Last weekend, in my Market Forecast, I wrote:
"For the new week, we'll continue to watch the delicate balance between the dollar and the commodity sectors. Technically speaking, the market can now break higher on a new leg up. This could draw in another chunk of the money sitting on the sideline. We could see the market take a leap to SPX 1050-1100 and Nasdaq 2100-2200. Techs should rise if the market pushes for that new leg up. We'll have to see if the commodity sectors can continue to rebound while the dollar stabilizes."
Indeed, the delicate relationship between the dollar and the commodity sectors dictated the movements on the broader market. All through the week, when the commodity sectors were up, the market was up, and vice versa. On Monday and Tuesday, the the commodity sectors were weak, and, the market fell. On Wednesday, the dollar dropped lower and the commodity sectors strengthened. The Fed left the interest rates unchanged and the market kept most of the advances made in the day. On Thursday, commodity sectors rallied higher, led by the coal stocks, and, the broader market pushed to its highest close since October 2008. On Friday, the dollar rose again, and the commodity sectors came back down, taking the broader market with them. However, SPX managed to close above 1000.
For the week, the Dow was down 48.67 points ; the SPX slipped 6.39 points; Nasdaq fell 14.73 points. This evening, Asian markets are mostly down. The dollar is trading higher. Both gold and oil are lower. Let's see where the market stands after Friday's close:
SPX
On Friday, SPX slipped 8.64 points to close at 1004.09. The daily MAs were up, but, the MACD went down.
Nasdaq
Nasdaq fell 23.83 points close at 1985.52, below its 10-day MA. The 10-day MA flattened and the MACD went lower.
Last week, the market saw some weakness early in the week, but, it came back up later on Wednesday and Thursday, only to sink back into the red on Friday. Financials and techs displayed fatigue and the movements in the commodity sectors dominated the markets. For the new week, after trying hard, but unsuccessfully, to break away from the recent resistance levels (SPX 1000; Nasdaq 2000), the market technicals are showing slight weakness. The MACD on both SPX and Nasdaq have turned lower. Nasdaq closed below its 10-day MA. SPX closed right at its 10-day MA. The market may need to get a quick drop for the major indices to test the 20-day MA. Again, the relationship between the dollar and the commodity sectors will be among the top factors. Next week is also options expiration week. So, be ware of expiration manuevers.
Sector Watch
UUP (dollar)
UUP closed slightly down last week, but, did get a solid boost on Friday. Its MACD is showing a new bullish cross-over, but, the daily MAs are still in a bearish formation. If UUP pushes below $23.2 gain, it will likely extend the bearish formation in its daily MAs. Between $23.5 and $23.6 is the resistance to watch.
USO (oil)
USO took a big dip on Friday and ended the week lower. It closed below its 20-day MA and the MACD turned down. Although its daily MAs are still in a bullish formation, closing below the 20-day MA brings USO back into the neutral territory. The 30-day MA, which is at about $35.5, is the nearest support.
XME (metals and mining)
Just when XME was about to break out, it got tugged back to the 10-day MA. Metals and mining now can play a big role in the strength of the overall market. If XME pushes above that $43 level, the miners should break out. Coals and steels are the dominant players in this sector.
MOO (fertilizer)
MOO managed a small gain last week. It once again tested the $39 level. Breaking above this level, we should see some breakouts in this sector. POT, MOS, and CF are still among the favorites.
Good night and HappyTrading! ™
