Last weekend, in my Market Forecast, I wrote:
"For the new week, the market looks strong and ready to break higher. SPX should look to push above 950, although it may see some resistance around that level. Nasdaq can easily punch through 1800, above which 1900 is the next resistance."
Indeed, SPX tested the 950 level and Nasdaq closed the week above 1800! On Monday, better manufacturing, consumer spending, and construction spending data encouraged the bulls to push hard to squeeze the the market higher. SPX stopped just shy of 950 while Nasdaq charged above 1800. On Tuesday, the market traded sideways after Monday's big rally. Profit-taking took the overall market lower, but, GOOG looked ready to break high on news of its Android operating system. On Thursday, better unemployment data brought the buyers back in and drove the market back up. On Friday, the market jumped just above SPX 950 early in the morning. But, as I had warned in the Market Forecast and on Thursday evening, SPX 950 saw some resistance. We cashed out our profits early on Friday and wrapped up another fantastic week!
In last weekend's Sector Watch, I also specifically talked about the biotech sector. I said, "As you can see, BTK has been trading in a tight range for the past 2 months. On Friday last week, it finally showed signs that it could be ready to go higher." In addition, I saw gave several candidates that were likely to breakout higher. The biotechs had a huge week and BTK closed at the top of its recent trading range.
Every weekend, in my Market Forecast and Sector Watch article, I try to give our members an idea of what to expect in the coming week by summarizing likely scenarios in a paragraph or two. I also often specify important levels to pay attention to in the market indices. In the Sector Watch section, besides looking at dominant factors that may affect the stock market (such as oil, dollar, and gold), I also discuss sectors that may be ready to move in a big way. These discussions often come with trading ideas. This is where I let my readers know ahead of time where I may be focusing in the coming week. The full content of this weekly article is only accessible by a subscription to HappyTrading's Premium Articles.
For the week, the Dow was up +262.8 points; SPX added +20.95 points; Nasdaq jumped +75.09 points. But, on Friday, after reaching 950, profit-taking took SPX back to 940 for the close. Let's see where the market indices stand after Friday's close:
SPX
On Friday, SPX slide 2.37 points to close at 940.09. Its daily MAs and MACD went higher.
Nasdaq
Nasdaq lost just 0.6 points to close at 1849.42. Its daily MAs and MACD also went up.
SPX tested 950 last week, but was not able to close above. Nasdaq jumped above 1800 and did not look back. VIX closed the week just below 30. SKF (financial ultrashort ETF) barely hung on to $40, while SRS (real estate ultrashort ETC) bounced off of $17. At the time of this writiing, Asian markets are mixed, Nikkei (Japan) attempting to break out higher. For the new week, many sectors are starting to look toppy. But, the financials still have not really broken out. XLF is still unable to break above $13. The market might start out the week slowly. We could see some more profit-taking in the techs and the miners, both of which have gone pretty far. Biotechs, however, seem to have finally woken up!
We're in mostly cash and there's no need to go on either side of the fence in a hurry. If VIX breaks below 28 and starts a new leg down, it will be a signal to squeeze higher. If SPX were to break 950, it'll probably need strong help from the energy and financial sectors.
Sector Watch
USO (oil)
USO went higher last week, but, was not above to close at $18. Its chart still looks healthy, though.
XLF (financials)
XLF has been in a tight range since early May. It only made a marginal gain last week. But, its daily MAs have started a new bullish formation. GS broke higher last week and tested $150. I think it has more room to go higher from here. Other big names such as WFC, JPM, and BAC have been much weaker. BLK has been strong and may be ready to break $170 if the whole sector strengthens.
XLE (energy)
XLE continued its run-up above $50, but, saw a big pullback on Thursday. Its daily chart is still strong and going back up to its daily upper BB would be a bullish sign. The overall market will need this sector for extra fuel to break SPX 950. But, the bad news from VLO last week has put a drag on the sector. HES was also very weak.
PBW (clean energy)
PBW broke out higher last week, riding its daily upper BB up. STP and YGE led the charge. FSLR, on the other hand, actually closed lower! If XLE strengthens, we could see some more fireworks in the solar plays. SPWRA also had a significant week, closing above $30.
Good night and HappyTrading! ™
