Last weekend, in my Market Forecast, I wrote:
"For the new week, we might see some sideways trading to start the week. Miners may need to let off some more steam, although some other sectors are just starting to show breakout signs. SPX has support at 1060 and Nasdaq needs to stay above 2120. Again, we'll need to see both indices stick close to their daily upper BB to keep this rally going."
Again, the market behaved according to the forecast. From Monday through Wednesday, the market treaded water and traded sideways. The market started to look weak on Wednesday morning, and, we began to raise cash and close our long positions. After the FOMC meeting, the market was not able to hold its rally and did a sharp reversal to close lower. Although both SPX and Nasdaq stayed just above the support levels (SPX 1060; Nasdaq 2120) discussed in the forecast, they were unable to stick close to their daily upper BB. On Thursday, the market broke below the near-term support levels and RIMM earnings report disappointed investors. Miners led the market on the downside. On Friday, the market slid some more. Regardless, we closed out on another lucrative month!
For the week, the Dow was down 155.01 points; SPX fell 23.92 points; Nasdaq lost 41.44 points. Both crude oil and gold prices traded lower. Crude went below $70/barrel and gold fell below $1000/ounce. This evening, at the time of this writing, Asian markets were mostly down. The Japanese Nikkei Index was particularly vulnerable on the rising Yen. Let's see where the US market stands after Friday's close:
SPX
On Friday, SPX slipped 6.4 points to close at 1044.38. It closed above its 20-day MA. The MACD went lower.
Nasdaq
Nasdaq fell 16.69 points to close at 2090.92. Its 10-day MA flattened. Its MACD curved lower.
Both SPX and Nasdaq have fell below their 10-day MAs. VIX has risen back above 25. Oil has been slipping although the dollar is not particularly strong. Yen continues to rise and the Japanese market looks really weak. For the new week, the market seems to be in a consolidation phase. Both SPX and Nasdaq are displaying a new "bearish" crossover in the MACD. VIX could test 27 from here. The 20-day MA will be the initial support for the market indices. If the 20-day MA holds, then, we could be in "stock-picking" environment next week. If not, the 30-day MA (SPX 1025; Nasdaq 2050) could be tested.
Sector Watch
GLD (gold)
GLD came near $100 last week, as gold price went above $1020/ounce. However, it came down to close right at the $97 support level. I think we'll see some bounces in gold/silver plays this week. Again, GLD needs to break above that $98 level.
XME (metals and mining)
XME took a beating last week, but, managed to stay above its 20-day MA. Metals and mining has become one of the most influential sectors for the SPX. Coals and steels may still be wobbly to start the week. But, we could see some bounces in mid-week.
USO (oil)
USO dropped below its recent trading range, below the $35 level. Its daily MAs are showing a new, and still-developing, "bearish" formation. The MACD is also showing a bearish crossover. USO looks weak for the near-term. $33 provides a soft support; but, $32 may be tested. It'll be interesting to see if the energy stocks can finally trade a little more independent of the oil prices.
FXY (Yen)
I don't often include currency ETFs in the Sector Watch. But, this breakout in FXY is very significant. YEN had a huge jump last Friday, and finally broke above $110. N225 (Nikkei) is looking very weak and could test 9750. We'll be watching how Yen trades carefully. The rest of the Asian markets is also going through a consolidation phase and is not as weak as N225. FXY can easily test $115 from here.
Good night and HappyTrading! ™
