbers line up properly and a final word of caution… never take single day moves at face value.

Adding support to the growing optimism in the market is the 2 days correction in oil price. Even though it is not yet a significant pullback that might suggest leading into a full scale correction, it is still great to see the great crude oil halting its advance at least for now.

Let’s recap and update our signs of the bottom:

1. Recovering ISM index (will tomorrow’s number continue to point upwards?)

2. Gold getting beaten like dogs (and still being whipped)

3. Consumer Sentiment index collasped (its always grimmest before dawn) in March and hit a 5 years low in April

4. Fed bailout of BSC is demostration of their resolve not to allow the financial system to sink.

5. Existing home sales rising suggests possible start of the bottom in housing market.

6. Extremely steep bond yield curve suggests that smart money needs to move back into value stocks soon. (which is already rising as money moved back to equities from bonds)

7. GDP has not gone negative despite widespread speculation on an academic recession. (Even the recent Q1 GDP turned in positive despite widespread pessimism)

8. Capitulation in the job market with an 80,000 loss in March.

9. Biggest jump upwards in the Empire State Index in 5 years.

10. Inflation coming in inline with expectations.

11. Capitulation in the housing development market signalled by a 17 years low in housing start number.

12. Capitulation in the housing sales market as signalled by a multi-year low new home sales number.

13. Jobless claims decreasing, signalling an economic pickup.

14. US dollar demostrating clear signs of strength.

15. The VIX getting below 20 once again.

TECHNICAL ANALYSIS
The Dow went for the 13000 resistance level today just to find that it simply could not break it as it is already in a short term overbought condition. In fact, today’s market action did nothing but close the Dow sideways once again with a hint of bullishness by making a higher high and a higher low. In fact, stock options traders would have been able to make a quick one day profit today relatively risk- free. There are many ways to trade stock options… see my tutorial on Options Trading Styles. Those of you who do not know what stock options are all about and want to learn the basics, you may want to go through my free Options Trading Basics Guide. Ok, back to our technical analysis. From the Dow’s proximity to its 200 days moving average, which is historially a strong resistance level as well, the obvious strength of the 13000 resistance level (demostrated through 2 failed attempts on 24 April and today), as well as the short term overbought condition of the Dow, I would conclude that the path of least resistance is a pullback to probably around 12650 before rebounding to challenge these resistance levels again. I would not expect a surprise break out these few days as the last of the bears would certainly want to still sell into any display of strength.

Thought For The Day : “Lesson Learnt”