Last weekend, in my Market Forecast, I said,
"For the new week, it looks like the market intends to go higher. Monday's actions could set a strong tone for the week. But, the market will need to break above SPX 800 and Nasdaq 1500 to go higher. Catching the daily upper BB would bode really well for this rally."
Indeed, Monday set a strong tone for the week as the market jumped to 1-month high! The market broke above SPX 800 and Nasdaq 1500. At the same time, it caught the daily upper BB on both market indices!! On Tuesday, the market slipped lower in the afternoon, but, we locked profits in the morning. On Wednesday, the market tried pushing higher in the morning, but, reversed its direction in the afternoon, as people locked more profits. On Thursday, solars outshined other sectors as the market powered higher in this broad-based rally! We locked in more profits on FSLR. Friday was an uneventful day, as the market slid in a tight range going into the weekend.
For the week, the Dow was up 497.8 points; SPX added +47.41 points; Nasdaq gained +87.93 points. This the 3rd, straight, week of gains that the market has had since reaching a 12-year low in early March!! It does seem that the market tone is shifting slightly more bullish. Nasdaq is almost back to even for the year! But, comparing to just 6 months ago, the market still has a long way to recover. Let's see where the market stands:
SPX
On Friday, SPX lost 16.92 points to close at 815.94. It closed below 830. The 30-day MA flattened.
Nasdaq
Nasdaq fell 41.8 points to close at 1545.2. Its daily MAs and MACD all went higher.
SPX had some problems going above 830 last week (SPX 850 was the hard resistance that we were looking at). On the other hand, Nasdaq got close to 1600. The 30-day MAs are trying to turn up in both indices. The 20-day MAs are about to cross above the 30-day MAs, which would create new bullish formations. For the new week, the market looks tired and may need to breathe a little. SPX 800 and Nasdaq 1500 should now be supports. So, we'll keep our eyes on those levels. I do not expect the market to come down too far, just yet. But, we'll see how SPX 800 and Nasdaq 1500 hold up. SKF has been holding the support at $90 very well, and, it may need to come up to test the $100-$120 region.
Sector Watch
XLF (financials)
XLF closed above the $9 level last week. Its 20-day MA has just crossed above the 30-day MA, forming a new bullish phase. That $9 should be come a support. We'll see how it holds up next week.
SOXX (semiconductors)
SOXX pushed a lot higher last week and really helped the overall market. It has also established a new bullish formation in its daily MAs. This is a very important sector to watch as the market recovers. Staying above that 240 is crucial. QCOM, BRCM, INTC are some of the leading stocks in this sector.
PBW (clean energy)
PBW jumped more than +15% last week, closing above that $8 level. We mentioned during the week that the next resistance is at $9. This sector may become the new leader in energy and should be a good indicator for the overall market strength in the near-term. The Chinese solar stocks, however, may have gone a bit far and might need to pull back. FSLR and SPWRA still look quite strong.
OIH (oil services)
Although OIH managed to keep some of its gains this week, it came back to almost even. It also closed below its 10-day MA. I think the natural gas stocks along with the oil services will be the market's weakness. So, I may be looking for puts in these if the market gets weak.
Notice that I'm looking at a different set of sectors as my indicators for the overall market. As the market tone shifts, different leaders shall emerge. We aim to look at the sectors that dominate the market to maximize our profits and chance to to catch high-probability trades.
Hope you've had a great weekend!
Good night and HappyTrading! ™
