Last weekend, in my Market Forecast, I said,
"For the new week, it looks like the market is trying to send the Fed a message before the FOMC meeting on Wednesday. What the market is trying to show is the potential "double-dip" if the Fed pulls out liquidity measures too soon. On Friday, the market will get the latest unemployment rate report. The next support levels are SPX 1020 and Nasdaq 2000. But, if the market falls fast, we could see SPX 1000 and Nasdaq 1950 tested. VIX popped back above 30, which is alarming. The market tone has turned more bearish for the short-term and could continue to see some weakness to start the week. We'll have to see how the market responds to the Fed on Wednesday and to the unemployment report on Friday. We might see some bounces, but, unless the market indices can rise above the daily MAs, the momentum is presently on the downside."
Indeed, the market started on the weak side. But, it did not fall too much lower than last week's close. On Tuesday, the market found buyers coming back into commodity sectors as gold jumped to a new record high! In last weekend's Sector Watch, I alerted to watch GLD for a potential run:
"GLD actually held up quite well, still holding its bullish formation. The end of the year is usually a strong time for gold. The question is, with the stock market reeling and commodity sectors falling, can gold rally. I still expect gold to rise again before the end of the year."
We got into GLD calls just in time to capture some really nice trades this week. On Wednesday, the Fed left the interest rates unchanged, and we took profits on the rest of our GLD November calls as I commented, "I think gold may need to trade sideways a bit before going higher, although it may test $1100 this week." On Thursday, the market rallied on good economic data, closing above the 10-day MA, and started to turn the near-term momentum back up. On Friday, the unemployment rate rose to above 10%, but, the market shrugged off the news and closed higher! Gold touched $1100 intraday, but, closed around Wednesday's high, which was the forecasted action as I pointed out on Wednesday.
For the week, the Dow was up +310.69 points (closing above 10,000!); SPX added +33.11 points; Nasdaq gained +67.33 points. Oil finished slightly higher. At the time of this writing, Asian markets were mostly higher. The US market showed some surprising strength on Friday, given the worse-than-expected unemployment numbers. Let's see how things look after Friday's close.
SPX
On Friday, SPX added +2.67 points to close at 1069.3. It closed at its 20-day MA. The MACD turned higher.
Nasdaq
Nasdaq added +7.12 points to close at 2112.44. It closed at its 30-day MA. Its MACD turned up.
Both SPX and Nasdaq have risen above the 10-day MA. SPX is right at the 20-day MA, above which the SPX index can turn bullish again. Both indices are also seeing their respective MACDs turning higher. VIX has fallen back to below 25. For the new week, the market will start the week in a neutral position. If SPX and Nasdaq can rise above their respective daily MAs, the market can rally higher. The immediate resistance levels above the daily MAs are SPX 1080 and Nasdaq 2150. Although VIX closed below 25, we might see a quick test of that level early in the week. If VIX again poses resistance at 25, it'll be a bullish sign for the market. The Dow is actually leading the broader market, and, closing above 10,000, is already carrying a more bullish tone. Financials and semiconductors are still a bit weak, and, will need to see renewed strength in these sectors to help to the market run higher.
Sector Watch
GLD (gold)
We have been watching the $104 level for a while now, and, last Tuesday, GLD finally broke above that level, in a big way! It has been riding its daily upper BB higher since. Its daily MAs are just about to start a new bullish formation. It looks like it is just starting on its new leg up. I think we could see GLD above $110 by this week, which probably means gold can get to above $1030/ounce. $1050 should be a soft, psychological resistance.
GDX (gold miners)
While gold is making all-time highs, gold miners are lagging. GDX had a good week, but, still closed below the resistance at $48. I think GDX should be stronger in a strong market environment. GOLD (reporting Tuesday morning), ABX, NEM, RGLD are among the favorites.
XLF (financials)
XLF was able to make some gains last week, but, it still looks weak. It is still under the 10-day MA. It'll need to get above $15 to turn bullish. The credit card stocks broke out last week. MA, AXP, V all made new 52-week highs. AXP looks like it has more room to go. MA has momentum on its side. PNC reported good earnings and is still looking strong. On the other hand, the big banks don't look too hot. WFC actually closed down last week. Some mixed signals in the financials. We'll watch this sector closely.
BTK (biotechs)
BTK had a strong bounce last week. It finished at its 30-day MA. The MACD is already showing a bullish crossover. CELG, AMGN, AMAG, OSIP, BIIB are among the usual suspects to lead this sector.
Good night and HappyTrading! ™
