Happy Labor Day! Hope you've had a nice, restful, long weekend.
Last weekend, in my Market Forecast, I wrote:
"For the new week, although the market indices are showing a bullish formation, not being able to push higher after going above the recent trading range throws a shadow on the market's recent rally. SPX's immediate support is at 1015, and for Nasdaq, it is at about 2000."
Indeed, the market started out the week on the downside and those support levels were tested. On Monday, the market flashed the "danger" sign as it tested SPX 1015 and Nasdaq 2000. On Tuesday, the market plunged below those support levels. We took the advantage of the weakness in the financials by locking gains on AIG puts. On Wednesday, the market struggled to stay green, but, gold and silver stocks came alive. We switched gears quickly and play the long side on names such as AEM, PAAS, and GOLD. On Thursday, gold/silver stocks stayed strong, allowing us to lock in profits on our plays. The market was cautious ahead of the unemployment report, but, ended in the green on a small rally just before the close. On Friday, the market interpreted the unemployment data positively and pushed the indices back above SPX 1015 and Nasdaq 2000, giving us another week of great trading!
For the week, the market did lose some grounds. The Dow was down 102.93 points; SPX lost 12.53 points; Nasdaq was a bit stronger, sliding only 9.99 points. Asian markets had a good start on Monday as the US market was closed in observance of Labor Day. Let's see where SPX and Nasdaq stand after Friday's close:
SPX
SPX added +13.16 points to close at 1016.4, above the 1015 level. It closed right at its 10-day MA. The MACD was slightly lower.
Nasdaq
Nasdaq gained +35.58 points to close at 2018.78, above the 2000 level; and, above its 10-day MA. The MACD flattened.
The past week was an interesting one. After breaking above the recent trading levels, the market had a hard time pushing higher. Instead, it took a quick drop to test key levels. The support levels held up and the market ended just above the recent trading range again! We have gotten some more encouraging economic data, including better-than-expected housing, factory, and unemployment reports. On Monday, some Asian markets recorded new highs for 2009. For the new week, most sectors seem to have sync'd up to go higher. SPX closed right at its 10-day MA while Nasdaq closed above. Another solid green day, the indices could have the daily upper BB within their reach. The market will need to push the daily upper BB up in order to go another leg higher. For SPX it is at about 1040, and Nasdaq will need to break above 2050. The market looks to be in a good shape. Let's take a look at some important sectors.
Sector Watch
XLF (financials)
XLF had a big fall on Tuesday last week. However, it climbed back up to close above $14. XLF will need to break $15 for the market to establish a new leg up. GS managed to close above $160 and is posing a neutral stance. There seemed to be some new developments in AIG's unit in Asia this weekend. It'll be interesting to see how AIG reacts on Tuesday.
GLD (gold)
GLD had a big breakout last week. The volume more than doubled for the week! It is also displaying a new bullish formation on its daily chart. Most people are expected the $1000 level to be tested soon. AEM, ABX, PAAS, GOLD are still among the favorite gold and silver plays.
XME (metals and mining)
XME actually ended "higher" last week. It is right back above its daily MAs and now it has a new bullish formation. The MACD had also gone higher. FCX seems to be ready to break higher. Coals and steels still dominate this sector. So, we'll keep our eyes on those.
MOO (agriculture)
MOO has been range-bound for the past month as big fertilizer names (such as POT and MOS) have been weak. MOO tested $37 again last week and closed just above its daily MAs. This could make things a little more interesting for this sector. CF has been really strong and closed at a new 2009 high on Friday. CF filed a lawsuit against TRA on Monday and said that its offer to buy TRA had expired. This makes CF very interesting as AGU's offer to buy CF is still open. In addition, don't forget, rumors on MOS being a buyout target is circulating again. The fertilizers could heat up again with potential M&A deals!
Good night and HappyTrading! ™
