Last weekend, in my Market Forecast, I wrote:
"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."
Last Friday, in our Trading Room, I also commented:
September 25, 2009 7:12 AM
market
this is a market in consolidation mode where things bounce around. no hurry to trade. what I'd like to see is VIX breaking above 25 and test 28, SPX and Nasdaq at least testing their 20-day MAs...
Indeed, things unfolded as predicted above. SPX closed the week just above 1025 and Nasdaq finished just below 2050. VIX closed at 28.68. We did some pretty good "stock-picking" as the market stayed above the 20-day MA from Monday through Wednesday. We locked in most of profits on Wednesday and went to mostly cash. Here are the closed trades for the week:
October 01, 2009
12:47 | HappyTrading FSLR ($144.90) Sold to Close HJQJJ Oct 150 calls, at $4.40 -51%
12:44 | HappyTrading AAPL ($182.60) Sold to Close APVJR Oct 190 calls, at $2.16 -40%
09:58 | HappyTrading BLK ($213.30) Sold to Close BDWJU Oct 210 calls, at $8.00 +38%
September 30, 2009
12:53 | HappyTrading ISRG ($262.70) Sold to Close AXVJX Oct 260 calls, at $10.50 +33%
12:28 | HappyTrading BLK ($216.00) Sold to Close BDWJU Oct 210 calls, at $10.00 +72%
11:17 | HappyTrading ISRG ($263.80) Sold to Close AXVJX Oct 260 calls, at $11.00 +39%
08:02 | HappyTrading AEM ($67.20) Bought to Open AEMJN Oct 70 calls, at $1.60
September 29, 2009
08:42 | HappyTrading BLK ($214.50) Sold to Close BDWJU Oct 210 calls, at $9.20 +59%
September 28, 2009
08:28 | HappyTrading AAPL ($185.60) Bought to Open APVJR Oct 190 calls, at $3.60
07:31 | HappyTrading BLK ($208.60) Bought to Open BDWJU Oct 210 calls, at $5.80
We got shook out of the FSLR and AAPL positions on Thursday. There were no published trades on Friday. Both FSLR and AAPL bounced on Friday. FSLR was announced to be included in the S&P 500 Index and AAPL received an upgrade to "Buy" from UBS.
As the week unfolded, stocks jumped on Monday on M&A deals. On Tuesday, the market was flat as investors awaited for new economic data. From Wednesday through Thursday, the market got weaker as new jobs data were disappointing to investors; and, the market broke below the 20-day MA. On Friday, there was some buying in the morning. But, the market faded into the red before the close.
(continued from Part I)
For the week, the Dow was down 177.52 points; SPX slipped 19.17 points; Nasdaq lost 42.81 points. Both crude and gold prices went higher. At the time of this writing, Asian markets were mixed. Besides the Chinese market, most others were hovering around the flatline. Let's see where the US market stands after Friday's close:
SPX
SPX slid 4.64 points to close at 1025.21. It closed below its daily MAs. The MACD was down.
Nasdaq
Nasdaq fell 9.37 points to close at 2048.11. The 10-day MA turned down and the MACD dropped.
Both SPX and Nasdaq closed below their respective daily MAs, and their 10-day MAs have turned lower. The MACDs are down as well. VIX has risen above 28. For the new week, the market will start out with a slightly weaker stance. However, if the market can hold its support levels (SPX 1025; Nasdaq 2050), the market can bounce right back up. The market will need to stay strong right from the beginning. Earnings season is kicking off next week. Among the notable ones is AA, which reports next Wednesday after the market close. Metals and mining is a very important sector for the broader market, and, AA's earnings can certainly affect this whole group. Financials is the other group to watch, and GS still looks strong.
Sector Watch
GLD (gold)
GLD closed above $98 last week and just above its daily MAs. If GLD goes above $100, it should create a new leg up. Gold miners were flat last week, but, it GLD pushes higher, the miners should bounce as well.
USO (oil)
USO closed higher last week, but, still looks vulnerable. It is still showing a bearish formation in its daily MAs, although the MACD is trying to establish a bullish crossover. It'll need to at least test $37 to turn the daily MAs up.
XME (metals and mining)
XME lost further grounds last week, closing below the support at $44. It'll likely need a strong earnings from AA to turn bullish.
XLF (financials)
XLF finished lower last week, but, managed to close at $14. Breaking below the $14 level would be bearish.
Overall, the market looks a bit weak, and, will need to hold the support levels right from the beginning to avoid turning bearish. Strong earnings would definitely help. So, we'll be patient and see how things go early in the week.
Good night and HappyTrading! ™
