FUNDAMENTAL ANALYSIS
Markets closed marginally up as investors sit on the only day of the week without any critical economic releases. Such is the typical behavior just days before every FOMC releases. Even though it is almost certain that interest rates are going to stay stagnant, investors are expecting the Feds to put on a hawkish stand about future interest rate movements, leaving a lot of investors on the fence, waiting to see the initial reactions to the release. Yesterday’s trading volume is the lowest so far for 2007 and CBOE’s equity put call ratio remained relatively stagnant. Is this the fabled calm before the storm?

TECHNICAL ANALYSIS
Markets closed sideways yesterday as both the Dow and the Nasdaq composite struggled to stage a rebound. The Dow closed sideways but traded above its 30 days moving average support level for whole of the day to close right on top of it again. This is again a healthy sign that the support level for the Dow is strong and investor sentiments remain bullish inclined. This gave the Dow a high chance of rebounding off this level to form yet another step in its staircase formation and therefore yet another historical high. This little consolidation has also helped the Dow get off its short term overbought condition, thereby giving it more headroom for growth in the short term. The Nasdaq composite is, again, slightly more shaky. Even though it has been trading sideways these 2 trading days, it has closed right below its 50 days moving average support level in a fashion which almost transforms the support level into a resistance level which is hard to break upwards from. Over the last 6 trading days, the Nasdaq composite has closed just slightly below its 50 days moving average for 5 of these days. Even though support and resistance level analysis is not a precise science and such situations are common, it still does cast a hawkish shadow. One reassurance at this point is that the Nasdaq composite is forming yet another “Black & White Brothers” candlestick formation. (Please read my post on 21 Dec 2006 for explanations HERE.) This is a high probability bullish formation, even though it failed to effect a rebound on 21 Dec, it still does have a large string of successes going back.

Well, all Star Traders should not put on new positions for real in accordance to the new rules now as it is just 1 day before FOMC already.

Jason Ng
Founder, Masters ‘O’ Equity
mastersoequity.com
“Your Personal Stock Option Mentor”

Welcome back from the weekends!

Hope you are mentally and spiritually recharged for the challenges ahead. A warm welcome goes to our new week one students too.

Last week was an extremely turbulent week with the indices going up and down like rouge waves. Major indices were down for the week and the Nasdaq composite index is back down where we started last Monday. Like I said last week, it is again going to be a very critical week for the Nasdaq Composite as the index is again at a very dangerous position, a position that can decompose into a downwards, bear trend if it’s 50 days moving average and the 2400 psychological support level do not hold. If that happens, it will not be long before the Dow follow suit.

This week is again going to be a stormy week for the US markets. There will be major “weather systems” formed by important economic releases such as the GDP numbers, FOMC release, oil inventories, jobless rate, chicago PMI…etc. (For a full list of the releases this week, please visit http://www.mastersoequity.com/option_trader_hq.php )Again, the markets will be torn apart by the inflation worries and depression worries camp. Too much good news activates the inflation worries camp and too much bad news activates the depression worries camp. Who wil reign supreme this week?

The number of evening stars versus morning stars today seems to indicate a market downturn… or at least a short term one.

Jason Ng
Founder, Masters ‘O’ Equity
mastersoequity.com
“Your Personal Stock Option Mentor”