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Last weekend, in my Market Forecast, I wrote:
"For the new week, much attention will be on the changes in the stimulus plan and the second stage of the TARP. But, judging for the market's reaction late last week, the crowd is getting harder and harder to please. SPX 800 is the next support. The market will need to see effective and smarter plans to help the financial systems. Without any new encouraging development to revive our financial system, the market could easily re-visit that support level (SPX 800). If the market bounces, it will need to go above last week's high (SPX 875; Nasdaq 1550) to be able to have any sustainable momentum."
On Monday, the market was weak and came close to SPX 800. On Tuesday, the market bounced as biotechs inspired buyers to come in. On Wednesday, the market slid back lower, but, we cashed in on some very good trades. On Thursday and Friday, the market rallied higher on hopes of an economic stimulus plan being passed soon. Nasdaq closed above 1550 and SPX came close to 875. We also had a very good week, topping the week off with a +130% profit on a GOOG trade.
Let's see where the market stands:
SPX
SPX added +22.75 points to close at 868.6. It closed above its 30-day MA, but, still below the 875 level. The MACD curved up and started a new bullish crossover.
Nasdaq
Nasdaq gained +45.47 points to close at 1591.71. It has caught up with its daily upper BB. Its MACD went higher.
The market indices are now looking more bullish. Nasdaq has already caught up with its daily upper BB and has gone above its resistance level of 1550. SPX closed above its daily MAs but has not yet gone above 875. Both indices are showing new bullish crossovers in their respective MACD. The market is waiting to see if the stimulus plan will be swiftly passed in new week. The market looks optimistic about the lastest stimulus package that is being discussed, and, could be ready to go higher. SPX 900 and Nasdaq 1700 are the next resistance levels. New developments in the TARP may also provide more reasons for the market to go higher. We'll continue to watch the financials closely to get an indication on how the market will react to the stimulus plan when passed.
Sector Watch
SKF (financials ultrashort)
SKF closed below its 30-day MA. Its 10-day MA has turned down and went below the 20-day MA. Its MACD is displaying a new "bearish" formation. This bodes well for the financials. Below $125, SKF could go to $100 in a hurry.
GLD (gold)
GLD closed lower last week, as I mentioned to wait for GLD to test $88-$90 again. Now that the $88 level has been tested again, GLD looks ready to go higher. Going above $90 should draw more buyers back in.
GDX (gold miners)
GDX was a little stronger than GLD. It closed higher last week. Going above $36 should start a new leg up!
XME (metals and mining)
Beyond gold and gold miners, other metal and mining stocks were much stronger. XME has caught up with its daily upper BB. Its daily MAs and MACD have curved up. Coals were especially strong (CLF, BTU, CNX,).
FXI (Chinese ADRs)
FXI jumped higher last week, going above its daily upper BB. It gapped higher 4 days in a row! Its MACD is also showing a bullish crossover. $30 is its closest resistance.
Good night and HappyTrading! ™
