Yes, its inflation week again! All eyes would be on the Producer Price Index and Consumer Price Index this week (see economic calendar). Both numbers are expected to turn in higher due to the ever rising oil price. As long as the numbers do not suggest a slow down or reduction in inflation rate, stocks would continue to come under pressure as capital cost increase and consumption decrease. And yes, the numbers are not likely to turn in either way this week as oil rebounds as expected and continues its way higher (of course, the recent rise will not affect the inflation numbers this time round). On the technical front, the Dow continues to display weakness with no signs of a relief rally yet. Its going to be a long way down.

Star Option Trader’s Thought For The Day : “Every Morning Marks A Brand New Beginning”

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

Investors decided to beat down stocks today as they come to the conclusion that the Feds may be at their wits end with regards to the inflation situation. With inflation at hand, investors need to cash out of the capital market in order to maintain living standards, hence the sell off and beat down. Did you realize how the Star Trading System seems to see this coming by keeping us out for the past week or so? That is why we always follow the rules and use the Most Conservative Option (week 1 and 2 students willl learn about this in the near future) whenever market seems this wierd.

FUNDAMENTAL ANALYSIS
After moving sideways for almost a month, oil staged a breakout today, shattering the hopes of all investors speculating in a turn around in oil. Oil broke the critical $140 resistance level today as more lip service by OPEC “predicted” oil would reach over $150 this year. OPEC’s lip service today totally beat Uncle Ben’s lip service yesterday. Like I said before, predictions always carry with it an element of self-fulfillment. What will determine the true course of oil? Reality. If oil inventory continues to be higher than expected like it just did, investors would see that the talks are not supported by reality at all. Well, this is going to be a drawn out battle and one that is definitely going to take the rest of the year.

TECHNICAL ANALYSIS
The Dow broke below the March Low support level as I have expected on strong volume as investors decide to keep the bears going. In fact, today’s drop took all of the gains of 2007 away. The Intermediate and short term downtrend remains strong but do not be surprised to see a slight pull up before it goes any lower as this drop gets over extended. That is what we call a Bull Trap where the bulls get trapped in a fake rally. It is also what I always call a “Dead Cat Bounce”.

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