Last weekend, in my Market Forecast, I said,
"For the new week, we could see some major advancements in the market by the week's end. The important thing is for the market to keep above SPX 1080 and Nasdaq 2150, while letting off some steam. Techs will see a lot of important earnings: AAPL (Monday), YHOO (Tuesday), EBAY (Wednesday), AMZN (Thursday), and MSFT (Friday). Miners were relatively quiet last week and could be the ones to take the market higher. Financials saw profit-taking and got dragged down by BAC and GE at the end of the week; this sector will need to see some good earnings in the new week to help the market. If the market breaks above SPX 1100, it will have some room to run."
While the earnings from techs were mostly good (AAPL, YHOO, AMZN, and MSFT all reported well and traded higher. AMZN went up more than +26% on Friday!!), the market was very cautious. It tested SPX 1100 a couple of times, but, was not able to break it. Then, it tested the support levels a couple of times and was not able to break them either. Both SPX and Nasdaq ended right at the above-mentioned support levels. On Monday, commodities took the lead and push the market to test SPX 1100. After the market, AAPL reported stellar earnings. On Tuesday, AAPL jumped, but the rest of the market didn't. After the market, YHOO gave a good report card. On Wednesday, the market tried attacking SPX 1100 again, but, ended down to test the support levels, instead! On Thursday, the market bounced off of the support levels and returned to positive territory for the week. After the market AMZN blew the top off of its earnings estimates. On Friday, AMZN jumped to a new all-time high trading near $120/share; however, the rest of the market did not follow and finished at the support levels.
Besides some big movements due to earnings, the market as a whole was trapped in a fast oscillating, and yet, very tight range. VIX tested 20, and bounced to close above 22. We didn't do much trading, but, took some profits off the table:
October 23, 2009
01:01 | HappyTrading MA ($230.40) Sold to Close MALKF Nov 230 calls, at $9.80 +15%
12:56 | HappyTrading GOOG ($554.00) Sold to Close GOPKN Nov 570 calls, at $7.00 +12%
11:50 | HappyTrading GOOG ($555.50) Sold to Close GOPKN Nov 570 calls, at $7.20 +15%
08:52 | HappyTrading MA ($230.90) Sold to Close MALKF Nov 230 calls, at $10.00 +18%
October 21, 2009
07:14 | HappyTrading GOOG ($557.75) Sold to Close GOPKN Nov 570 calls, at $8.00 +28%
As I said on Wednesday, "be more careful and there's no hurry chasing trades. I think it's prudent to keep a health cash position until things are clearer."
Oil charged up to a new yearly high, trading above $80/barrel; still no help to energy stocks last week. Gold treaded water and fluctuated in a tight range. For the week, the market was basically flat, with the Dow down 23.72 points, SPX losing 8.08 points, and Nasdaq sliding 2.33 points. At the time of this writing, Asian markets were mostly higher to start the week. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX fell 13.31 points to close at 1079.6. It closed just below the 1080 level. The MACD went down.
Nasdaq
Nasdaq dropped 10.82 poinst to close at 2154.47. It closed just above the 2150 level. Its MACD slipped well.
The market's reluctance to break above SPX 1100 demontrated some fatigue. At the same time, buyers came to maintain the support levels (SPX 1080 and Nasdaq 2150). Remember, these support levels were the resistance levels back in September! If you study the charts above carefully, you'll see that, essentially, after the market broke through these levels on October 14, it has not really gone anywhere! It's been consolidating for the past 8 trading sessions. For the new week, I think the recent consolidation has been healthy. The market will start the new week in a bit more vulnerable position. With VIX above 22, it can easily test 23 to 24 area. If SPX 1080 and Nasdaq 2150 can hold, we could see the market bounce to test SPX 1100 again; if not, the 20-day and 30-day MAs could be tested. On the upper end, the story is still the same. The market will need to break SPX 1100 to go higher. Financials, energies, and the miners lost some grounds last week, and, will be among the key sectors to watch.
Sector Watch
GLD (gold)
For more than 2 weeks now, GLD has been stuck between $102 and $104. It closed right at its 10-day MA. While its daily MAs are still holding the bullish formation, the MACD is looking a bit weak. The uptrend is intact, but, will need to break $104 to go higher.
XLE (energy)
XLE fell back to its 10-day MA last week. The MACD has turned lower. Some key energy companies are reporting next week, including NOV (Monday), XOM (Thursday), CVX (Friday). SLB's earnings last Friday spooked some investors in this sector. Even though oil has gone higher, XLE is looking weak. The market cannot afford to lose this leg, so, we'll watch these stocks carefully.
XLF (financials)
XLF barely closed above $15 last week. This level will be an important one to hold. While some major banks have reported well, most regional banks have not. GS has gone from above $190 to close barely at $180 last week. JPM could not keep any gains even after a strong quarterly report. Among the winners that really pushed higher after earnings were PNC and COF. AIG closed below the $40 level and could provide some good downside plays if the market turns weak.
XME (metals and mining)
XME shows a similar picture, closing right at the 30-day MA. Steels have been weak, while coals have shown a little more strength. Here are some reporting dates: AKS (Tuesday), X (Tuesday), MEE (Tuesday), MT (Wednesday), CLF (Thursday), ACI (Friday).
Some major sectors are barely hanging on to their support levels. We'll need to see some positive earnings reports for those levels to hold. So, be more careful in the new week.
Good night and HappyTrading! ™
