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Last weekend, in my Market Forecast, I wrote:
"For the new week, it still seems that the market is waiting to see how the stimulus package is going to play out. The market is still undecided and needs more clarity on how the new "Obama" plans are going help our economy. SPX is danger of break down. But, recently, the market seems to turn at break points, keeping it range-bound, not breaking out and not breaking down. However, the financials are showing some new weakness and could push the market lower."
The financials indeed were very weak and pushed the Dow to new lows! SPX broke down and closed at 770, below 800. Nasdaq slipped back to below 1500. It was a tough week for the market, but, we found ways to profit from the market's weakness in the ultrashort ETFs. Gold briefly went above $1000/ounce and oil fell below $35/barrel before bouncing up (both were discussed in the Sector Watch from last weekend). For the week, the Dow lost 484.74 points; SPX fell 56.79 points; and, Nasdaq lost 93.13 points!
Let's see where the market stands:
SPX
On Friday, SPX lost 8.89 points to close at 770.05. Its daily MAs and MACD continued to go lower.
Nasdaq
Nasdaq slid 1.59 points to close at 1441.23. The daily MAs and MACD curved down.
The market technicals are looking just ugly! The Dow had already penetrated below the Nov '08 lows. SPX is basically there and Nasdaq is slightly above. Overnight, Asian markets are mostly higher, but, Nikkei (Japan) is down, at the moment. The was news that the U.S. government may be seeking up to 40% stake in Citigroup (C), which has fallen from $55 to below $2 since May of 2007. For the new week, the market is on very shaky grounds. The market indices have been sliding lower on their daily lower BBs. The daily MAs and MACD have turned lower. All eyes will once again be focused on the financials, which slipped to new lows last week. Unless we get positive development and infuses some confidence back into the financials, it will be difficult for the market to find strength.
Sector Watch
XLF (financials)
XLF broke below the support at $9 early last week and continued lower. It briefly went below $7 and bounced back. If it can bounce back above $8, it will find some support there. But, at the moment, XLF is looking very weak still.
GLD (gold)
GLD broke higher last week. $98 seems to be the new resistance. It may need to rest for a day or two, but, its chart is still very bullish. It can easily go above $100 after catching its breathe.
SOXX (semiconductors)
SOXX is very indicative of the health of the techs. It took a tumble last week and the Nasdaq followed. We'll need to see some strength back into the semiconductors for techs to have a chance to hold above the Nov lows.
XLE (energy)
XLE is starting to look very weak. It was among the weakest sectors on Friday. Its daily MAs are going into a new bearish formation. Even though oil bounced back on Thursday and Friday, XLE continued to go lower. This sector could fall lower if oil slides again. CVX and XOM are also getting weaker.
Good night and HappyTrading! ™
