Free Stock Market Research Report by Jason Ng, the man behind The Star Trading System (one of the best option trading systems)

Investors continue to react in a fairly muted way to the crude oil price slide so far as they continue to be skeptical about oil not getting back up again. This caused the Dow to completely lose its upwards momentum today as profit taking ruled more than half the day. The Dow continues to struggle with the strong intermediate bear trend that is still intact, providing no certainty as to a breakout. The Star Trading System continues to be skeptical about the sustainability of this “rally” as it continues to provide us with bearish stars. Lets see if the Star Trading System eventually prove that its right.

FUNDAMENTAL ANALYSIS
Oil sunk below $130 today to close $124.48 per barrel even though crude inventory fell larger than expected. Shouldn’t a drop in crude inventory make crude oil price go up instead? In a normal, fairly traded market based on the fundamentals of economic principles, YES. BUT, was oil traded this high this quickly based on the fundamentals of economic principles? Definitely not. Oil is this high this fast due to speculation by oil traders and hedge funds all over the world. In fact, most of this retreat is due again to the exodus of these funds as authorities all over the world stepped in to investigate possible manipulation (not to mention the fact that oil demand has dropped significantly in the US this past quarter). Not surprisingly, the transport sector led the advance today as airlines rebound on the lower crude oil. The Dow rallied early on the retreat in oil before settling down at +29.88 points. The oil led “rally” so far has not been a broadbased one. Pro oil sectors are down and con oil sectors are up. Such a market action is definitely not one of a healthy bull market recovery and can only be considered speculative.

TECHNICAL ANALYSIS
The Dow ended higher today but produced 2 very negative signs. 1; It failed to breakout strongly today. 2; Momentum indicators are displaying a reduction in bullish momentum. All these happening at the 30MA bearish resistance ceiling shows that the Dow has yet to change its intermediate bear trend. Following up from my analysis yesterday, we did not see the investor conviction that we hope to see today and that investors are certainly still short term pessimistic and requires more evidence and support before taking action.

Star Option Trader’s Thought For The Day :”There are specific market conditions favorable for every kind of options strategy”

Free Stock Market Research Report by Jason Ng, the man behind The Star Trading System (one of the best option trading systems)

Oil seemed to have entered a significant correction phase right now, spurring stocks onwards. The Star Trading System seems to be still skeptical about this “rally” and continue to give us more bearish stars. Indeed, some of the bearish stars that turned up over the past few days did go lower despite the market going higher even though they did not qualify for trading. Does this mean the end of the correction and a total rebound? Not really. The Dow is still within its framework of a bear relief rally, suggesting that it can still turn south and head south significantly, so, this is definitely not the time to get optimistic yet… lets continue to follow the system.

Do I still need explain why the stock market is up today?

Yes, like I mentioned yesterday, crude oil was at a short term support level and if it breaks below that level, it would give a boost to the stock market. Indeed, oil took the biggest 6 days hit for the year and totally erased its intermediate bull trend. This is definitely a good point for an intermediate stock market rally but it will all depend on whether investors think the same way. How would we know if investors would think the same way? Through technical analysis of course! The Dow is still steeped in its intermediate bear channel even though it has rallied for so many days. Which means that this is still to be classified as a relief rally within a bearish framework… in other words, it is still not out of the mine field. We need to see investors convinction in the form of a bullish breakout through the ceiling of this bear channel on strong volume. That will tell us that investors are ready to get optimistic with the retreat in crude oil price. I would define the current ceiling at around its 30MA. Remember, even though crude oil is the biggest market driver right now, there are still many other factors that can add up to produce pessimism. In fact, the Dow is right on its 30MA resistance level right now. This is the first level that we need to see a strong breakout. If the Dow retreats tomorrow, it would suggest that investors continue to be short term pessimistic and requires more evidence and support.

Star Option Trader’s Thought For The Day : “Always Follow The System.”