Last weenkend, I said,
"The biggest news on Sunday evening have been on LEH, MER, and AIG. At the time of this writing, there has not yet been a deal reached for LEH. There are new rumors about BAC possibly in talks to buy MER. Other the other hand, AIG is planning major reconstructuring, including selling of assects to raise cash. The market seems to be ready to open lower on Monday if no solid solutions are reached to help LEH before the market open. For the new week, we'll need to see how the market acts early in the week. If the market cannot hold the July lows (SPX 1200; Nasdaq 2200), it could start a new leg lower. Both SPX and Nasdaq are showing new bearish formations in their daily MAs. VIX is above 25 and could shoot up to 30."
The market fought hard to keep the support levels (SPX 1200 and Nasdaq 2200) early in the week. But, by mid-week, both SPX and Nasdaq fell below their respective support levels, and started on a new leg down. On Thursday, just when the market sank lower and lower, the news about the government creating a "RTP-type" agency to help solve the credit problems encouraged the market to turn its downward spiral into a sharp rally! On Friday, the market continued higher as SEC banned short-selling on financial stocks until Oct 2.
After a wild roller coaster ride, the market closed the week basically unchanged with the Dow having a range of over 1,000 points! For the week, the Dow ended down 33.55 points; SPX added +3.38 points; Nasdaq gained +12.63 points:
SPX
On Friday, SPX added +48.57 points to close at 1255.08. Its 10-day MA flattened and the MACD went higher.
Nasdaq
Nasdaq jumped +74.8 points to close at 2273.90. It closed above its 10-day MA, which turned up. Its MACD also went higher.
Some financial headlines at the time of this writing include: Sydney banning short-selling across the whole market; GS and MA received approval to become bank holding firms! Asian markets were mostly higher. Governments all over the globe are working together to solve the credit crisis. In the US, we are still waiting to hear the finalized rescue plan from the Treasury and the Congress. VIX went over 40 on Thursday and came back down to close just above 32. On the daily chart, it looks like VIX has reached a near-term top. For the new week, we'll need to see this market continue to rally. Any big drops will likely bring back fear and discourage the investors. After a 2-day, sharp rise, we'll have to see how the market does on Monday. We could see a mixed open, as there may be some profit-taking; unless, our lawmakers can give us some good news before the market opens in the morning. But, we'll need to see strength to hold the altitude and push this market higher.
Sector Watch
GLD (gold)
GLD made a huge turn-around last week as gold prices jumped about $100/ounce! GLD has caught its daily upper BB and begun to ride it up. Its daily MAs have also turned up. Gold miners are also looking strong. AEM and ABX both recorded solid gains last week.
UUP (dollar)
On the other hand, UUP fell below its daily MAs and the 10-day MA turned down. Its next support is at $23.5 We'll be watch this level closely.
XLF (financials)
XLF got a big jump on Friday, topping $24. Its daily MAs have turned up. XLF will need to break $23 to continue higher.
HGX (housing)
Amid all the craziness, HGX broke out last week. It closed above the daily upper BB and extended its bullish phase. It closed just above the resistance at 145. If 145 gets taken out, the next resistance is at 155. Some of XHB's top holdings are looking very strong. I like TOL, MCD, and SHW.
USO (oil)
USO bounced off $75 and closed above its 10-day MA. It has created consecutive higher highs and higher lows. It does look like USO is drawing a bottom. $80 could now be a support.
XLE (energy)
XLE closed above its daily MAs last week. UNG (natural gas) also closed the week slightly higher. With both USO and UNG drawing bottoms, energy plays could come back into focus, including the solar sector.
Hope you've had a fun and restful weekend!
Good night and HappyTrading! ™
