Last weekend, in my Market Forecast, I wrote:
"Both SPX and Nasdaq were rising back above their daily MAs, until Friday when the Dubai news spooked the market. VIX jumped to test 26 on Friday and closed just below 25. However, SPX's daily MAs have just developed into a new bullish formation! There are still some mixed signals. For the new week, although the market pulled back on Friday, it held up exceptionally well comparing to other markets. Gold is holding its ground this evening after another big win last week. Asian markets are mostly higher. We could get another "mutual fund Monday" buying to start the week. We still need to see strength in the financials for this market to break above its recent trading range. Black Friday shopping results are moderately positive, so, we'll see if the retailers can respond positively on Monday. On Friday, we'll get December's unemployment numbers. The market may stay range-bound until then. On the top, SPX 1110 and Nasdaq 2200 still remain as the resistance levels; on the bottom, the immediate supports are the daily MAs."
Indeed, the "mixed signals" kept the market range-bound. On Monday, the market finished slightly higher and the big buying did not come until Tuesday, as semiconductors jumped on ALTR's favorable forecast. On Wednesday, fertilizers took over and charged up to new heights. We cashed out with more than +100% gain on our MOS trade. On Thursday, things started to wobble before the unemployment rate report. On Friday, the new jobs data came out better-than-expected, with unemployment rate dropping. The market's initial reaction was strongly bullish, but, saw some profit-taking as the day went. The commodity sectors were weak as the dollar rose. However, the market did manage to finish higher. The resistance levels (SPX 1110 and Nasdaq 2200) were tested, but, the market did not close above them.
For the week, the Dow was up +78.98 points; SPX added +14.49 points; Nasdaq gained +55.91 points. Gold finally came down on Friday after reaching above $1220/ounce on Thursday. Oil tried to bounce, but, closed slightly lower for the week. This evening, both gold and oil were stable, with gold down slightly. At the time of this writing, Asian markets were mixed. Let's see how the US market looks after Friday's close:
SPX
SPX added +6.06 points to close at 1105.98. It closed above its daily MAs, which went higher. Its MACD was flat.
Nasdaq
Nasdaq gained +21.21 points to close at 2194.35. It closed just below the 2200 level. It daily MAs and MACD turned up.
The market has been consolidating for about 3 weeks now, since mid-November. Overall, the financials have not been participating much. Energy stocks have been weak. Metals and mining have been stronger, thanks in part to gold. Techs have shown strength, especially this week in semiconductors, which we'll discuss in the "Sector Watch" later. Solar and agricultural stocks have started to see buyers coming back in, especially the agricultural stocks. For the new week, the market will start with a more bullish stance. The daily MAs on both SPX and Nasdaq have turned higher. Nasdaq is already seeing the hint of a new bullish crossover in the MACD. VIX managed to close just above 21; but, breaking below 21 could send it to test 20 again. Semiconductors have been basically "dormant" since 2002 when energy stocks took over as the leaders on the market. We could be seeing the changing of the "leader baton" back to the techs, which will ride heavily on the semiconductors. We'll still need to see financials wake up from its recent slumber, though. If the market can close above SPX 1120 and Nasdaq 2200, it should start a new leg up.
Sector Watch
XLF (financials)
XLF has been struggling. It basically has been following the 30-day MA since early November. It'll need to close above the daily MAs to turn bullish; rising above that $15 level is a breakout. BAC is still looking the strongest, while GS, JPM, and WFC have all been struggling for the past 3 weeks. GS and JPM did manage to close higher last week, with GS back above $165. GS will need to be above $175 to turn bullish.
GLD (gold)
Last week, we said GLD may need to trade sideways to let off some steam. Although GLD ramped up during the first 4 days, it lost all of its weekly gain on Friday, ending basically flat. The support now is at $112.5 to $113. It should start to establish a range (between $113 and $120) and test the $120 level before the year end.
SOXX (semiconductors)
Remember that "timely" downgrade on the sector 3 weeks ago when SOXX tried to rise above 325? Well, SOXX managed to break above that level last week. Its daily MAs are rising and showing a new bullish formation. At just above 335, SOXX recorded a new 52-week high last week! We can see that there is some resistance around this 335 level. I think this sector can provide a good clue whether the market will break higher next week. Among the big names in this sector are: TXN, INTC, AMAT, BRCM, ALTR, and MRVL. ALTR boosted its earnings forecast last week and has been trading sideways after the initial big jump; it should break higher this week. MRVL, after rising all week, vaulted to a new 52-week high on Friday on great earnings.
XLE (energy)
While the SOXX was breaking out, XLE could barely hold its support. It closed just be $56. Its daily MAs are sloping down. $55 level should provide another support. The energy stocks have been weak and really need to see a bounce to prevent a bearish phase from forming. We'll have to watch these carefully. The two biggest positions on XLE are XOM and CVX (counting for more than 32% of XLE), which have been holding up so far.
This week, I'll be watching the techs for leadership and the financials for a supporting role. But, both will have to see strength for the market to break higher. If the energy sectors can hold their support levels and we see more buying in the fertilizers and solars, the market should be in a good shape.
Good night and HappyTrading! ™
