Daily Market Comments

Daily US Market Comments 19 Jan 2007

FUNDAMENTALS
Oil rallied almost $2 in a day closing up $51.99 yesterday. That gave the Tech sector a slight boost as the NASDAQ Composite closed up slightly by 0.33%. The Dow continue to display slight weakness, which was expectedly in our technical analysis, with the lacklustre earning seasons so far and closed down marginally by 0.02%. So far, this has been a week that surprised many investors. While most investors expect bullishness to prevail as Q1 earnings are expected to be strong, the reverse happened. The markets always have its way of teaching us not to be over confident. Next week shall be another week of high level of uncertainty. With the mixed sentiments created by the earnings seasons so far, this is the time investors turn to more technical analysis for guidance.

TECHNICALS
Hardly surprising move in the markets as both the NASDAQ composite and the Dow played out EXACTLY as we have expected them to. The Dow continued to close sideways in order to form its staircase formation with no surprise and the NASDAQ composite rebounded off its 50 days moving average as we have predicted it to. The 50 days moving average once again proved itself to be a strong support level as investors rallied about that point to give support to the index. The NASDAQ composite has once again formed a bullish harami candlestick formation comprising of one big down day and one small up day near the bottom of the down candle. This is an extremely bullish formation which has helped the index stage numerous turnabouts. I suspect that the NASDAQ composite would go into a new neutral channel bordered by its 50 days moving average and the 2500 level. The Dow's chart pattern continues to be very healthy and is not even surprising should it test the 12500 level soon before moving up to greater heights. This will certainly help it wear off some short term overbought sentiments.

Daily US Market Comments 18 Jan 2007

FUNDAMENTALS
Tech giants continued to disappoint across the board no matte how their earnings turned in, resulting in a 1.5% drop in the NASDAQ composite in a single day, the greatest single day drop in 2 months! Cramer continues to call a sell on the tech sector as giants like IBM (-0.57%), Apple (-6.19%), CISCO (-1.96%), Qlogic (-0.78%), INTC (-1.85%), NVDA (-8.28%) all collapsed no matter how well their earnings turned in. Surprisingly, there seems to be no real reason for this huge correction in the tech sector except for the loud calls to sell by analysts. It sure seems like only the tech sector is hit this time round as the Dow didn't look like it is affected in anyways as it closed marginally lower by 0.07%. Oil continued to drop as we have expected yesterday after a slight bargain hunting. Overall, the tech sector seems to be hit by a strong tsunami of pessimism and traders should be careful to enforce stop losses.

TECHNICALS
The NASDAQ composite corrected sharply back down below its 2450 resistance level and onto its 50 days moving average support level once again. It did so on extremely heavy volume, with all short term momentum indicators showing strong downside momentum building up. The testing of the 50 days moving average is extremely critical at this point. If the 50 days moving average fails to hold up today, we should be seeing a testing of the bottom of its previous neutral channel at the 2400 level next. Overall, all indicators points downside for NASDAQ and traders should exit tech longs by now. The Dow on the other hand looks extremely healthy as it closed sideways, forming yet another step in its staircase formation as we have expected. It is not even strange to see the Dow pullback down slightly for a day from this point before rebounding to new heights. The oil chart is an unmistakable down down down, so, oil traders should have cleared all long positions by now.

Daily US Market Comments 17 Jan 2007

FUNDAMENTALS
Markets were down yesterday as the earnings season continues to disappoint investors across the board, especially in the Tech sector. December PPI numbers released yesterday also showed a slight rise and along with a small rally in oil price, it is certainly not surprising to see more investors taking profits off the table. There is a saying in the Chinese market for a phenomenal like this called, "Shaking The Board" and is a way of driving uncommitted investors off the markets before the rally continues for those determined enough to stay with it. Well, that's from a market that's still in its infancy anyways. :) Does this mean that we have just experienced a false rally? I don't think so. A slightly pull up in oil price and a slight rise in the volatile PPI is hardly surprising. We definitely need to see more convincing evidence than these. Apple released Q1 earnings yesterday, beating estimates by a mile, however, AAPL fell on a Q2 outlook that failed estimates, sparking a small sell off to close down by 2.21%. Apple, however, continues to be Cramer's no.2 tech choice of the year and I personally see AAPL going further on the mid term as long as the lawsuit against CISCO doesn't come in the way too much.

TECHNICALS
The Dow closed sideways yesterday as NASDAQ closed down significantly. As I have mentioned in yesterday's comments, I suspected that the Dow should be forming yet another step in its staircase formation within these couple of days and yes, we saw it begin yesterday as it closed marginally lower. I see a testing of the 12500 level before rising yet to another high. Upside momentum continue to be strong in the Dow and with its strong 30 days moving average support level rising along steadily, there is again no reason to say that this rally is over, yet. NASDAQ closed down by 0.74% yesterday, showing a definite lost of short term upside momentum in our indicators and a sharp turn down from a short term overbought position. This could be a slight pull back before going any higher as mid term indicators continue to point strongly to more upside. We saw the same behaviour back in 17 October 2006 where after another 15 days of going sideways, NASDAQ staged a rally. NASDAQ seems to hit a psychological resistance level every 50 points or so and 2480 seems like one of these. Unlike Cramer, I would still say that the Tech is still a buy until we see definite evidence of the end of its rally. Oil staged a small rally yesterday but not without making a new intraday low. This showed that bearishness still persists in oil and that it is most likely a false rally.

FUNDAMENTALS
Oil plunges further into the ditch to close at $51.40 putting severe pressure on the Energy sector as markets closed mixed. Surprisingly, OPEC still look like they don't care at all and stated that there are no need to cut production further in order to support crude oil prices. They are probably looking at the current high oil inventory level due to the warm winter as a temporary situation. NASDAQ was further hit by a lacklustre earning season and caused some investors to take some quick profits off the table. Giants like CISCO, KLA-Tenor and NOVELLUS were downgraded yesterday on valuation concerns. Even though there are some profit taking yesterday, the internals still tell us that the bull trend is still intact as advancers par decliners even on a day like this. Apple will release Q1 earnings tomorrow and will definitely be something to watch.

TECHNICALS
Markets closed mixed yesterday as the Dow continued its uptrend and NASDAQ closed marginally lower, sideways, I would say. The Dow made yet another historical high yesterday and sure looks like it should be forming another step of its staircase formation within these few days. NASDAQ closed sideways but still made a higher high which preserves its bullishness. NASDAQ is in a short term overbought position and is not strange at all to see some form of slight pullback. Such a pullback is extremely healthy as long as NASDAQ closes up tomorrow. All in all, the bull trend has just started and with upside momentum still strong, there are no signs nor reasons yet to think that the rally is over. I would see the next resistance level for NASDAQ at the 2710 level.

Bullishness spreads across global markets yesterday when US Markets were closed for Martin Luther King day. In many ways, this is also a sign that expectations are for the US Markets to continue its bullishness as it has been known for decades that many Asian markets like the Singapore markets rise and fall according to the expectations in the US Markets. Let's see what happens today when market opens.

Last week was an important week for the markets technically as it was a week where all major indices made committed breaks to upside and out of their neutral channels. With short term market momentum turning to upside, we can expect the bullishness to rage on through the week this week.

Jason Ng began Masters "O" Equity in November 2004 from Singapore. While it started as a modest home-based business, it has grown in that time to incorporate three different trading strategies:

Star Trader System

Ride The Flow System

Pay-Per-Pick System

Now with offices in New York and Shanghai and incorporating a multi-million dollar hedge fund, it has grown considerably during its short life.

You can find out more about Masters "O" Equity from their web site and, while you're there, take their unique psychometric test to find out what trading style you're most suited to!