by Jason Ng, Founder, Master ‘O’ Equity

Its been a week with a ton of ups and downs again. The markets continue to sway uneasily on its slow advance like someone on a tight rope. These are markets which made it extremely difficult for swing traders like us to catch a good swing. Where we used to hold on swings as large at 15 days early last year, this year, we are reduced to swings of about 3 to 5 days if we are lucky before a retracement happens again. However, that did not stop us from being profitable on a couple of really nice stocks like LTR, BOL and EXP. Always remember, market conditions are not homogenous. As a lifetime trader, we will go through many kinds of market conditions. Some will please us, some will break our hearts a little but all of them will feed us if we stick to our game in a disciplined and patient manner.

FUNDAMENTAL ANALYSIS
Stocks closed mixed once again today as rising oil prices continue to dampen sentiments in the market. Oil price has seen the light of day once again as it rises above its psychological resistance level to close near the $61 level. Oil has closed this high for the first time since December and certainly looks like it could go higher with all the excuses it needs in place… Increased tension with Iran, the upcoming driving season, lower petroleum inventory and hedge fund moving into commodities. Higher oil prices leads to higher production prices and hence higher retail prices, things that the economy definitely don’t need at this point in time. Higher oil prices may not have an immediate impact on the stock market eventhough in the long run, it certainly will.

TECHNICAL ANALYSIS
Indices continue their expected and normal route of advance today as the Dow pulled back slightly for another day and the Nasdaq composite slowed its advance forward. It is certain normal for the Dow nowadays to pull back for up to 3 days before surging to another new high, forming yet another step in its staircase formation. In fact, it could go all the way down to its 30 days moving average tomorrow, let’s not all be surprised or be put into a panic. The Nasdaq composite slowed its advance as the Nasdaq-100 comes up against its 1850 resistance level. As I have mentioned in my post yesterday, I expected the Nasdaq-100 to find the 1850 resistance level a strong one as it is already in the deep short term overbought region. The Nasdaq-100 and the Nasdaq Composite are displaying a huge spinning top signal at the overbought region and that is usually a very bad thing. Such huge spinning top formations usually decompose into an evening star formation, which is a strong downside reversal signal. Today is again critical to the Nasdaq composite. There is no telling if it will make an advance tomorrow but chances are that it may be more inclined to downside as the Nasdaq-100 doesn’t look ready for a topside break yet.

The Star Trading System continues to sit on the fence today with very little signal. This is a sign of uncertainty.

DISCOVER A Simple, Easy To Learn SYSTEM That You Can Use NOW To Turn A Small Amount Of Money Into A Big Fund…QUICKLY”
Click HERE to find the secret!

by Jason Ng, Founder, Master ‘O’ Equity

FUNDAMENTAL ANALYSIS
Stocks opened deep in the mires and closed mixed after CPI numbers showed a “larger than expected” increase in January by 0.3% (analysts are expecting 0.1%). While the CPI numbers did spark some concern that the Feds may be overly optimistic about the results achieved by the rate hikes so far, markets still ended with pretty decent internals with advancers parring decliners 1 : 1. I am impressed with the overall bullishness in the markets today as it held up such great internals despite a barrage of spirit dampening releases and Oil price surging to close slightly above $60. Today is the peak of the storm for the week and with nothing more to shake the markets this week, I would expect the bullishness to return again tomorrow.

TECHNICAL ANALYSIS
No big surprises today as the Dow dipped slightly as it always had before rebounding into new highs and the Nasdaq composite staged a weak followup to the resistance level break of yesterday. I did not see the kind of strong follow up in the Nasdaq composite today as volume was still mediocre. This does not convince me yet that the Nasdaq composite is ready to trade above the lateral channel within which it has been trading since November 2006. I do however agree that its current sentiment and momentum remains strong to upside. I am not seeing a significant decline in upside momentum in the Nasdaq composite yet as all momentum indicators remain strong. With such strong upside undercurrent, I would expect to see the kind of follow up tomorrow that will change my sentiment on the Nasdaq composite.
If I am so “confident” about the Nasdaq composite, why am I not indicating “Bullish” yet? Well, that is because the Nasdaq 100 is still a distance from its 1840 resistance level and is already into the short term overbought condition. It may be difficult to stage a resistance level break from such overbought condition and if it fails and dips again, it could bring down the Nasdaq Composite too.
That is just me… I am the kind who wants to see real evidence instead of going on a mere hunch. That being said, the Nasdaq composite is still long term bullish as it formed a bull flag formation. We saw similar bull flag formations before in May 2005 and December 2005 before and it usually followed up with a short but strong surge upwards. I am looking for signs and evidences for the beginning of the surge so as to make a move. Thats the difference between swing traders like myself and other long term investors.

I remain Neutral on the Nasdaq composite and Bullish on the Dow.

Instantly Transform Complete Newbies Into Master Option Traders With This Objective, No Guesswork, Option Trading Strategy!
Click HERE to find the secret of The Star Trading System.