US markets are at the crossroad

The US markets are at the crossroad with the Nasdaq index having broken its uptrend line in mid-December 2006 (see Chart 1). Despite the break, Nasdaq has not fallen but it has instead stayed above the 2,400 level. This means that the Nasdaq index has been moving sideway for the past 3 weeks.

The other main indices are all at their uptrend lines. These are the blue chips-laden DJIA (Chart 2), the broader market barometer, S&P500 (Chart 3) and the small-cap, Russell 2000 (Chart 4).


Chart 1: Nasdaq's daily chart as at Jan 5, 2007



Chart 2: DJIA's daily chart as at Jan 5, 2007



Chart 3: S&P500's daily chart as at Jan 5, 2007



Chart 4: Russell 2000's daily chart as at Jan 5, 2007

Stock markets throughout the world will be watching the US markets for clue of the direction of equity markets as a whole. While many expects the Asian markets to benefit from weakness in the US markets, a sharp fall in the US will likely to produce a knee-jerk reaction that can be very painful for traders. The Malaysian stock market will not be an exception & until a favorable outcome is at hand, we can expect trading to be volatile & directionless.