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Last weekend, in my Market Forecast, I wrote:
"The market seems to be testing the 30-day MA again (The Dow, not shown here, actually closed above the 30-day MA last week.) There are some differences this time:
1) The financials are leading the rally this time. GS has gained more than +50% from its low of $47.41. During the October rally, GS actually traded lower.
2) The market seems to be so oversold that the bad news are being ignored and the market jumps on any good news.
3) The 30-day MA on the major market indices is finally flattening. In October, it was still sloping lower.
4) New bullish crossovers have just been established in the MACDs.
On the other hand, the market does seem like it needs a rest. It has rallied for 5 straight sessions.... So, for the new week, we'll be looking to see how the market deals with the 30-day MA this time. VIX has calmed down considerable from 80 to 55. But, the 55 level was tested on Friday and VIX managed to close above. The intraday charts on VIX have also been showing bottoms. We'll need to see if the market can find strength to go higher after letting off some steam."
On Monday, the market took a huge tumble as investors were prompted to lock in profits by more bad economic news. But, for the rest of the week, as disappointed economic news continued to pour in, the market grew more and more resilient and went higher regardless. Especially on Friday, the market opened lower as worse-than-expected unemployment report came in. But, the market rallied off the lows in late morning and charged higher all day. However, the sell-off on Monday was so severe that the market still recorded a loss for the week: the Dow was down 193.62 points; SPX lost 20.17 points; Nasdaq fell 26.26 points.
Let's see where the market stands:
SPX (SPY)
On Friday, SPX gained +30.85 points to close at 876.07. It closed just below its 30-day MA. The MACD continued higher. (I'm using SPY's chart because my chart source had some problems with SPX.)
Nasdaq
Nasdaq added +63.75 points to close at 1509.31. Its 10-day MA turned up. The MACD went higher.
Here we are again: the market seems to be still negotiating with that 30-day MA. This weekend, lawmakers and the White Hourse were working together to come up with a short-term loan plan for the auto companies. India announced stimulus package and another interest rate cut. Also, OPEC seemed ready to decided on a production cut when it meets on Dec. 17. So, for the new week, we should be looking at how the market reacts to the "rescue plan" for the automakers when the details are finally agreed on. It does seem that the market is more ready to break above the 30-day MA this time. The 30-day MA has flattened out and the 10-day MA has turned up. VIX closed just under 60, and, looks ready to come down more. The energy-related sectors are still looking weak. We'll have to see how the threat of an OPEC production cut would affect the oil prices before the meeting in mid-Dec.
Sector Watch
USO (oil)
USO took another tumble last week, closing below $35. The chart is still very bearish, although we might see an attempt to bounce from here.
UNG (natural gas)
UNG also took a huge drop last week. Looks like it just started a new bearish phase with a new leg down. Many of the natural gas stocks had a tough week: CHK, HES, APA, OXY, and DVN all suffered big losses.
INX2 (Internet)
INX2 managed to close flat for the week, with a big jump on Friday. It is right at its 30-day MA. It looks like INX2 could finally break above the 30-day MA this week.
BTK (biotechs)
BTK closed higher last week. It closed just under the 30-day MA. Its 10-day MA has turned up. It is also showing a new bullish crossover on the MACD.
It looks like some of the tech sectors are shaping up for a rally in the new week. Let's see if the market can finally break the 30-day MA and establish a bottom!
Hope you've had a great weekend!
Good night and HappyTrading! ™
